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MINISTRY OF EDUCATION AND TRAINING MINISTRY OF JUSTICE HANOI LAW UNIVERSITY DINH VAN CUONG COMPENSATION LIABILITY FOR DAMAGES IMPOSED BY COMMERCIAL CONTRACT INFRINGEMENT UNDER THE LAW OF VIETNAM Major Code : Economic Law : 9.38.01.07 SUMMARY OF JURISPRUDENCE DOCTORAL THESIS HÀ NỘI – 2021 The thesis was completed at HANOI LAW UNIVERSITY Instructor Prof Dr HOANG THE LIEN Reviewer 1: Reviewer 2: Reviewer 3: This thesis was defended in front of the Doctoral thesis grading committee at the university level, at Hanoi Law University, on……… The thesis can be viewed at: National Library of Vietnam Hanoi Law University Library INTRODUCTION The necessity of the topic Guaranteeing the equality between investors in each specific field is one of the goals that the Vietnamese legal system in general and commercial law in particular aim to achieve However, in practice, many entities are ready to disregard any rule of law to breach any agreement and violate the rights and benefits of other entities for maximum profit Therefore, ensuring a healthy business environment and protecting the legitimate rights of all entities are important for sustainable economic development After 10 years of practical application, the provisions on compensation liability for commercial contract infringement in the 2005 Commercial Law have revealed many inadequacies that need to be examined and amended for academical and practical demands It is the shortcomings of the provisions of the law and the above-mentioned different opinions which affect the dispute settlement activity of authorized entities Hence, it is necessary to amend the inadequacies and shortcomings of the provisions on compensation liability for commercial contract infringement, especially when international integration, commercial relations, particularly international commercial relations are getting more diverse as well as more complicated and those shortcomings interfere with development and international economic integration Thus, the study to improve the provisions of commercial law in general, and the law on compensation for damages imposed by commercial contract infringement in particular, is currently one of the urgent matters The research topic on “compensation liability for damages imposed by commercial contract infringement under the law of Vietnam” will bring significant academical and practical values and help create the scientific foundation for the improvement and completion of this important rule of law This is the reason why the author chose this topic for the Jurisprudence Doctoral Thesis Research purpose and objective 2.1 Research purpose The research purposes of the thesis are to clarify the academical and practical issues of the law on compensation liability for damages imposed by commercial contract infringement and propose the solutions to improve the law on such matter in Vietnam 2.2 Research objective - Conduct an overview and assessment of the research status of issues related to the topic, thereby, pointing out the issues and arguments that need to be further clarified within the research scope and content of the thesis; summarize of the applied research theories, pose research questions and research hypotheses, indicate the research approach for the topic - Clarify the theoretical matters of compensation liability for damages imposed by commercial contract infringement according to the provisions of law in Vietnam such as its legal nature, function, legal structure and principle - Sum up the current application status of the law on compensation liability for damages imposed by commercial contract infringement in comparison with international law and certain national laws Assess the current application status and enforcement practice of the law to point out the inadequacies, limitations and causations of the legal regulations on this issue - Propose solutions to improve the law and the effectiveness of the legal application of compensation liability for damages imposed by commercial contract infringement to meet the new practical requirements in Vietnam Subject and scope of research 3.1 Subject of research - The opinions and theories related to civil liability in general and compensation liability for damages imposed by commercial contract infringement in particular - The provisions of Vietnamese law and foreign law as well as international law on compensation liability for damages imposed by commercial contract infringement - Recent practical application of the law on compensation liability for damages imposed by commercial contract infringement in Vietnam 3.2 Scope of research Regarding the content, the thesis studies the basic and in-depth issues of compensation liability for damages imposed by commercial contract infringement in accordance with current law in terms of theory and practice Regarding the space and time, the thesis studies the compensation liability for damages imposed by commercial contract infringement in accordance with the current Vietnamese law, especially since the enactment of 2005 Commercial Law Methodology and research method 4.1 Methodology The thesis is carried out based on the fundamental methodology of MarxistLeninist theory on State and law, Ho Chi Minh's ideology and the Party's directions and guidelines, the State's legal policies on commercial contract and compensation liability for damages imposed by commercial contract infringement 4.2 Research method The thesis uses the research methods in social sciences and humanities such as: systematic, interdisciplinary approach (economic, politic, history, jurisprudence); analysis and synthesis; legal comparative; legal statistics and sociology… New scientific contributions First, the thesis approached and deepened the academical issues of compensation liability in general and compensation liability for damages imposed by commercial contract infringement in particular It also identified and clarified the legal nature of compensation liability for damages imposed by commercial contract infringement The research results of the thesis help clarify the characteristics of compensation liability for damages imposed by commercial contract infringement compare to other types of liability in terms of arising conditions, principles and subjects when Vietnam join the international economic integration Second, through the analysis of the current legal application status and the evaluation of the actual legal implementation of compensation liability for damages imposed by commercial contract infringement in Vietnam, the thesis signified the inadequacies and limitations of the law on this matter and the main causes such shortcomings Third, from the academical and practical research, the thesis identified the basic directions, proposed solutions to improve the law and the effectiveness of the implementation of the law on compensation liability for damages imposed by commercial contract infringement in Vietnam Academical and practical significance Academically, the thesis will provide more important information and content to enrich the legal issues on compensation liability for damages imposed by commercial contract infringement in Vietnam, contributing to the identification of such liability under the provisions of the Civil Code, Commercial Law and other relevant legislations that are consistent with the nature of compensation liability for damages imposed by commercial contract infringement in a market economy Practically, the thesis will be a valuable reference for legislative research and law enforcement agencies, as well as for legal training institutions in Vietnam to examine, study and teach Structure Apart from the introduction, the overview of the research status and research theory, the conclusion and the list of references, the thesis has three chapters: Chapter 1: Academical issues and the law on compensation liability for damages imposed by commercial contract infringement Chapter 2: Legal application and practical implication of the law on compensation liability for damages imposed by commercial contract infringement in Vietnam Chapter 3: Directions and solutions to complete and improve the effectiveness of the implementation of the law on compensation liability for damages imposed by commercial contract infringement in Vietnam OVERVIEW OF THE RESEARCH STATUS AND RESEARCH THEORY OF THE TOPIC Overview of the domestic and international research status of the topic 1.1 The academical research of the law compensation liability for damages imposed by commercial contract infringement 1.1.1 The studies on the concept, characteristics of commercial contract infringement and sanctions in commercial activities Notable studies include: “Regulations on contract in the Vietnamese Civil Code” is an in-depth study of general academical issues on contract law by author Nguyen Ngoc Khanh (Judicial Publishing House, Hanoi, 2007), the author analyzed and explained some basic contents of the regulations on contract “Sanctions for breach of commercial contract - Academical and practical issues”, (Master of Law Thesis, Hanoi Law University, 2012), author Hoang Thi Ha Phuong studied a combination of academical, and practical issues related to sanctions for breach of commercial contract “Sanctions for breach of commercial contract from the comparative perspective of Vietnamese law and the UNIDROIT Principles on international commercial contracts”, (Master of Law Thesis, Hanoi Law University, 2016), author Phan Thuy Linh studied the comparison between the provisions of Vietnamese law and the UNIDROIT Principles on international commercial contracts The article “Damages for Breach of Contract”, California Law Review (1985), Robert Cooter and Melvin Aron Vol 73, No (Oct 1985), pp 14321481, also mentioned the general studies on damages for breach of contract 1.1.2 The research status on compensation liability for damages imposed by commercial contract infringement The doctoral thesis by author Truong Van Dung (Jurisprudence Doctoral Thesis, Hanoi Law University, 2003) with the topic: “Liability due to breach of contract for the international sale of goods” which focused on comparative research of the provisions of the law of Vietnam, the Vienna Convention in 1980 and the laws of several countries on liability for breach of contracts for the international sale of goods The doctoral thesis by author Bui Thi Thanh Hang, Hanoi Law University (2018) with the title: “Compensation for damage caused by breach of contract” which mentioned the most basic research about compensation for breach of contract in general The master thesis: “Compensation liability for damage caused by breach of contract in commercial activities” by author Nguyen Thi Thu Huyen (Master of Law Thesis, Hanoi Law University, 2013) which also mentioned research on academical issues, practical situation and application of the law on compensation for breach of contract in commercial activities The master theses: “Compensation for damage caused by breach of civil contract - Some academical and practical issues” by author Le Thi Yen (Master of Law Thesis, Hanoi Law University, 2013) which mentioned the main research on compensation