Understanding regulations on disputes arising from goods lease contracts

Disputes arising from goods lease contracts have become increasingly common due to differences in agreements, breaches of contractual obligations, or force majeure. Common issues include late payment, failure to return goods on time, damage to goods, or unlawful unilateral termination of contracts. The absence of clear and specific contractual provisions also contributes to the increased disputes, causing losses to the parties involved.

I. Current situation of disputes arising from goods lease contracts

Disputes arising from goods lease contracts have become increasingly common due to differences in agreements, breaches of contractual obligations, or force majeure. Common issues include late payment, failure to return goods on time, damage to goods, or unlawful unilateral termination of contracts. The absence of clear and specific contractual provisions also contributes to the increased disputes, causing losses to the parties involved.

II. Legal regulations on disputes arising from goods lease contracts

1. What is a dispute arising from a goods lease contract?

A dispute arising from a goods lease contract refers to a conflict between the parties during the execution of a goods lease contract, arising from breaches of obligations, misinterpretation of contractual provisions, or unforeseen circumstances.

Common disputes include late payment, failure to deliver or return goods on time, damage to goods, and unlawful unilateral termination of the contract. Resolution of such disputes is typically based on contractual agreements, applicable laws, and competent dispute resolution authorities.

2. Common types of disputes arising from goods lease contracts

Below are some common disputes arising in goods lease contracts:

Late payment or non-payment of lease fees: The lessee fails to make payment obligations on time, causing damage to the lessor.
Failure to deliver goods on time: The lessor fails to supply the goods in accordance with the agreed duration, adversely affecting the lessee’s operations.
Damage to or loss of goods: Disputes regarding liability when goods are damaged during use or transportation.
Failure to return goods or return of goods not in their original condition: The lessee fails to return the goods or returns them in a condition inconsistent with the contractual commitments.
Unlawful unilateral termination of the contract: One party arbitrarily terminates the contract without legitimate grounds, causing damage to the other party.
Breach of contractual provisions: One party fails to comply with agreements relating to the purpose of use, maintenance, or preservation of the goods.
Disputes over deposits: Conflicts concerning the refund or retention of deposits upon termination or expiration of the contract.

Resolution of these disputes is generally based on the contract, negotiations between the parties, or intervention by competent authorities in accordance with the law.

3. Methods for resolving disputes arising from goods lease contracts

Disputes arising from goods lease contracts may result from breaches of obligations, disagreements in contract execution, or force majeure. To resolve disputes effectively, the parties may choose for one of the following methods:

Negotiation and mediation: It is the preferred approach, as it helps save time and costs while maintaining cooperative relationships. If an agreement is reached, it should be drafted in writing to ensure legal validity.
Resolution through commercial arbitration: If the contract contains an arbitration clause, the dispute may be resolved by a commercial arbitration center in accordance with the Law on Commercial Arbitration 2010. Such a method is expeditious, confidential, and suitable for enterprises or disputes involving foreign elements.
Initiation of court proceedings: If negotiation and arbitration are ineffective, the parties may file a lawsuit with the competent People’s Court. Pursuant to the Civil Code 2015, the statute of limitations for initiating a lawsuit is three (03) years from the date on which lawful rights and interests are infringed.
Application of interim urgent measures: During the litigation process, the requesting party may petition the court to freeze bank accounts, seize goods, or suspend transactions in order to protect its lawful rights and interests.

The parties should prioritize negotiation; if no agreement can be reached, the dispute may be referred to arbitration or the court. To mitigate risks, contracts should clearly stipulate rights, obligations, and remedies in case of breach.

III. Questions regarding disputes arising from goods lease contracts

1. Can disputes arising from goods lease contracts be brought before VIAC?

Disputes arising from goods lease contracts may be resolved by the Vietnam International Arbitration Centre (VIAC) if the parties have entered into a valid arbitration agreement. Pursuant to Article 5 of the Law on Commercial Arbitration 2010, the existence of an arbitration agreement between the parties is a prerequisite for arbitration.

The arbitration agreement must be made in writing, either as an arbitration clause in the main contract or as a separate agreement. In the absence of such an agreement, the dispute does not fall within the jurisdiction of VIAC.

Furthermore, the choice of arbitration must comply with applicable laws and must not fall within disputes that are required by law to be resolved by the courts. Therefore, prior to initiating arbitration at VIAC, it is necessary to carefully verify the existence and validity of the arbitration agreement between the parties.

2. Is it mandatory to issue invoices for leased goods?

Invoices must be issued for leased goods if the goods lease contract falls within the scope of value-added tax (VAT) as prescribed by the Law on VAT and Circular No. 219/2013/TT-BTC, except for cases exempt from VAT in accordance with the law (Article 4 of Circular No. 219/2013/TT-BTC).

