Regulations on the resolution of disputes related to breaches of service contracts

In business activities and daily life, service contracts play an important role. However, the execution of such contracts does not always proceed smoothly, leading to disputes due to breaches of contractual obligations. As a result, the demand for resolving disputes related to breaches of service contracts in an effective and lawful manner has become increasingly pressing. 

I. The need to resolve disputes related to breaches of service contracts

Disputes over service contracts may arise in various sectors such as consultancy, design, maintenance, education, transportation, logistics, advertising, etc.

Accordingly, common breaches include failure to perform services on time, failure to meet agreed quality standards, refusal to make payment, unlawful unilateral termination of the contract. When their lawful rights and interests are infringed, the parties often seek intervention from competent authorities to compel the breaching party to compensate for damages or to continue executing its contractual obligations.

II. Legal regulations on the resolution of disputes related to breaches of service contracts

1. What is the resolution of disputes related to breaches of service contracts?

Pursuant to Article 513 of the Civil Code 2015: A service contract is an agreement between the parties whereby the service provider performs work for the service user, and the service user is obliged to pay service fees to the service provider.

Accordingly, the resolution of disputes related to breaches of service contracts is understood as the process by which the parties apply for various methods (self-negotiation, mediation, arbitration, or court proceedings) to settle disagreements and conflicts arising from one party’s failure to execute or improper execution of the obligations agreed upon in the service contract.

2. Common disputes related to breaches of service contracts

Common disputes include:

• Disputes over service quality not in accordance with the agreement;
• Disputes over time of implementation;
• Disputes over payment obligations;
• Disputes over unlawful unilateral termination of service contracts;
• Disputes over compensation for damages arising from contractual breaches.

These disputes often affect the rights and interests of the parties and require appropriate resolution methods in accordance with legal regulations.

3. Competent authorities to resolve disputes related to breaches of service contracts

Jurisdiction to resolve disputes depends on the dispute resolution method chosen by the parties:

• Courts: If negotiation and mediation fail, either party has the right to initiate a lawsuit before the competent People’s Court in accordance with Article 26 of the Civil Procedure Code 2015. The Court’s jurisdiction shall be determined based on regulations on general jurisdiction, specific jurisdiction, and territorial jurisdiction.
• Commercial arbitration: If the dispute arises from commercial activities and the parties have entered into an arbitration agreement, the dispute shall be resolved by commercial arbitration in accordance with Articles 2 and 5 of the Law on Commercial Arbitration 2010.

The choice of dispute resolution authority depends on the agreement between the parties and the nature of the dispute.

III. Certain questions regarding the resolution of disputes related to breaches of service contracts

1. If one party to a service contract is a foreign legal entity, may the dispute be resolved in Viet Nam?

Pursuant to Clause 1 Article 469 of the Civil Procedure Code 2015, Vietnamese courts have jurisdiction over civil cases involving foreign elements in the following circumstances:

• The defendant is an individual residing, working, or living long-term in Viet Nam;
• The defendant is an agency or organization headquartered in Viet Nam, or is an agency or organization having a branch or representative office in Viet Nam with respect to disputes related to the activities of such branch or representative office;
• The defendant has assets located within the territory of Viet Nam;
• Divorce cases where the plaintiff or defendant is a Vietnamese citizen, or where the parties are foreigners residing, working, or living long-term in Viet Nam;
• Civil relations where the establishment, change, or termination of such relations occurs in Viet Nam, the subject matter of such relations is assets located in Viet Nam, or the work is performed in Viet Nam;
• Civil relations where the establishment, change, or termination occurs outside Viet Nam but relates to the rights and obligations of Vietnamese agencies, organizations, or individuals, or of parties having their headquarters or residence in Viet Nam.

In the above cases, Vietnamese courts have jurisdiction to resolve civil disputes involving foreign elements. Accordingly, parties to contracts with foreign elements may agree to select Vietnamese courts for dispute resolution.

