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When are fines for breach of contract applied?

Besides compensation for damages, fines for breach of contract are important penalties that can protect the legitimate rights and interests of the party in the contract. So, when are fines for breach of contract applied? Apolo Lawyers - Solicitors & Litigators (Hotline: (+84) 903.419.479) will let you know about it.

Fines for breach of contract are a monetary remedy that the breaching party must pay to the breached party.

1. Fines for breach of a civil contract

Agreement on fines for breach of contract is reached by the parties to a contract which requires the violating party to pay a fine to the aggrieved party.

The fine levels shall be agreed among the parties unless otherwise prescribed by relevant laws.

The parties may reach an agreement on fines for breach of contract which does not specify that the breaching party has to pay both a fine for breach of contract and compensation for damage, then the breaching party has to pay only the fine for the breach of contract.

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Thus, the parties to a civil contract can only apply fines for breach of contract where there is an agreement.

2. Fine for breach of commercial contract

Fines for breach mean remedies whereby the breached party requests the breaching party to pay an amount of fine for its breach of a contract, if so agreed in the contract, except for cases of liability exemption specified in Article 294 of Law on commercial.

The fine level for a breach of a contractual obligation or the aggregate fine level for more than one breach shall be agreed upon in the contract by the parties but must not exceed 8% of the value of the breached contractual obligation portion, except for cases specified in Article 266 of this Law.

Where the parties do not agree upon fines for breaches, the aggrieved party shall only be entitled to claim damages, unless otherwise provided for by this Law.

Where the parties agree upon fines for breaches, the aggrieved party shall be entitled to apply both remedies of fines and damages, unless otherwise provided for by this Law.

Thus, the parties to a commercial contract can only apply fines for breach of contract when there is an agreement.

>>> Read more: Exemption from liability due to breach of a contract

>>> Read more: Procedure for signing contracts for the international sale of goods

3. Fines for breach of construction contract

Fines for breach of construction contracts must be agreed upon by the parties and stated in the contract.

For construction works using public investment capital or foreign state investment capital, the contract fine shall not exceed 12% of the value of the breach contract portion.

In addition to the agreed – upon fine, the breaching party must also compensate the other party or third party (if any) for damage in accordance with the Construction law and other relevant laws.

Thus, the parties to a construction contract can only apply fines for breach of contract where there is an agreement.

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There is an overview of when are fines for breach of contract applied?. If you have any problems, do not hesitate to contact us via email at contact@apolo.com.vn or Hotline - 0903 419 479 for the best advice and support.

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