Specifically, when an enterprise or organization leases assets, equipment, or machinery, and such lease does not fall under VAT exemption, the lessor is obligated to issue VAT invoices upon collection of lease fees.

However, if the lessor is not subject to VAT or if the leased assets are not subject to VAT, the issuance of VAT invoices is not required.

3. Main contents in goods lease contracts to prevent disputes

To minimize the risk of disputes arising from goods lease contracts, the contracting parties should pay particular attention to several essential contractual provisions. These elements not only protect the parties’ interests but also ensure transparency and clarity throughout contract execution.

Essential provisions include:

Detailed information on the goods: Clear description of the type, quantity, quality, condition, and technical specifications of the leased goods to avoid disputes after delivery.
Lease term and delivery method: Clear stipulation of the lease duration, delivery and return dates, delivery conditions, and the responsibilities of the parties during delivery and receipt.
Lease value and payment method: Clear specification of lease fees, additional costs (if any), payment methods, and payment deadlines.
Rights and obligations of the parties: Clear determination of the rights and obligations of both the lessor and the lessee, including use, preservation, and maintenance of the goods, as well as liability for damage or loss.
Repair and maintenance provisions: Clear allocation of responsibility and costs for repair and maintenance during the lease term.
Contract termination provisions: Conditions for early termination and the legal consequences arising from contractual breaches.
Dispute resolution clause: Clear agreement on dispute resolution mechanisms, including the competent authority, procedural steps, or alternative dispute resolution methods such as arbitration.
Insurance provisions: If necessary, stipulation of the lessee’s obligation to obtain insurance for the leased goods to protect the assets in case of incidents.

Focusing on these provisions helps protect the parties’ rights and minimize disputes during contract execution.

4. How should late return of goods by the lessee be handled?

If the lessee fails to return the goods on time, the lessor may apply measures in accordance with the law and the contract, including:

Compelling proper execution: Pursuant to Clause 1, Article 297 of the Commercial Law 2005, the lessor has the right to require the lessee to properly execute contractual obligations, including returning the goods upon expiry. If the lessee fails to comply, the lessor may claim damages or late payment sanctions.
Initiating court or arbitration proceedings: If the parties fail to reach an agreement, the lessor may file a lawsuit with the court or refer the dispute to arbitration in accordance with Article 30 of the Civil Procedure Code 2015, requesting the return of goods or compensation for damages.
Unilateral termination of the contract: If the lessee fails to return the goods on time without legitimate reasons, the lessor may unilaterally terminate the contract pursuant to Article 428 of the Civil Code 2015 and claim damages.
Dispute resolution: If no agreement can be reached, the dispute may be resolved by the court or arbitration in accordance with the Civil Code and the Civil Procedure Code.

All measures must comply with contractual provisions and applicable laws to protect the lessor’s lawful rights and interests.

5. Who takes liability when leased goods are damaged?

Liability for damage to leased goods is determined based on the following factors:

The lessee: If the damage results from the lessee’s negligence, lack of responsibility, or improper use, the lessee must repair or compensate for the damage.
The lessor: If the damage is caused by the lessor’s fault, such as defective goods or pre-existing damage prior to delivery, the lessor takes responsibility.
Contractual agreement: In many cases, liability is determined by the contractual provisions. Where the contract clearly stipulates responsibility for damaged goods, the parties must comply with such agreement.

Accordingly, in addition to statutory liability and the cause of damage, contractual agreements are decisive in determining responsibility.

6. Is unilateral termination of the goods lease contract permissible?

Unilateral termination of the goods lease contract is permissible, provided that it complies with contractual provisions and applicable laws, specifically:

Pursuant to contractual agreement: Where the contract clearly stipulates the right to unilateral termination and accompanying conditions, the parties may lawfully exercise such right.
Pursuant to Article 428 of the Civil Code 2015: If the lessee fails to return goods on time without legitimate reasons, the lessor may unilaterally terminate the contract and claim damages.

In summary, unilateral termination is permissible but must be based on contractual provisions and legal regulations to ensure the lawful rights and interests of the parties.

7. What is the statute of limitations for initiating disputes arising from goods lease contracts?

Pursuant to Article 429 of the Civil Code 2015, the statute of limitations for initiating disputes arising from goods lease contracts is three (03) years from the date on which the lawful rights and interests of the non-breaching party are infringed, or from the date on which the non-breaching party becomes aware of such infringement.

It means that within three years from the occurrence of the dispute or from the date the infringement is discovered, the non-breaching party has the right to initiate legal proceedings. After this period, the right to initiate a claim may lapse unless legally justified grounds for extension apply.

IV. Legal consulting services on disputes arising from goods lease contracts

NP Law’s legal consulting services on disputes arising from goods lease contracts assist enterprises in drafting, negotiating contracts, and resolving disputes, ensuring the lawful rights and interests of the parties.