2. What are the conditions for requesting a court to resolve disputes related to service contracts?

To request a court to resolve a dispute related to a service contract, the following basic conditions must be satisfied:

• The claimant has the right to initiate a lawsuit in accordance with Article 186 of the Civil Procedure Code 2015;
• The case falls within the jurisdiction of the court according to Article 26 of the Civil Procedure Code 2015;
• The statute of limitations for initiating legal proceedings has not expired, in accordance with Articles 154 and 155 of the Civil Code 2015 and Article 184 of the Civil Procedure Code 2015;
• The matter has not been resolved by a legally effective judgment or decision of a court or by a legally effective decision of a competent state authority according to Point c Clause 1 Article 192 of the Civil Procedure Code 2015.

Satisfaction of these conditions constitutes the basis for the court to accept and resolve service contract disputes in accordance with the law.

3. May disputes related to service contracts be submitted to VIAC for resolution?

Pursuant to Article 2 of the Law on Commercial Arbitration 2010, the jurisdiction of arbitration covers:

• Disputes arising between parties from commercial activities;
• Disputes arising between parties where at least one party engages in commercial activities;
• Other disputes between parties that are permitted by law to be resolved by arbitration.

The condition for dispute resolution by arbitration under Clause 1 Article 5 of the Law on Commercial Arbitration 2010 is as follows: A dispute shall be resolved by arbitration if the parties have an arbitration agreement. An arbitration agreement may be established before or after the dispute arises.

Accordingly, if the parties have agreed to an arbitration clause designating the Vietnam International Arbitration Centre (VIAC) as the dispute resolution forum, they may request VIAC or the designated arbitral institution to resolve the dispute in accordance with the applicable arbitration rules.

4. What is the statute of limitations for initiating a lawsuit to resolve service contract disputes?

Pursuant to Article 429 of the Civil Code 2015: 

• The statute of limitations for initiating a lawsuit requesting a court to resolve a contractual dispute is three (03) years from the date on which the person with the right to initiate the lawsuit knows or must know that their lawful rights and interests have been infringed.

Accordingly, the statute of limitations for initiating a lawsuit to resolve a service contract dispute is three (03) years from the date the infringement is known or should have been known.

5. May the parties agree on the method of dispute resolution themselves?

Pursuant to Clause 2 Article 3 of the Civil Code 2015: 

• Individuals and legal entities shall establish, execute, and terminate their civil rights and obligations on the basis of freedom and voluntariness in commitments and agreements. All commitments and agreements that do not violate prohibitions of the law or contravene social morals shall be legally effective and respected by other subjects.

Accordingly, the parties are fully entitled to freely agree on dispute resolution methods such as negotiation, mediation, or to agree to submit the dispute to arbitration or court; they may even agree on a separate dispute resolution procedure, provided that such agreement does not violate prohibitions of the law or contravene social morals.

6. What should be done if the breaching party refuses to comply with a court judgment or arbitral award?

Pursuant to Clause 1 Article 66 of the Law on Commercial Arbitration 2010: 

• Upon expiry of enforcement of an arbitral award, if the obligated party fails to voluntarily enforce it and does not request to cancel it in accordance with Article 69 of this Law, the injured party has the right to submit a petition requesting the competent civil judgment enforcement authority to enforce the arbitral award.

Clause 2 Article 9 of the Law on Civil Judgment Enforcement 2008 provides: 

• If the obligated party has the conditions to enforce a judgment but fails to do so voluntarily, they shall be subject to compulsory enforcement in accordance with this Law.

Accordingly, if the breaching party fails to voluntarily comply with a legally effective court judgment, decision, or arbitral award, the non-breaching party has the right to request the competent civil judgment enforcement authority to organize compulsory enforcement in accordance with the law on civil judgment enforcement.

IV. Legal advisory services on resolving disputes related to breaches of service contracts

The above constitutes NPLaw’s article on the resolution of disputes related to breaches of service contracts. With a team of experienced lawyers and legal professionals, NPLaw provides reputable and professional legal services, ensuring the best protection of our clients’ lawful rights and interests. Should you require legal support, please contact NPLaw for consultation and assistance.