Tri-party contracts of purchase and sale (tripartite agreements) are becoming increasingly common in today's business. So how are these contracts regulated under Vietnamese law? Let NPLaw walk you through the key legal aspects in the article below:
Tri-party contracts of purchase and sale (tripartite agreements) are becoming increasingly common in today's business. So how are these contracts regulated under Vietnamese law? Let NPLaw walk you through the key legal aspects in the article below:
I. Current situation regarding Tri-party contracts of purchase and sale
Tri-party contracts of purchase and sale are a common form of transaction in commerce, finance, and technology. However, the current application of these contracts presents certain legal and practical issues that should be noted:
- Legal uncertainties: Although Tri-party contracts of purchase and sale are widely recognized and applied, various legal issues remain unresolved. Specifically, determining the responsibilities of each party, as well as their rights and obligations, may lead to disputes.
- Risks: These contracts inherently involve higher risks due to the complexity of the transaction and the number of parties involved. Risks may arise from unclear contract terms, payment capacity of parties, or unforeseen market changes.
- Lack of transparency: In some cases, contracts lack transparency, leading to confusion or misunderstandings about the rights and responsibilities of the parties. This can result in contract breaches and disputes.
- Challenges in dispute resolution: When disputes arise, resolution may become complicated due to the involvement of multiple parties. Determining each party’s responsibilities and benefits in the dispute process can be particularly difficult.
Therefore, executing a tri-party contract of purchase and sale requires careful attention and legal precision to avoid future complications.
II. What is a Tri-party contract of purchase and sale?
A tri-party contract of purchase and sale is a type of commercial agreement involving three entities: a purchaser, a seller, and a third party. This third party may be an intermediary, a financial institution, or any other individual or organization involved in the transaction.
In such contracts, the purchaser and seller conduct the transaction as usual, but with the involvement of a third party whose role may vary depending on the specific nature of the contract. A third party may act as an intermediary facilitating the transaction, as a lender offering financial services to support the deal, or as an insurer mitigating risks for the contracting parties.
Tri-party contracts of purchase and sale are widely used across various sectors such as real estate, finance, information technology, and more.
III. Conditions for the validity of a tri-party contract of purchase and sale
1. Conditions regarding content
According to Clause 1, Article 117 of the 2015 Civil Code of Vietnam, a contract is legally valid if the following content-based conditions are satisfied:
- Legal capacity: All three parties must have the legal capacity to engage in the transaction. This means that individuals must be of legal age and competent, while business entities must be properly registered and legally allowed to engage in the relevant business activities.
- Voluntary participation: The contract must be entered into willingly by all parties, without coercion, deception, or fraud. Each party should freely make decisions without undue influence.
- Lawful purpose and content: The objective and terms of the contract must not violate legal prohibitions or social ethics. Any clause or purpose contrary to the law or societal values will render the contract invalid.
2. Conditions regarding form
According to Clause 2, Article 117 of the 2015 Civil Code, the form of a civil transaction is a condition for its validity if specified by law.
For example: Sales contracts for condominiums must follow Form 01 as regulated under Decree No. 02/2022/NĐ-CP.
According to Articles 117 and 119 of the Civil Code, contracts can be concluded in oral, written, or conduct-based forms. However, due to the complexity of tri-party contracts and the necessity for clearly defined roles and responsibilities, a written contract is generally preferred.
Nonetheless, oral agreements are not prohibited under Vietnamese law. The parties may form an oral agreement, but it is advisable to document the terms in some way to serve as evidence should a dispute arise.
If a contract fails to comply with legal requirements regarding form — where form is a condition for validity — the contract will be deemed invalid under Article 122 of the Civil Code. In such cases, the legal consequence is that the parties must restore the original state prior to the transaction.
IV. Frequently asked questions about tri-party contracts of purchase and sale
1. Is notarization required for a tri-party contract of purchase and sale?
As noted above, a tri-party contract of purchase and sale is similar to a two-party contract and is based on mutual agreement. Its purpose is to establish, amend, or terminate rights and obligations. The 2015 Civil Code does not require notarization for all such contracts unless the law mandates it for specific types (e.g., land use right transfers).
Therefore, in most cases, notarization is not mandatory. However, notarizing a contract enhances its legal certainty, confirms the mutual consent of the parties, and strengthens its evidentiary value in case of disputes.
2. When does a tri-party contract of purchase and sale become effective?
Under Article 401 of the 2015 Civil Code, the contract becomes effective:
- At the time of notarization or authentication, if required by law;
- At a time agreed upon by the parties, if such agreement exists;
- At the time of conclusion, if no agreement or legal requirement for notarization exists.
3. Can a tri-party contract of purchase and sale be made orally?
Vietnamese law does not prohibit oral three-party contracts. However, to ensure clarity and minimize risks, most such contracts are put in writing. Written documentation also provides proof of the contract’s existence if needed for legal purposes.
V. Legal services related to tri-party contracts of purchase and sale
The above is an overview of legal considerations regarding three-party sales contracts. For more information, legal support, or personalized consultation, feel free to contact NPLaw for advice from our experienced team of lawyers and legal specialists.
