Precedent No. 09/2016/AL

Precedent No. 09/2016/AL on determining the average overdue debt interest rate on the market and paying interest on the amount of fines for violations and compensation for damages was approved by the Council of Judges of the Supreme People's Court on October 17, 2016 and promulgated under Decision No. 698/QD-CA dated October 17, 2016 of the Chief Justice of the Supreme People's Court.

Source of case law:

Final judgment No. 07/2013/KDTM-GDT dated March 15, 2013 of the Council of Judges of the Supreme People's Court on the business and commercial case "Dispute over goods sale contract" in Bac Ninh province between the plaintiff, Viet Y Steel Joint Stock Company, and the defendant, Hung Yen Metal Joint Stock Company; the persons with related rights and obligations are Ms. Le Thi Ngoc Lan and Mr. Le Van Dung.

Location of case law:

Paragraphs 4, 5 and 6, Section 2, “Considering” section of the above-mentioned cassation decision.

Overview of the case law:

- Case study 1:

The contract for the sale of goods is breached because the seller fails to deliver or fails to deliver enough goods to the buyer, resulting in the seller being obliged to refund the advance payment and interest due to late payment.

- Legal solution 1:

In this case, interest due to late payment is calculated according to the average overdue debt interest rate on the market equal to the average overdue debt interest rate of at least three local banks at the time of payment (first instance trial), unless otherwise agreed or otherwise provided by law.

- Case study 2:

Contracts for the sale of goods give rise to obligations to pay fines and compensation for damages.

- Legal solution 2:

In this case, the person obligated to pay the fine or compensation for damages does not have to pay interest on the amount of the fine or compensation for damages.

Legal provisions relating to precedents:

• Article 34, Article 37, Clause 3, Article 297, Articles 300, 301, 302, 306 and 307 of the Commercial Law 2005;
• Articles 307, 422, 474 and 476 of the 2005 Civil Code.

CASE CONTENT

According to the petition dated July 7, 2007, the request to change the petition dated October 10, 2007, the documents in the case file and the presentation of the plaintiff's representative:

On October 3, 2006, Viet Y Steel Joint Stock Company (hereinafter referred to as Viet Y Steel Company) signed Economic Contract No. 03/2006-HDKT with Hung Yen Metal Joint Stock Company (hereinafter referred to as Hung Yen Metal Company); represented by Mr. Nguyen Van Tinh - Deputy General Director under Authorization No. 621 dated September 10, 2005 of the Company's General Director. According to this Contract, Viet Y Steel Company (Party A) purchased goods in the form of continuous cast steel billets CTS-5SP/PS in bulk, according to GOST 380-94 standard from Hung Yen Metal Company (Party B) with a quantity of 3,000 tons +/- 5%, unit price of 6,750,000 VND/ton; delivery time from October 25 to 31, 2006; Total contract value is 20,250,000,000 VND +/-5%.

On October 4, 2006, Viet Y Steel Company transferred the entire amount of VND 20,250,000,000 to Hung Yen Metal Company according to the payment order through Hai Duong Foreign Trade Bank. Hung Yen Metal Company also delivered to Viet Y Steel Company a total quantity of 2,992,820 tons of steel billets, still lacking 7,180 tons corresponding to the amount of VND 48,465,000.

On December 20, 2006, the two parties signed Contract No. 05/2006-HDKT. The representative of Hung Yen Metal Company to sign the contract was Mr. Le Van Manh - Deputy General Director (according to Authorization No. 1296/UQ/HYM of the General Director of the Company). According to this contract, Viet Y Steel Company purchased 5,000 tons of steel billets (standards and quality are the same as Contract No. 03), unit price 7,290,000 VND/ton (including VAT and transportation fee). The total contract value is 36,450,000,000 VND +/- 5%; delivery time from January 18, 2007 to January 30, 2007; Viet Y Steel Company will advance 500,000,000 VND to Hung Yen Metal Company immediately after signing the contract; The remaining amount will be paid in two installments after Viet Y Steel Company receives the goods.

The contract also stipulates that Hung Yen Metal Company must pay a penalty of 2% of the contract value if it fails to deliver the correct type of goods or does not deliver at all. According to the representative of Viet Y Steel Company, on December 21, 2006, Viet Y Steel Company transferred 500,000,000 VND in advance to Hung Yen Metal Company, but Hung Yen Metal Company did not perform this contract without reason.