liability due to breach of civil contract under the Civil Code The book titled “Measures to handle the non-performance of contracts under Vietnamese law” (National Political Publishing House, Hanoi, 2013) by author Do Van Dai which mentioned and analyzed the types of liability caused by breach of contract in logical order, meaning measures that facilitate the parties to achieve the benefits they expect when entered into a contract are prioritized to be studied first The work: “Termination clauses in international contracts” (1997), Filip de ly, RDAI/IBLJ, N° - “Terms of contract termination in international contracts”, by author Filip de Ly, Professor of law, Erasmus University, Rotterdam, who prepared this report for the Working Group on International Contracts (Groupe de Travail Contrats Internationaux), which met in 1990, 1991, 1996 in Barcelona, Geneva and Knokke and twice in Louvain-La-Neuve, Belgium The document is in RDAI/IBLJ, N° 7, 1997 In the doctoral thesis “Deferral or termination of contract” by Hariz Saidani, 2016, University of Toulon, France (Hariz Saidani (2016), La rupture du contrat, Universitộ de Toulon, Franỗais), the author believes that a contract once signed becomes the law of the contracting parties The binding obligation of the contract compels the contracting parties to perform their obligations according to the agreement The article “Unilateral termination of contract under Quebec law” by Claude Fabien, published in a 2006 law journal (Claude Fabien (2006), La rupture du contrat par volonté unilatérale en droit québécois, Revue générale de droit, 36(1), 85–109) mainly referred to types of contracts in the field of vehicle service (cars, vehicles - vehicule in French): labor contract (hire driver), service contract, and authorization contract The document: “Les dommages et interets pour rupture de contrat commercial” by Murielle CAHEN, which summarize information from L'expresse newspaper, opinions of a female lawyer named Murielle CAHEN and legifrance website (specializing in French law), discussed how one party terminate the contract, who must compensate and the handling according to French law when there is a breach of contract in some specific cases 1.1.3 The research status on the issue of exemption from compensation liability for damages caused by breach of commercial contracts The notable studies on exemption from compensation liability for damages caused by breach of commercial contracts include: The thesis by author Bui Thi Thanh Hang with the topic “Compensation for damage caused by breach of contract” (Jurisprudence Doctoral Thesis, Hanoi Law University, 2018) which studied, analyzed and pointed out the three grounds for exemption from compensation liability The Master of Law Thesis by author Nguyen Thi Thu Huyen on “Compensation liability for damage caused by breach of contract in commercial activities”, (Hanoi Law University, 2013) analyzed and commented on cases of exemption from compensation liability for damages due to breach of contract in commercial activities In addition to in-depth research on general theoretical issues of contract law in the book “Contract regulations in the Vietnamese Civil Code” (Judicial Publishing House, Hanoi, 2007), author Nguyen Ngoc Khanh also had a fairly in-dept analysis on the grounds of exemption The article “Agreement to limit or exempt liability due to breach of contract” in the Legislative Research Journal (No 3), 2005 by author Duong Anh Son analyzed the provisions of the law in certain countries such as the United Kingdom, the United States, France, Germany, Russia, and the provisions of the 1980 Vienna Convention regarding the issue of agreement on the exemption of liability for breach of contract 1.2 Studies related to the practical situation of compensation liability for damages caused by breach of commercial contracts Notable studies on the practical situation of compensation liability for damages caused by breach of commercial contracts include: The doctoral thesis “Compensation for damage caused by breach of contract” author Bui Thi Thanh Hang (Jurisprudence Doctoral Thesis, Hanoi Law University, 2018) which studied the grounds for applying compensation measures and the application status of the law on damage determination The article “The practical application of the regulation on sanction and compensation in commercial contract dispute settlement” by Nguyen Thi Hang Nga in the People’s Court Journal, No 09, pg 25-27, 2006 also analyzed some issues regarding the practical application of sanction and compensation in commercial contract dispute settlement The article “Opinions on sanction in commercial activities according to the provisions of the Commercial Law” in the State and Law Review, Institute of State and Law, No 01, pg 43-46, 2008 by Nguyen Thi Khe confirmed that legal sanction measures in general and sanction in commercial activities are significantly important However, the regulations on sanction in commercial activities are vague and difficult to apply The article “The principle of fault in Vietnamese commercial law” in the State and Law Review, Institute of State and Law, No 11, pg 28-37, 2010 by Phan Huy Hong focused on answering the question whether compensation liability for damages in commercial law is based on the condition of fault The book “Scientific commentary on the 2005 Civil Code” (2nd edition), National Political Publishing House, Hanoi, 2010 by Assoc Prof Hoang The Lien (chief editor) mentioned the comments on the regulations related to civil liability and civil contract Specially, article “Proposal on