Nguyên tắc thiện chí trong pháp luật hợp đồng việt nam với pháp luật một số quốc gia dưới góc độ so sánh tt tiếng anh

First, the thesis systematizes theoretical issues of the principle of good faith in contract law, including the concept of this principle in Vietnamese contract law, the characteristics

MINISTRY OF EDUCATION AND TRAINING MINISTRY OF JUSTICE

HANOI LAW UNIVERSITY

NGUYEN ANH THU

THE PRINCIPLE OF GOOD FAITH UNDER THE

CONTRACT LAW OF VIETNAM AND SOME SELECTED COUNTRIES IN COMPARATIVE PERSPECTIVE

SUMMARY OF LAW THESIS

HANOI – 2020

MINISTRY OF EDUCATION AND TRAINING MINISTRY OF JUSTICE

HANOI LAW UNIVERSITY

THE PRINCIPLE OF GOOD FAITH UNDER THE

CONTRACT LAW OF VIETNAM AND SOME SELECTED COUNTRIES IN COMPARATIVE PERSPECTIVE

Specialization: Civil Law and Civil Procedure

Code: 9 38 01 03

SUMMARY OF LAW THESIS

HANOI – 2020

PREFACE

The principle of good faith is the fundamental principle of almost all legal systems in the world, including Vietnam However, Vietnamese legal scholars do not seem to have paid due attention to this principle This fact is reflected in the quantity and the depth of researches referring to this principle as well as practice application of Vietnamese Courts to resolve contractual disputes With the introduction of the Civil Code 2015 (CC), the scope of good faith principle adjusts contractual relations in Vietnam has been extended to all stages of contract: pre-contractual, performance and termination However, while the provision acknowledges the principle of good faith

is highly generalized, other provisions considered as concretization of this principle still have drawbacks This leads to the fact that good faith principle has not been fully and consistently understood, thus significantly affecting the protection of parties’ legitimate rights and interests as well as failing to reflect the true value of the rule of law that Vietnamese government pursuits Meanwhile, the principle of good faith is considered an effective tool to protect legitimate rights and interests in modern legal systems that recognize this principle as in Germany, even legal systems which do not recognize the general principle of good faith as in England also applies this principle or its variations to protect the legitimate rights and interests of contractual parties

For the above reasons, studying the principle of good faith in Vietnamese contract law is an objective requirement both in theory and in practice, especially in the context of Vietnam’s

increasingly extensive international economic integration Therefore, the study of “The principle of

good faith under the contract law of Vietnam and some selected countries in comparative perspective” will bring both theoretical and practical value

The research scope of this study is the theoretical basis of good faith principle in German, English and Vietnamese contract law, in which the Civil Code 2015 will be used as the main research subject for Vietnamese contract law In addition to the theoretical research, the thesis also studies courts’ judgments of the three legal systems to illustrate the results of theoretical research The research purpose of this study is to illuminate theoretical issues, issues on regulation as well as the practical issues in applying this principle under Vietnamese contract law on the basis of comparison with German and English contract law On that basis, the thesis proposes to perfect regulations in the

CC which are concretization of good faith principle in a modernization way of thought, which will in turn thereby enhance the efficiency of this principle in Vietnamese contract law For this purpose, the thesis has the following tasks: Clarify theoretical issues of the principle of good faith, Compares the principle of good faith and its concretization under Vietnamese contract law with German and English contract law (represent civil law and common law traditions), Proposes guidelines and specific solutions to perfect regulations manifest the principle of good faith in the CC To achieve its goal, the thesis uses the methodology of dialectical materialism, historical materialism For Vietnamese contract law, the thesis uses the above mentioned methodologies on the basis of the Communist Party

of Vietnam’s perspectives, objectives and guidelines on economy, politics, culture and society

New contributions of the thesis include:

First, the thesis systematizes theoretical issues of the principle of good faith in contract law,

including the concept of this principle in Vietnamese contract law, the characteristics and meaning of this principle in contract law as well as its scope of application under German, English and Vietnamese contract law

Second, the thesis analyzes theories related to the principle of good faith worldwide as well as

perspectives of famous scholars in the world on the concept of good faith in contract law From that the thesis introduces suggestive concept of good faith principle for Vietnamese contract law

Third, the thesis analyzes and evaluates objectively and comprehensively current legal

regulations and practice in applying this principle in pre-contractual stage in a comparative perspective between German, English and Vietnamese contract law In specific, the thesis analyzes

in depth the manifestations of the principle of good faith in regulating bad faith behavior which prevent the consummation of contract and which lead to void contracts

