Regulations On Unfair Contract Terms In Vietnam

October 13th, 2023
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An unfair contract term is a provision or condition considered unjust, biased, or which favors one party (typically the party that drafted the contract) and that disadvantages the other party. The regulations on unfair contract terms are primarily governed by the Civil Code and the Law on Protection of Consumers’ Rights 2023 (“LPCR”). Neither uses the language “unfair contract term” but both imply that unfair terms are unjust terms. The 2015 Civil Code regulates the fairness of contract terms but only in connection with the use of standard form contracts and general transaction conditions. Articles 405 and 406 of the Civil Code specify that a standard form contract is a contract created by a business or trader specifically for a transaction involving consumers, while general transaction conditions are stable terms announced by a party to apply to the offeree; if the offeree accepts to enter into the contract, the offeree is deemed to accept the terms. The LPCR mainly protects consumers against unfair contract terms by establishing a list of prohibited clauses to exist in contracts. How is a party protected?

Ensuring Transparency and Publicity: The 2015 Civil Code and the LPCR aim to raise public awareness of standard contract forms and general trading conditions. A business is obligated to disclose the existence of standard form contracts or general transaction conditions to consumers. That is, a company must publish terms that are not specifically agreed. Businesses must disclose their standard contract forms and general trading conditions to consumers, allowing them adequate time to review and understand the conditions. The LPCR mandates that businesses engaged in the sale of goods and services that fall within specified categories must register sample consumer contracts and general transaction conditions with certain government agencies. In addition, the Civil Code and the LPCR establish principles for interpreting ambiguous contract terms and ambiguities are resolved in favor of consumers. This principle of interpreting unclear provisions of Vietnamese law, based on the contra proferentem theory, is also widely recognized in many other jurisdictions. This theory results in a rule that when contractual terms convey uncertain meanings, preference in interpretating these terms should be granted to the party that did not draft the contract. The Civil Code clearly states that consumers must be favored when interpreting contracts with ambiguous terms. Article 405.2 of the 2015 Civil Code sets forth this principle: “In situations where a standard form contract contains unclear terms, those terms should be interpreted in a manner favorable to the party accepting the contract offer“. In the LPCR, this principle is articulated in Article 24: “In cases where there are differing interpretations of contract content with consumers, standard form contracts, or general transaction conditions, the interpretation should lean towards benefiting consumers”.

While transparency requirements are broadly expressed, specific industries must register the contracts they use with government agencies responsible for consumer protection and they must receive approval for their use. There are nine categories of goods and services for which standard form contracts must be registered: residential electricity, supply of domestic water, pay TV services, landline telephone services, terrestrial mobile communication services with postpaid payment arrangements, internet access services, passenger air transportation, railway passenger transportation, and buying and selling of apartments, along with the residential services offered by an apartment management entity.

Eliminating Unfair Terms: The Civil Code and the LPCR prohibit some contractual terms that do not serve the interests of consumers. For example, the seller may not absolve itself of liability. Even though the LPCR does not use the language “unfair contract term”, it enumerates a list of terms including fifteen types of clauses and states that these terms must not be included in contracts. The Civil Code stipulates that if a standard form contract either relieves the party providing the contract from liability, or enhances liability, or infringes upon the legitimate rights of the other party, such a clause is deemed unenforceable unless mutually and specifically agreed by all contracting parties.

These regulations are designed to ensure the fairness of contract content, especially where content is disadvantageous to consumers. They aim to establish a regulatory framework that safeguards consumer rights, particularly in crucial sectors where consumers’ interests are most vulnerable to exploitation.

The Inadequacy of Legislation

However well-meaning the intention of this legislation, the LPCR and the 2015 Civil Code share a common deficiency. They do not provide a definition of what constitutes unfair terms. Most significantly and most fundamentally, the terms “fair” and “unfair” are conspicuously absent from the language of the law. Consequently, there is no definition of fairness or unfairness. Without a definition, which would include reasonable criteria to determine fairness, the prohibition of fifteen terms stipulated in the LPCR or similar provisions will be hard to enforce. If a consumer seeks to challenge an unfair term not included in the list specified by the LPCR, it will be exceedingly difficult to do so because there is no legal basis to support a judge’s decision on unfairness in such cases. Similarly, businesses need guidance to help determine whether the terms they draft are unfair in a legal context. This lack of clarity limits consumer protection. Without a test of fairness, both parties will find it challenging to navigate and enforce their legal rights and perform their legal obligations.

A definition of unfair contract terms must be established. This will create a solid mechanism to determine whether language is unfair. The objective of such a test is to be able to judge whether a specific clause meets the criteria of fairness.

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