contract fine and its relationship with 11 the nature and characteristics, the exemption and the relationship between fines and damage compensation 2.1.2 Regarding the practical situation and implication of the law on compensation liability for damage caused by breach of commercial contract The published studies analyzed and illustrated the grounds, conditions for the compensation liability to arise They also produced different opinions on determining the damage to be compensated About the obligations of the party requesting the compensation, most studies affirmed that the party who suffered the damages is obligated to prove that the damage was caused by the breach of commercial contract Regarding the obligations to limit the damages, the studies mentioned two different approaches In terms of the practical implications of the sanction methods for violations of commercial contract, it can be observed that most studies related to the matter only focus on the academical issues instead of focusing on the practical application of the provisions 2.1.3 Regarding the solutions to improve the law on compensation liability for damage caused by breach of commercial contract Initially, the published studies have proposed some solutions to improve the legal foundation for the application of sanction methods in commercial activity, which include compensation liability for damage caused by breach of commercial contract However, the proposed solutions lack practical values for today standard 2.2 Academical and practical issues that is being studied in the thesis 2.2.1 The academical issues on the law on compensation liability for damage caused by breach of commercial contract Academically, the thesis continues to study the following issues: (i) the nature and characteristics of compensation liability for damage caused by breach of commercial contract compare to breach of contract in general - as a civil libility; (ii) breach of commercial contract and the causation relationship between the act of violation and the resulted damages; (iii) the method and principle in determining the level of damage; (iv) obligated entity, related entity…; (v) the relationship between compensation and other types of sanction 12 methods 2.2.2 The practical status and implication of the law on compensation liability for damage caused by breach of commercial contract Practically, the thesis summarizes, analyses and clarifies the following issues: (i) the similarities and disparities between Vietnamese law on compensation liability for damage caused by breach of commercial contract compare to the law of other countries; (ii) the inadequacies and limitations of the law on compensation liability for damage caused by breach of commercial contract; (iii) the difficulties and complications of the practical implication of the law on compensation liability for damage caused by breach of commercial contract in Vietnam; the application mechanism of the compensation liability for damage caused by breach of commercial contract 2.2.3 The solutions to improve the law on compensation liability for damage caused by breach of commercial contract Based on the academical and practical research, the thesis shall propose directions and solutions to improve the law on compensation liability for damage caused by breach of commercial contract since the solutions proposed by previous studies did not cover all the shortcomings that need to be resolved Theoretical basis, research questions and theories 3.1 The applied theoretical basis - Research approach for the thesis: The thesis considers the compensation liability for damage caused by breach of commercial contract as a special civil liability; thus, it is for the party to decide as agreement, the law only interfere to protect public interest - The applied theoretical basis for research: right to freedom of business; contract; obligation, property, legal liability for breach of duty; compensation liability for damage caused by breach of contract In addition, the thesis is also carried out based on the viewpoints, guidelines of the Party and policies of the State of Vietnam on building and developing a market economy and international economic integration 3.2 Research questions and theories - First, academic research: 13 + Research questions: What is the nature of the compensation liability for damage caused by breach of commercial contract? What is the scope of law on such liability? What influence the law on such liability? What is the concept and content of the law on such liability? Research theory: The compensation liability for damage caused by breach of commercial contract, at its nature, is a type of civil liability + Research question: What does the structure of the law on compensation liability for damage caused by breach of commercial contract consist of? Research theories: The law on compensation liability for damage caused by breach of commercial contract consists of the provisions on subject, compensation level; exemption of compensation liability, principles, and scope of law; compensation procedures… - Second, practical research: Research questions: What is the current situation of the law on compensation liability for damage caused by breach of commercial contract? What are the limitations, shortcomings, and the reasons for such inadequacies? What are the difficulties in the implication of the law on compensation liability for damage caused by breach of commercial contract? Research theories: The law on compensation liability for damage caused by breach of commercial contract has certain limitations and shortcomings, which