On the same day, December 20, 2006, Viet Y Steel Company also signed Contract No. 06/2006 with Hung Yen Metal Company (represented by Mr. Le Van Manh - Deputy General Director) to purchase from Hung Yen Metal Company 3,000 tons of steel billets, unit price 7,200,000 VND/ton. The total contract value is 21,600,000,000 VND; delivery time from January 5, 2007 to January 15, 2007.

On December 22, 2006, Viet Y Steel Company transferred to Hung Yen Metal Company the full amount of 21,600,000,000 VND according to the payment order at Techcombank Hung Yen Branch, but Hung Yen Metal Company only transferred to Viet Y Steel Company 2,989,890 tons of steel billets, still lacking 7,640 tons, equivalent to 55,008,000 VND.

On February 1, 2007, Viet Y Steel Company signed Contract No. 01/2007 with Hung Yen Metal Company (represented by Mr. Le Van Manh - Deputy General Director) to purchase 5,000 tons of steel billets from Hung Yen Metal Company, unit price 7,800,000 VND/ton. The total contract value is 39,000,000,000 VND +/- 5%. During the contract implementation, Viet Y Steel Company transferred to Hung Yen Metal Company 37,710,000,000 VND and Hung Yen Metal Company transferred to Viet Y Steel Company 3,906.390 tons of steel billets, totaling 30,469,842,000 VND. The number of steel billets that Hung Yen Metal Company has not paid to Viet Y Steel Company is 928,25538 tons, equivalent to the amount of 7,240,158,000 VND.

Viet Y Steel Company has sent many official dispatches requesting Hung Yen Metal Company to perform the contract, but Hung Yen Metal Company still does not perform, forcing Viet Y Steel Company to buy steel billets from other manufacturers to ensure the Company's production and business.

Because Hung Yen Metal Company violated the contracts signed by both parties, Viet Y Steel Company filed a lawsuit requesting Hung Yen Metal Company to be responsible for payment and compensation for all damages due to violation of delivery obligations in Contracts No. 03/2006, 05/2006, 06/2006, 01/2007 at the time of filing the lawsuit, which was 12,874,298,683 VND, of which the goods price corresponded to 1,777,020 kg of steel billets = 11,181,662,503 VND, the violation penalty was 1,316,490,480 VND, and the overdue interest was 376,145,700 VND.

At the first instance trial on September 3, 2009, the plaintiff's representative requested that Hung Yen Metal Company pay Viet Y Steel Company up to the time of the first instance trial on September 3, 2009, VND 28,145,956,647 and forced Hung Yen Metal Company to issue a value-added invoice to Viet Y Steel Company equivalent to the quantity of goods delivered in Contract No. 06/2006, which was VND 21,544,992,000, and Contract No. 01/2007, which was VND 30,469,842,000.

In the minutes of testimony, minutes of conciliation, minutes of trial, the Defendant's representative stated:

At the time when Hung Yen Metal Company signed the above contracts with Viet Y Steel Company, Ms. Le Thi Ngoc Lan was still the General Director and Mr. Le Van Dung (Ms. Lan's husband) was the business consultant. On March 22, 2007, Ms. Le Thi Ngoc Lan transferred all of her shares in Hung Yen Metal Company to Ms. Nguyen Thi Toan and Ms. Toan took over the position of Acting General Director from April 2, 2007.

In the agreement on property division during the marriage between Mr. Le Van Dung and Ms. Le Thi Ngoc Lan as well as the commitment on the Company's debt, Mr. Le Van Dung acknowledged that he would be responsible for paying all debts of Hung Yen Metal Company established before April 1, 2007.

Now, Viet Y Steel Company is suing for compensation for damages in Contracts No. 03/2006, 05/2006, 06/2006, 01/2007. Hung Yen Metal Company does not agree because the responsibility for paying the debt belongs to Mr. Dung, Ms. Lan and the former leaders and managers of Hung Yen Metal Company. Hung Yen Metal Company is trying to work officially with Mr. Dung so that Mr. Dung can pay directly to Viet Y Steel Company or Mr. Dung can pay to Hung Yen Metal Company so that Hung Yen Metal Company can pay to Viet Y Steel Company.