Fourth, the thesis analyzes and evaluates objectively and comprehensively current legal

regulations and practice in applying this principle in performance and termination stage in a comparative perspective between the three legal systems along with the study of a number of judgments Specifically, the thesis analyzes the manifestations of the principle of good faith in adjusting contract contains unclear terms or absent some non-essential terms, as well as in case of unfair contract terms, hardship and abuse of termination rights

Fifth, the thesis points out shortcomings of CC’s provisions which are the manifestation of

good faith principle in all stages of contract and proposes to complete the CC base on the experiences learned from German and English law which are in compliance with Vietnamese contract theory and judicial practice in Vietnam

In addition to the preface, overview of research topic, conclusion, references, the thesis includes

3 chapters:

Chapter 1 General overview of the principle of good faith in contract law

Chapter 2 The principle of good faith in pre-contractual stage

Chapter 3 The principle of good faith in performance and termination stages

CHAPTER 1 GENERAL OVERVIEW OF THE PRINCIPLE OF GOOD FAITH IN CONTRACT LAW

1.1 The notion of good faith and good faith principle

Based on the typical approaches to the notion of good faith worldwide, the author agrees with the dominant point of view that it is not necessary to bring out an exact definition for the principle of good faith due to its open and flexible nature Therefore, the content of this principle cannot be framed

in a definition Due to its open and flexible nature that allow flexible application of the principle of good faith to regulate contractual relations, the content of this principle should be determined by Courts and gradually improved through court practice

However, in order to have an initial step in building the content of good faith principle in Vietnamese contract law, the author introduces the concept of good faith principle suggestive for Vietnamese contract law on the basis of the first three approaches as follows:

The principle of good faith is fundamental principle of Vietnamese civil law that governs the relationship between parties during the pre-contractual, performance and termination stage of contract Good faith principle creates standards of behavior for parties in a contractual relationship based on criteria such as honest, reasonable in the spirit of cooperation and take account rights and interests of other party, eliminates any acts with bad intentions as well as any behavior contrary to reasonable expect of the other party

1.2 Characteristics and meaning of the principle of good faith

Five characteristics of the principle of good faith include: the principle of good faith is the fundamental principle of contract law that contains ethical values; The principle of good faith is a tool to convey good values of the Constitution into contract law; The principle of good faith has flexible content; The principle of good faith is one source of contract law; The principle of good faith

is one source of obligation

The above characteristics are factors that determine the important meaning of good faith in contract law, including: An effective tool to ensure the balance of rights and interests between parties

in a contractual relationship; An effective tool to ensure that the civil and economic human rights recognized in the Constitution are protected in harmony with the interests of the nation and public interests; A flexible tool that can adapt to all situations arising in social life in the absence of direct legal provisions; An orientation for the development of legal provisions and allowing Courts to contribute to the development of new legal regulations through adjudication activities; Guideline for Courts to resolve contract disputes accurately and fairly; A tool to ensure the long-term vitality of the Civil Code

1.3 Development history of the principle of good faith in contract law

The principle of good faith is a principle firstly formed and developed based mutual trust between people in society, it was then heavily influenced by religious ideas, ethics, philosophy, and socio-economic development Thus, the development of the legal principle of good faith is inseparable from ethical, religious and philosophical aspects Although initiate as a moral concept, the principle of good faith gradually been fostered and enriched to become a legal concept along with

the development of human society Today the principle of good faith is regarded as the fundamental principle of almost all legal systems in the world

1.4 Adjustment scope of the principle of good faith in contract law

Among the three legal systems, the scope of good faith principle in English contract law is the most modest as English contract law only recognize this principle in regulating unfair terms in consumer and insurance contracts Unlike English contract law, the principle of good faith is one of the fundamental principles of Vietnam and Germany private law in general and contract law in particular Although there is a difference in the recognition of adjustment scope, both the Vietnamese and German law recognize that good faith principle has a wide scope of adjustment throughout all stage of a contract, including pre-contractual, performance and termination

1.5 Relation between the principle of good faith and the principle of freedom of contract

The principle of freedom of contract and the principle of good faith are two main pillars of contract law The relationship between these two principles is manifested in the fact that the principle

of good faith overcomes negative effect of excessive freedom of contract, ensures parties’ freedom

of contract coexist reasonably and balance between parties’ legitimate rights and interests It can be seen that not only does the principle of good faith assists the principle of freedom of contract (as well

as principles growth from the principle of freedom of contract) to achieve its goal but also overcomes reserve side of the principle of freedom of contract to ensure fairness between parties to a contractual relationship, protect ethical values, public order, legitimate rights and interests of parties as well as that of third parties