result from subjective and objective reasons - Third, recommendation: Research questions: What are the basic requirements for the improvement of the law on compensation liability for damage caused by breach of commercial contract? Which solutions need to be applied to improve and enhance the effectiveness of such law? What are the academical and practical basis for those solutions? Research theory: The proposed solutions to improve the law on compensation liability for damage caused by breach of commercial contract are not effective enough CONCLUSION Chapter 1: ACADEMICAL ISSUES AND THE LAW ON 14 COMPENSATION LIABILITY FOR DAMAGES IMPOSED BY COMMERCIAL CONTRACT INFRINGEMENT 1.1 Academical issues of the compensation liability for damages imposed by commercial contract infringement 1.1.1 The concept of compensation liability for damages imposed by commercial contract infringement 1.1.1.1 The concept of commercial contract: Commercial contract is an agreement between contracting parties to establish, amend, or terminate the rights and duties of the parties in commercial activity, including sale of goods, services, investment, trade promotion and other commercial activities for making profit 1.1.1.2 The concept of breach of commercial contract: Breach of contract in general and breach of commercial contract are understood as illegal acts conducted by one or more contracting parties through non-performance or incorrect performance of agreed terms in the contract, hence, those parties suffer sanction according to the contract or the rule of law The concept of breach of contract was introduced by the legislators in Article clause 12 of the 2005 Commercial Law, which stated that “Breach of contract is when a party did not perform, fully perform or incorrectly perform the duties as agreed by the parties or in accordance with the provisions of commercial law.” 1.1.1.3 The concept of compensation liability for damages imposed by commercial contract infringement The compensation liability for damages imposed by commercial contract infringement is a type of sanction applied against the party who breach the contract as agreed or according to the law to cover the damages that the other party suffer because of the breach It is guarantee by law 1.1.2 The nature of compensation liability for damages imposed by commercial contract infringement In general, the nature of compensation liability for damages imposed by commercial contract infringement can be identified through the following 15 common attributes: (i) it is a type of property liability; (ii) it only arises between the contracting parties; (iii) the entity with the compensation liability is always the entity who breached the contract, and such act caused the damage for the counter party; (iv) the application of such liability always prioritize the agreement in the contract between the parties; (v) the application of such liability always have negative result for the violated party; (vi) such liability arises under the conditions prescribed by the law In addition to the above-mentioned common attributes, the compensation liability for damages imposed by commercial contract infringement also has certain characteristics: (i) it does not based on the element of fault; (ii) it is to cover the losses and repair the damage better for the damaged party compare the compensation in civil law; (iii) it does not to be agreed in advance; (iv) it mainly arises between traders; (v) it is attached to the occupation of the trader and the objectives of commercial contract are usually services or goods; (vi) it does not include damage in honor or reputation 1.1.3 Identifying the grounds for the compensation liability for damages imposed by commercial contract infringement to arise The academical foundation relate to compensation liability for damages imposed by contract infringement of the objective liability doctrine is suitable with the legislative viewpoint of Vietnam, especially the provisions regarding compensation liability for damages imposed by commercial contract infringement This is expressed in the provisions of the 2005 Commercial Law When requesting the compensation, the damaged party does not need to prove the violated party is at fault On the contrary, if the violated party want to be exempted from compensation liability, it needs to prove that it is not at fault 1.1.4 The relationship between compensation method and other sanction methods for breach of commercial contract The compensation method can be applied simultaneously with other sanction method if the conditions prescribed by law are satisfied (which include Article 303 of the 2005 Commercial Law) 16 1.2 Academical issues of the law on compensation liability for damages imposed by commercial contract infringement 1.2.1 The concept and characteristics of the law on compensation liability for damages imposed by commercial contract infringement The law on compensation liability for damages imposed by commercial contract infringement is a field of private law It includes all law provisions promulgated or recognized by the State to administer the compensation relation arises between contracting parties of commercial contract when there is a breach of contract As a field of private law, the law on compensation liability for damages imposed by commercial contract infringement has the following characteristics: (i) the regulated subjects; (ii) the regulating principles; (iii) the source of law 1.2.2 The structure of the law on compensation liability for damages imposed by commercial contract infringement The law on compensation