Hung Yen Metal Company requests the Court to review and re-evaluate the legal value of Contracts No. 03/2006, 05/2006, 06/2006, 01/2007 signed by Mr. Tinh and Mr. Manh on behalf of Hung Yen Metal Company with Viet Y Steel Company in this case and to consider the responsibility of Mr. Dung, Mr. Manh, Mr. Tinh and Ms. Lan for the debts requested by Viet Y Steel Company.

At the first instance trial, Hung Yen Metal Company basically agreed with the contract performance figures provided by Viet Y Steel Company, but the financial figures were not recognized because the debt had not been reconciled; the interest on the contracts needed to be recalculated, but for contract No. 05, the defendant did not agree because the two parties had agreed to cancel the contract and transfer 500,000,000 VND that Viet Y Steel Company had advanced to perform contract No. 01/2007, so for contract No. 05, Hung Yen Metal Company did not violate.

Person with related rights and obligations - Ms. Le Thi Ngoc Lan presented:

In early 2004, she and her husband bought back shares from Mr. Nguyen Luong Tuan and Mr. Nguyen Van Thanh in Hung Yen Metal Company, at that time Hung Yen Metal Company was under construction. Since then, Ms. Lan became the General Director and Chairman of the Board of Directors, and Mr. Dung, her husband, became a business consultant for Hung Yen Metal Company.

Due to conflicts in their marital relationship, on September 5, 2005, Ms. Lan and Mr. Dung signed an Agreement on dividing property during their marriage at Hong Ha Law Office (under the Hanoi Bar Association). According to this agreement, Ms. Lan was entitled to own the house at 250 Ba Trieu Street, and Mr. Dung was entitled to own the entire 48 billion VND of shares of the couple at Hung Yen Metal Company, but Mr. Dung was responsible for paying the debts of Hung Yen Metal Company during the construction period of Hung Tai Steel Rolling Factory (under Hung Yen Metal Company).

Because there were no more shares and the shares were assigned to Mr. Dung, Ms. Lan delegated the management of the company to Mr. Tinh and then Mr. Manh. Although there were no more shares, Ms. Lan was still the General Director, but in reality, the management of Hung Yen Metal Company was managed by Mr. Dung (Ms. Lan's husband), Mr. Tinh and Mr. Manh.

It was not until July 2007 that Ms. Lan handed over the outstanding loan and the position of General Director to Ms. Toan. Ms. Lan also confirmed that Mr. Manh and Mr. Tinh (both of whom were Deputy Directors of Hung Yen Metal Company at that time) had signed economic contracts with Viet Y Steel Company with Ms. Lan's regular authorization. However, when handing over to Ms. Toan (rights and obligations), it was Mr. Dung and Ms. Toan, Ms. Lan affirmed that the responsibility to pay the debt to Viet Y Steel Company was not Ms. Lan's obligation.

Person with related rights and obligations - Mr. Le Van Dung presented:

Although the couple had divided their assets during their marriage and Mr. Dung owned shares in Hung Yen Metal Company, Mr. Dung only played the role of business consultant and was not allowed to participate in signing economic contracts or settlement of payments, so he had no responsibility. Mr. Dung did not agree with Hung Yen Metal Company's claim that he was the one responsible for paying the debt, but that responsibility should belong to Hung Yen Metal Company and Ms. Toan.

Mr. Dung confirmed that on April 1, 2007, he signed a commitment with Ms. Nguyen Thi Toan. That commitment shows the total value of the debt for the two parties to settle with each other and is only of personal internal significance between Mr. Dung and Ms. Toan as a basis for settlement and handover, but in fact there has been no purchase or sale of shares in the company between him and Ms. Toan. The two parties have not signed any share purchase contract, and he does not know how the transfer of company shares between Ms. Lan and Ms. Toan took place.

Regarding the lawsuit filed by Viet Y Steel Company to request Hung Yen Metal Company to pay its contractual obligations, Mr. Dung said that legally, Hung Yen Metal Company must take responsibility as a legal entity. He has no responsibility to any customers or partners, if any, it is only his responsibility to Hung Yen Metal Company. Mr. Dung requested to be absent from all court sessions.

