Legal regulations on assignment of contracts

At present, assignment of contracts is commonly implemented in many sectors, particularly in the real estate sector, in order to ensure flexibility in contract execution and to optimize the benefits derived from executed agreements. In the article below, NPLaw analyzes several current legal regulations on contract assignment.

I. Current situation of assignment of contracts

In the context of an increasingly developed economy and vibrant commercial activities, contract assignment is no longer merely an administrative procedure but has become an essential component of the business strategies of many enterprises.

Such assignment enables parties to be flexible in their investments while it also creates opportunities for the assignee. To ensure a lawful assignment process, the parties must strictly comply with legal regulations so as to avoid disputes arising in the course of contract assignment.

II. Legal regulations on assignment of contracts

1. What is a contract assignment?

At present, there is no statutory provision expressly defining contract assignment. However, based on practical application, contract assignment may be understood as an act whereby one party to a contract transfers its rights and obligations under the contract to a third party (the assignee).

Such assignment may apply to various types of contracts, including sale and purchase contracts, lease contracts, service contracts, and certain other types of contracts, provided that assignment is agreed upon in the original contract and the parties consent to the assignment.

2. Conditions for assignment of contracts

To assign the contract, the parties must have an agreement on contract assignment in the original contract and satisfy the agreed assignment conditions (if any). In addition, several basic conditions prescribed in Article 117 of the Civil Code 2015 must be met, including:

• The parties to the assignment contract possess appropriate civil act capacity and have the authority to execute the contract in accordance with the law;
• The execution of the contract is entirely voluntary;
• The purpose and contents of the assignment do not violate legal provisions or contravene social ethics;
• The form of the assignment contract is appropriate to the relevant subject matter and transaction.

Moreover, in certain special cases, the conditions for contract assignment may vary as governed by specialized laws. For example, the assignment of real estate business contracts must satisfy the conditions set out in Article 50 of the Law on Real Estate Business 2023.

Accordingly, when conducting the contract assignment transaction, the parties should carefully examine the specific assignment conditions applicable to each particular case to ensure that the assignment is implemented in compliance with the law and has full legal validity.

3. Is notarization of contract assignment mandatory?

Pursuant to Clause 2 Article 119 of the Civil Code 2015, the parties are not required to notarize a contract unless the law provides that a civil transaction must be expressed in writing with notarization, certification, or registration, in which case such requirements must be complied with.

However, in order to minimize legal risks and better protect the rights and interests of the parties involved in the event of a dispute, the parties may agree to have the contract assignment notarized.

III. Common questions regarding assignment of contracts

1. Is the consent of the other party required prior to contract assignment?

Whether prior consent of the other party is required depends on the type of contract and the contractual terms agreed upon by the parties at the time of execution. In practice, before assigning a contract, the consent of the remaining party is generally required to ensure proper contract execution and safeguard the rights and interests of the parties. It is particularly important for significant contracts that affect essential rights and obligations, such as lease contracts or contracts for the transfer of ownership of off-plan residential houses.

2. Cases where contract assignment is invalid

Pursuant to the provisions of the Civil Code 2015, a contract shall be invalid in the following cases:

• Invalid due to violation of prohibitions of law or contravention of social ethics;
• Invalid due to being a sham transaction;
• Invalid due to being established or performed by a minor, a person who has lost civil act capacity, a person with cognitive or behavioral control difficulties, or a person with limited civil act capacity;
• Invalid due to mistake;
• Invalid due to deception, threat, or coercion;
• Invalid due to the contracting party being unable to perceive and control his/her acts at the time of establishment;
• Invalid due to non-compliance with form requirements;
• Invalid due to an object that cannot be performed.

Accordingly, the contract assignment shall be deemed invalid if it falls under any of the above circumstances.

IV. Legal consultancy services on assignment of contracts

The above is NPLaw’s article on the current regulations governing contract assignment. With a team of experienced lawyers and legal specialists, NPLaw provides reputable and professional legal services, ensuring the best protection of the legitimate rights and interests of our valued clients. Should you require legal assistance, please contact NPLaw for consultation and support.