liability for damages imposed by commercial contract infringement is only a “small” rule of law It is consisted of the following provisions: (i) the entities and their rights, duties when entering the compensation relation; (ii) on the grounds for the compensation liability to arise; (iii) the principles and transaction method; (iv) implication of the liability and exemption of liability CONCLUSION OF CHAPTER Chapter 2: LEGAL APPLICATION AND PRACTICAL IMPLICATION OF THE LAW ON COMPENSATION LIABILITY FOR DAMAGES IMPOSED BY COMMERCIAL CONTRACT INFRINGEMENT IN VIETNAM 2.1 Legal application and practical implication of the provisions on the entities in compensation liability relation 2.1.1 The provisions on the entities, the rights and duties of the entity with the compensation liability 2.1.1.1 The grounds to determine which entity is liable to compensate Article 302 clause of the 2005 Commercial Law stated that the 17 compensation liability is for the breached party In order to determine which party that is, it is necessary to identify who breached the contract and whether that act is the direct cause to the damage for the other party However, there are cases where the party who breached the contract is not the party with the compensation liability Proving that the breached party is not responsible for the compensation once again reaffirms the important role of the causation relation between the act of breach and the actual damage in determining which entity is liable to compensate 2.1.1.2 Rights and duties of the entity with the compensation liability In terms of right, that entity obviously will not have the same amount of rights like the damaged party, nevertheless, it still has the basic rights, including the right to exemption of liability in certain cases; the right to request lowering the damage value to be equalled with the supposed minimum damage In terms of duty, the entity with the compensation liability must exercise the following duties: the duty to compensate and suffer other types of sanction; the duty to report and prove the exemption of liability 2.1.2 The provisions on the entities, rights and duties of the entity with the right to demand compensation 2.1.2.1 The grounds to determine which entity is entitled to demand compensation The damaged party can only be entitled to demand compensation when it has proven that it met the conditions 2.1.2.2 The rights and duties of the entity with the right to demand compensation i) In terms of right, this entity has the following basic rights: the right demand compensation; the right to demand the application of other types of sanction along with the compensation; the right to demand the interest to be paid for late pay (ii) In terms of duty, this entity also needs to exercise the following duties: the duty to prove the damage; the duty to minimize the damage 18 2.2 Legal application and practical implication of the provisions on the grounds for compensation liability 2.2.1 The provisions on “breach of contract” ground According to Article 351 clause of the 2015 Civivl Code, duty violation is defined as “a party did not perform its duty on time, did not fully perform its duty or incorrectly perform its duty.” Article clause 12 of the 2005 Commercial Law stated that “breach of contract is when a party did not perform, did not fully perform or incorrectly perform its duty as agreed by the parties or in accordance with the law.” When reviewing breach of contract, the clause agreed by the parties and recorded in the contract should be considered first If there is no clause in the contract, the provisions of the law on breach of contract or proper application of the provisions on such matter shall be considered Breach of commercial contract can be performance or non-performance and whether an act is considered a breach of contract or not depends on the contract first If there is no clause in the contract regarding the issue, then the rule of law shall be considered 2.2.2 The provions on “actual damage” ground According to Article 302 and 303 of the 2005 Commercial Law, the damage to be compensated for breach of contract is actual and direct losses caused by the violated party and the direct profit that the other party was supposed to gain had it not for the breach (or “damage to that supposed profit” under the 2015 Civil Code) Through practical examples, it can be concluded that actual damage is practically applied as follow: (i) determining the damage based on the provisions of the law is not as complicated as gathering the proof to prove those damages; (ii) damage to reputation has not been recognized in commercial law and it is very difficult to prove the damage to reputation 2.2.3 The provions on “causation between the breach of contract and the actual damage” ground In commercial law, the causation between the breach and the damage is 19 only furtively expressed under Article 302 clause of the 2005 Commercial Law: “Compensation is when the violated party compensate for the damage caused by its violation.” From the actual disputes, it can be concluded as follow: (i) in practice, there are damages that occurred outside the breach of contract process, these damages are not considered to be cause by the breach; (ii) the causation is only one of the requirements for the compensation liability 2.2.4 The “fault” element Although it is not directly recognized as one of the grounds for compensation liability for breach of contract, the consideration of the “fault” element in some cases can be the ground for compensation liability This is considered as an exception in commercial