CHAPTER 2 THE PRINCIPLE OF GOOD FAITH IN PRE-CONTRACTUAL STAGE 2.1 The degree of recognition of the principle of good faith in pre-contractual stage under German, English and Vietnamese contract law

Although Vietnamese and German contract law both acknowledge the principle of good faith

in pre-contract negotiations as well as impose legal liability for the violations of good faith obligations, good faith principle in pre-contract negotiations under Vietnamese contract law is narrower than that of German law While German contract law recognizes good faith obligations as soon as parties enter into pre-contract negotiations, Vietnamese contract law only recognizes good faith obligations in pre-contract stage when the parties have entered into the period of offer and acceptance English law hesitates to recognize a general principle of good faith as well as good faith obligations between parties in pre-contractual negotiations, and therefore generally does not impose liability in contractual negotiation However, English contract law also imposes liability for blameworthy conducts in pre-contractual stage based on independent doctrines (piecemeal solutions)

In other words, although there is a difference in the level of recognition of the principle of good faith

in pre-contract stage, all three legal systems manage to regulate bad faith conducts through different

methods

2.2 Bad faith conducts preventing the consummation of contract

2.2.1 Bad faith conducts preventing the consummation of contract under German contract law

Due to uphold the principle of freedom of contract, German contract law in principle allows parties to end pre-contracts negotiation without the burden of liability In other words, German contract law gives negotiating parties the right to choose between continue negotiations to conclude

a contract and end the negotiation without liability However, due to the ethical and social approach

to the principle of freedom of contract, German contract law considers that the freedom of negotiating parties must be in harmonization with social ethical values, to put it another words, the result of party autonomy (the contract) must be harmonized with the interests of society and pre-contractual negotiation is a form of friendly cooperation On that basis, German contract law recognizes that there

is a special relationship between negotiating parties (pre-contractual obligations) based on reasonable trust, so that the parties must not violation their good faith obligations (fault) The party in breach of good faith obligations must bear pre-contractual liability under German law base on the principle of good faith The conducts considered as violation of good faith obligations might include: (1) Sudden and unjustified rupture of negotiations; (2) Initiate negotiations with no real intention to contract; (3) Continue to negotiate when no longer intend to enter into a contract

2.2.2 Bad faith conducts preventing the consummation of contract under English contract law

Due to its hesitation in acknowledging the special obligation relationship between negotiating parties, English contract law does not recognize pre-contractual liability even if one party terminate negotiations in bad faith However, English contract law also has mechanism to protect the rights and interests of negotiating parties Accordingly, based on the doctrine of unjust enrichment and

restitution, the unjust enriched party has to return the benefit they have received under English contract law

In addition, based on the doctrine of misrepresentation, English contract law also imposes liability for damages to the party who acts in bad faith that prevent the consummation of contract if this party intentionally or neglect causing misrepresentation Which means a negotiating party shall

be liable for damages if she intentionally or neglect making statements that are inconsistent with reality causing damage to the other party for believing in the wrongful statement

2.2.3 Bad faith behavior preventing the consummation of contract under Vietnamese contract law

Similar to German contract law, Vietnamese contract law recognizes the principle of good faith

in the pre-contractual stage or recognizes the obligation act in good faith of parties when participating

in pre-contract negotiations Although recognizes good faith principle in pre-contractual stage, the scope of this principle in pre-contractual stage under Vietnamese law is somewhat limited compared

to German contract law That is while German contract law recognizes good faith obligations as soon

as parties enter into pre-contract negotiations, Vietnamese contract law only recognizes good faith obligations in pre-contract stage when the parties have entered into the period of offer and acceptance Consequently, Vietnamese contract law has not fully protected the rights and interests of the aggrieved party due to bad faith conducts preventing the consummation of contract of the other if it does not fall in either of the two cases: (1) The offeror terminates negotiation and enters into contract with a third party while awaiting for the offeree’s reply, (2) Violate the duty of inform

2.3 Bad faith behavior lead to void contracts

2.3.1 Bad faith behavior lead to void contracts under German law

Under German contract law, bad faith conducts lead to void contract can be intentional conduct such as fraud, duress or can be careless conducts such as negligent misrepresentation Fraud during pre-contractual stage is action of one party, who, despite being aware of the misleading information

or is not determine about the truthfulness of the information, gives out such information to create or

to maintain other party’s mistake which leading to her wrongful decision to enter into a contract based

on inaccurate or incomplete information The deceived party has the right to claim the contract as void even in case the bad faith conducts performed by a third party if this party acts for the benefit of one negotiating party and that third party’s conducts have significantly affected the decision to enter into the contract of the aggrieved party, regardless of the awareness of the other party to the contract Although the German Civil Code has specific provisions governing fraud in pre-contractual stage, there is a lack of specific provisions for negligent misrepresentation Stemming from this reality, the German Federal Supreme Court based on the principle of good faith and the principle of

culpa in contrahendo in order to develop mechanism to protect legitimate rights and interests of the

aggrieved party due to its reasonable belief in the neglect misrepresentation performed by the other party