law 2.3 Legal application and practical implication of the provisions on method and principle in determining the damage to be compensated in general cases and special cases 2.3.1 The method to determine the damage to be compensated The method to determine the damage to be compensated is the method used by the damaged party to prove the damage cause by the breach of contract The determination obviously needs to be based on legitimate proof but the most important aspect is that the damaged party has to prove that the damages caused by the breach of the other party are complete legal under the provisions of the law on damage to be compensated 2.3.2 The principles in determining the damage to be compensated Based on Article 302 clause of the 2005 Commercial Law, it can be confirmed that the basic principles of determining the damage to be compensated are: a) only actual and direct damage can be compensated; b) the direct profit that the damaged party supposed to gain had it not been for the breach can also be compensated The practical application of determining actual, direct damage and supposed profit shows that this principle is not being understood and used coincidentally Based on actual cases, the principles in determining the damage to be 20 compensated include: (i) the damage to be compensated is the damage that did occur and was paid by the violated party; (ii) supposed profit to be compensated is the profit directly relate to the breached contract 2.3.3 Determining the damage to be compensated in special cases 2.3.3.1 Determining the damage to be compensated when there are agreed terms Article 418 clause and Article 419 clause of the 2015 Civil Code allow the parties to negotiate a fix compensation for breach of contract in advance However, it is not logical for the 2005 Commercial Law to not have the same provisions as the 2005 Civil Code The agreed fix compensation is similar to contract fines for breach of contract These clauses all set out a fix amount of money for the violated party to pay They also can be triggered by the act of violation alone without any other requirement 2.3.3.2 Determining the damage to be compensated when the contracting parties violated the duty to pay This type of damage can be considered as “losses due to misappropriation of capital”, which is based on the “profit value” of the capital Basically, each amount of capital used for business in commercial or civil activity has a minimum profit value equal to bank’s interest Therefore, late payment will result in liability to pay interest, which is calculated according to the law to protect the legitimate rights and benefits of contracting parties 2.4 Legal application and practical implication of the provisions on exemption of compensation liability for breach of commercial contract 2.4.1 Practical implication of the compensation liability for breach of commercial contract This thesis has analyzed many aspects of the implication of the compensation liability for breach of commercial contract Currently, this issue is administered by the 2015 Civil Code (from Article 409 to 420) and the 2005 Commercial Law (Article 292, 231, 297, 310 and 311…) Once a contracting party breach the contract and cause damage to the other party, the commencement of compensation liability depends on whether the breach satisfies the requirement for such liability and whether it falls into exemption 21 cases as agreed by the parties or according to the law However, the legislators did not directly provide the principle, method, and time to execute the compensation liability for breach of contract and only provide the principle, method, and time to execute the compensation liability for damage outside of contract under Article 585 of the 2015 Civil Code This lack of rule makes it difficult to implement the compensation liability for breach of commercial contract 2.4.2 Practical implication of the exemption of compensation liability for breach of commercial contract (i) Exemption agreed by the parties; (ii) exemption due to events of force majeure; (iii) exemption due to the fact that the breach is a result of the fault of damaged party; (iv) exemption due to the fact that the violated party was carrying out a decision by the authority and the parties were unaware at the time of arrangement 2.5 Evaluation of the practical implication of the provisions on compensation liability for breach of commercial contract 2.5.1 Achievments 2.5.1.1 The compensation for breach for commercial contract under the Vietnamese law is compatible with the general rules of many other countries and international standards 2.5.1.2 The application of the law on compensation liability for breach of commercial contract was effective 2.5.2 Difficulties 2.5.2.1 Regulation on direct loss value was not applied 2.5.2.2 Damage limitation costs are not specified in the Commercial Law 2.5.2.3 Expenses incurred due to ununiform resolution of violation 2.5.2.4 Ambiguity regarding the concept of “fundamental violation” 2.5.2.5 Difficulty proving damage in some cases 2.5.3 Causes (i) Incompletion of the rule of law (ii) The application of the law regarding dispute settlement bodies was not consistent 22 CONCLUSION OF CHAPTER Chapter 3: DIRECTIONS AND SOLUTIONS TO COMPLETE AND IMPROVE THE EFFECTIVENESS OF THE IMPLEMENTATION OF THE LAW ON COMPENSATION LIABILITY FOR DAMAGES IMPOSED BY COMMERCIAL CONTRACT INFRINGEMENT IN VIETNAM 3.1 Directions 3.1.1 Completing the law on compensation for damage caused by breach of commercial contracts to ensure compliance with economic development guidelines, economic integration