Under German contract law, duress is an act of pressure by one negotiating party to influence the free will of the other party, causing this party to conclude a contract contrary to his free will On

the basis of Article 123 of the German Civil Code and courts practice, German legal scholars generalize duress leading to void contract, including: (1) the nature of the duress is illegal, (2) the nature of the coercive act is legal but the result (contract) is illegal, or (3) there was no strong connection between the coercive act and the result Stemming from the point of view that the will of the coerced party is affected more strongly than the will of the deceived party, German contract law grants the right to claim the contract as void for the coerced party for contracts concluded under the influence of a third party, even in case where the other party does not know and is not obliged to know about the coercive acts committed by the third party

2.3.2 Bad faith behavior lead to void contracts under English law

Besides the use of misrepresentation doctrine to regulate bad faith behavior preventing the consummation of contract, English contract law also use this doctrine to adjust misrepresentation in pre-contractual stage that lead to contract invalidation Tradition English contract law did not

acknowledge the obligation to inform in pre-contractual stage based on the doctrine of caveat emptor

and therefore did not consider silent as misrepresentation However, English contract law over the

time has recognized exceptions of caveat emptor, under which, parties to pre-contract negotiations

are obliged to provide information to their counterpart in a limited number of cases to protect her legitimate rights and interests In these cases, if a party keeps silent and does not provide necessary information to the other party, their action of not providing information will be regarded as the act of misrepresentation and she will bear liability Although expressing personal opinion in principle is not considered misrepresentation, the opinion maker shall bear liability if she is someone with a position, qualification or skill that makes the other party who reasonably trust the neglect misrepresentation to wrongfully enter into a contract contrary to their reasonable expectations

Although neither admitting nor using the general principle of good faith to regulate cases where contracts are entered into under the impact of improper pressure in pre-contractual negotiations, English contract law also achieved similar results to German contract law through the use of the doctrine of duress and the doctrine of undue influence – doctrines regarded as alternatives for the principle of good faith In which, the doctrine of undue influence acts as a complementation to the doctrine of duress in order to reduce the rigidity of the doctrine of duress and ensure fairness between negotiating parties In addition, in order to protect the rights and interests of the coerced party, English contract law uses the doctrine of unjust enrichment to force the unjust beneficial party to return what they have received, therefore overcome the consequences of the coercion

It can be seen that the doctrine of undue influence reflects partially the content of good faith principle through the assumption of the existence of improper influence in trust relationships (moral relations), thereby requiring the advantageous party to take into account the legitimate interests of the disadvantaged party and all actions of the advantageous party that do not take into account the disadvantaged party’s legitimate interests are considered as act of undue influence or in other words, act of bad faith

2.3.3 Bad faith behavior lead to void contracts under Vietnamese law

Vietnamese as well as German and English contract law all have mechanisms to regulate misrepresentation in pre-contractual stage to eliminate injustices Similar to the other two legal systems, Vietnamese contract law also based on the perception of the misrepresent party in pre-contractual negotiations to distinguish two types of misrepresentation, including duress (intentionally) and negligent misrepresentation However, Vietnamese contract law protects deceived party more strongly than German contract law against bad faith conducts which lead the deceived party to enter into a contract against her will In addition, the Civil Code 2015 has a direct provision

to regulate negligent misrepresentation while the German Civil Code lacks of direct provision to regulate this issue Although both the German Civil Code and the Civil Code 2015 give the contracting party due to the impact of misrepresentation the right to choose between acknowledging the validity of the contract and claiming the contract as void, the Civil Code 2015 seems to recognize the principle of good faith to a large extent, allowing the balance of interests between parties as well

as protect the common economic interests of society, as a result the CC not only recognizes the principle of good faith in granting rights to claim contract as void but also recognizes this principle through restricting the right to claim contract as void

Similar to German and English contract law, Vietnamese contract law does not recognize value

of contracts entered into due to the impact of improper pressure (duress, coercion) However, Vietnamese contract law does not seem to regulate behavior with improper pressure that is legal in nature but is used to achieve an improper purpose

2.4 Recommendations for legal improvement in Chapter 2

First, construct “Pre-contractual negotiations” subsection In order for the provisions of