requirements and a healthy business environment 3.1.2 Amending, supplementing, and perfecting the provisions on compensation for damage caused by breach of commercial contracts to ensure the consistency, harmonization, and synchronization between the concepts of the Commercial Law and the Civil Code 3.1.3 Completing the law on liability for damages caused by breach of commercial contracts in a general way to avoid too detailed regulations for each legal issue 3.1.4 Promulgating more precedents on cases of compensation liability for damages in commercial activities 3.2 Solutions 3.2.1 General solutions First, the provisions on types of compensations in the 2005 Commercial Law need to be properly amended to be compatible with those of the 2015 Civil Code Second, the illogical issues regarding the minimizing damage duty need to be resolved Third, the damage repairing and litigation cost need to be included in the damage to be compensated Fourth, the relation between compensation mechanism and contract fines in the 2005 Commercial Law need to be amended Fifth, the provision on “basic violation” in the 2005 Commercial Law 23 need to be removed because of its ambiguity in the application of the law on compensation for damage caused by breach of commercial contracts Sixth, the provisions on mental and reputation damage need to be added to ensure comprehension and compatible with science and practice Seventh, the provision on exemption of compensation liability need to be amended Eighth, the provisions on third parties’ exemption of liability in the events of force majeure Ninth, the provisions on grounds for compensation liability need to be completed Tenth, the provisions recognizing exemption agreement between contracting parties need to be added Eleventh, the events of exemption need to be specified 3.2.2 Specific solutions First, Article 361 of the 2015 Civil Code and Article 302 of the 2005 Commercial Law on types of damage to be compensated need to be amended Second, the provisions on agreed amount of compensation need to be amended Third, the provisions on damage minimize duty in the 2005 Commercial Law need to be amended and supplemented Fourth, the provision on the relation between other sanction methods for duty violation and compensation method under the 2015 Civil Code Fifth, the provisions on “basic violation” in the 2005 Commercial Law and “serious violation” in the 2015 Civil Code need to be amended Sixth, “payment deadline” in Article 468 of the 2015 Civil Code and Article 306 of the 2005 Commercial Law Seventh, the provisions of relevant law need to be amended 3.2.3 Solutions to improve the effectiveness of the implementation of the law on compensation liability for damages imposed by commercial contract infringement Firsth, complete the law and improve the quality of dispute settlement through Commercial Arbitration 24 Second, improve the quality of commercial dispute settlement by Court Third, strengthen the activities of summarizing trial practice and promulgating case precedents Fourth, increase the business community awareness of commercial law CONCLUSION OF CHAPTER CONCLUSION Currently, the law on compensation liability for damage caused by breach of commercial contract has drastically improved However, due to economical and social changes as well as international integration, some provisions of law on this liability are no longer adequate and need to be completed Compensation liability for damage in general and for damage caused by breach of commercial contract are important parts of any commercial law system In practice, the interpretation and application of the provisions on such matter are not consistent, which affect the rights and legitimate benefits of all parties Once again, it reaffirmed the necessity of the thesis, especially during this period Throughout the research, the Thesis has studied the most basic academical issue of the compensation liability for damage caused by breach of commercial contract It has pointed out the shortcomings of the law and its application as well as the causes for such limitations It also produced some valuable solutions to complete the law and improve the effectiveness of legal application The research results of the thesis can be important reference documents for the legislative process and legal enforcement 25 LIST OF PUBLISHED STUDIES RELATED TO THE THESIS Dinh Van Cuong (2020), “Exemptions of compensation liability for damage caused by breach of commercial contract under Vietnamese Law and comparison with law of France”, Democracy and Law Review, No 342, pg 47 Dinh Van Cuong (2020), “The legal situation and recommendation for improvement of the law on fines, compensation for damage caused by breach of commercial contract and the relation between the two methods”, Procuracy Science Journal, No 03, pg 50 Dinh Van Cuong (2020), “Performing commercial contract in case of fundamental circumstance changes under the law on Vietnam”, Democracy and Law Review, No 345, pg 12 ... LIEN Reviewer 1: Reviewer 2: Reviewer 3: This thesis was defended in front of the Doctoral thesis grading committee at the university level, at Hanoi Law University, on……… The thesis can be viewed... damages imposed by commercial contract infringement in Vietnam OVERVIEW OF THE RESEARCH STATUS AND RESEARCH THEORY OF THE TOPIC Overview of the domestic and international research status of the topic... under Vietnamese law” (National Political Publishing House, Hanoi, 2013) by author Do Van Dai, which mentioned the practical application of the provisions on liability for contract violation in Vietnam