Vietnamese contract law governing the conduct of individuals participating in pre-contractual negotiations to be more compatible with the contract law of modern legal systems, it is necessary to add a subsection on “Pre-contractual negotiations” before the subsection on “Entering into civil contracts" in Section 7 Chapter XV of the Third Part of Civil Code 2015

Second, building a general provision on good faith obligations in pre-contractual negotiations

In the subsection on “Pre-contractual negotiations”, there should have an additional provision on good faith obligations in pre-contractual negotiations with the following contents:

“Article… : The obligation to negotiate in good faith

(1) Nature and legal persons are free to negotiate as long as complying with the principle

of good faith

(2) The party violating the obligation of good faith is liable for losses caused to the other party Damages does not include benefits that would have been received by the aggrieved party if the contract was entered into

Third, amend the provision on “Information in entering into contracts”

It is necessary to move the provision on “Information in entering into contracts” to the subsection on “Pre-contractual negotiations” and rename this provision to “Information in pre-contractual negotiations” with the following revised content:

“Aritcle… : Information in pre-contractual negotiations

(1) The party who knows information which is of decisive importance for the consent of the other must inform him of it where the latter legitimately does not know the information or relies

on the contracting party

(3) The aggrieved party due to the violation of clauses 1 and 2 of this Article has the right

to claim damages and claim as void according to Articles 126 and 127 of this Code.”

Fourth, instructions to clarify regulations on invalid contract due to duress and coercion If

Vietnamese legislator chooses to protect coercion party more strongly than deceived party as in German contract law, paragraph 3 of Article 127 CC should be interpreted as the party coerced by a third party has the right to claim the contract as void even in case where the other party does not know

or is not required to know about the third party’s coercion If Vietnamese legislator chooses to balanced protect rights and interests of both parties then paragraph 3 of Article 127 CC should be interpreted as the party coerced by a third party only have right to claim the contract as void in cases where the other party knows or is required to know about the third party’s coercion Therefore, paragraph 3 of Article 127 CC should provide guidance on this issue in order to uniform the understanding and application of law

CHAPTER 3 THE PRINCILE OF GOOD FAITH IN PERFORMANCE AND TERMINATION STAGES

3.1 The principle of good faith in the stage of performance of contract

Contract performance is the stage of realizing the rights and obligations of the parties based on content of the legally concluded contract In practice, not in all cases the performance of the contract can go smoothly due to cases where the contract contains unclear terms or absent some non-essential terms, as well as in case of unfair contract terms and hardship In these cases, the three legal systems apply the principle of good faith or piecemeal solutions to ensure the performance of contract and balanced protect legitimate rights and interests of the parties Therefore, when analyzing the principle

of good faith in contract performance, it is necessary to analyze the principle of good faith expressed through the solutions used by German, English and Vietnamese contract law for the following issues: (1) Contracts contain unclear terms; (2) Contracts absent some non-essential terms; (3) Contract with unfair content; and (4) Hardship

3.1.1 Contracts contain unclear terms

In case the parties entering into a contract disagree on the meaning of one or more contract terms, traditionally legal systems may choose subjective or objective method for contract interpretation Nowadays, due to social and commercial factors, all legal systems recognize that reasonable expectation needs to be protected, thus most modern legal systems combine both subjective and objective method in contract interpretation German contract law regulates contracts with ambiguous content through the interpretation of contract Contract interpretation traditionally stemmed from subjective method but after the 2002 reformation, the starting point to interpret contract change from subjective method (finding mutual intentions of parties) to objective method (“reasonable person in similar circumstance” criterion) However, it is still possible to see subjective factors in the objective approach because the meaning of contractual term is not only determined by the understanding of a reasonable person but rather interpreted according to the understanding of a reasonable person in a similar circumstance

Basis of the objective approach to contractual interpretation of German contract law is to ensure balance between parties in a contractual relationship and is expressed in two aspects Firstly, by interpreting contracts based on the understanding of a reasonable person, this approach warns the contracting parties to be cautious in using words because they are responsible for their declaration and the law protects the legitimate belief of the person who put trust in the objective meaning of contractual terms Second, by interpreting contracts based on the understanding of a reasonable person placed in similar situation to the parties, this approach will prevent the Court from using abstract elements such as fairness or reasonable to arbitrarily explain the contract

In English contract law, contract interpretation is used to regulate contracts with ambiguous content Although traditionally follow parol evidence rule in interpreting contract, with the development through time English contract law has adopted a more open approach to interpret unclear contract terms, accordingly, the unclear contract terms will be interpreted in the formation context of the contract Nowadays English contract law mainly uses objective approach in interpreting contracts