In the First Instance Commercial and Business Judgment No. 01/2007/KDTM-ST dated November 14, 2007, the People's Court of Bac Ninh Province decided: "Hung Yen Metal Joint Stock Company must pay to Viet Y Steel Joint Stock Company the total amount of 04 contracts No. 03 dated October 3, 2006; No. 05 dated December 20, 2006; No. 06 dated December 20, 2006 and No. 01 dated February 1, 2007: VND 24,674,428,500". In addition, the First Instance Court also decided on the court fees and the right to appeal of the parties.

On November 27, 2007, Hung Yen Metal Joint Stock Company filed an appeal.

In the Commercial and Business Appeal Judgment No. 120/2008/KDTM-PT dated June 18, 2008, the Supreme People's Court of Appeal in Hanoi decided:

“Annul the First Instance Commercial and Business Judgment No. 01/2007/KDTM-ST dated November 14, 2007 of the People's Court of Bac Ninh Province. Transfer the case file to the People's Court of Bac Ninh Province to re-settle the case according to the provisions of law” for the reason that: The Court of First Instance has not taken the statements of Ms. Lan, Mr. Dung, Ms. Toan, Mr. Tinh, Mr. Manh and determined the participants in the proceedings, thereby clarifying the responsibility of who must pay the debt to the Viet Y Steel Company; in addition, documents such as the debt acknowledgment commitment, Mr. Dung's receipts, the authorization to manage and operate the company... are all photocopies without notarization, legal certification or comparison with the original of the Court of First Instance.

In the First Instance Commercial and Business Judgment No. 09/2008/KDTM-ST dated October 23, 2008, the People's Court of Bac Ninh province decided: "Hung Yen Metal Joint Stock Company must be responsible for paying Viet Y Steel Joint Stock Company the amount of 04 contracts No. 03 dated October 3, 2006; No. 05 dated December 20, 2006; No. 06 dated December 20, 2006 and No. 01 dated February 1, 2007, which is: VND 31,902,035,179.56".

On November 5, 2008, Hung Yen Metal Joint Stock Company filed an appeal.

In the Commercial and Business Appeal Judgment No. 32/2009/KDTM-PT dated February 19, 2009, the Supreme People's Court of Appeal in Hanoi decided:

“1. Annul the First Instance Commercial and Business Judgment No. 09/2008/KDTM-ST dated October 23, 2008 of the People's Court of Bac Ninh Province on the "Dispute over the contract for the sale of goods" between Hung Yen Metal Joint Stock Company and Viet Y Steel Joint Stock Company. 2. Transfer the case file to the First Instance Court to resolve the case again", with the reason: General Director Dinh Van Vi only sued Hung Yen Metal Company for 12,874,298,683 VND, but the authorized representative continuously changed and added additional requests for the lawsuit, which exceeded the scope of the lawsuit, violating Point 1, Clause 2, Article 164 of the Civil Procedure Code and Resolution No. 02/2006/NQ-HDTP dated May 12, 2006 of the Council of Judges of the Supreme People's Court. All of these amendments and additional requests for lawsuits are not in accordance with the law. The Court of First Instance accepted all of the representative's requests as serious violations of civil procedure, so the Court of Appeal did not consider the appeal on the content of Hung Yen Metal Company.

In the First Instance Commercial Judgment No. 18/2009/KDTM-ST dated September 3, 2009, the People's Court of Bac Ninh province decided:

“1. Force Hung Yen Metal Joint Stock Company to be responsible for paying Viet Y Steel Joint Stock Company the amount of 04 economic contracts: Contract No. 03/2006 dated October 3, 2006; Contract No. 05/2006 dated December 20, 2006; Contract No. 06/2006 dated December 20, 2006 and Contract No. 01/2007 dated February 1, 2007 with a total amount of 28,145,956,647 VND and must issue value-added invoices to pay Viet Y Steel for 2 contracts including Contract No. 06/2006 corresponding to the amount of goods of 21,544,992,000 VND and Contract No. 01/2007 corresponding to the amount of goods of 30,469,842,000 VND”. In addition, the Court of First Instance also decides on court fees, enforcement of judgments and the parties' right to appeal in accordance with the provisions of law.

On September 23, 2009, Hung Yen Metal Joint Stock Company filed an appeal.

In the Commercial and Business Appeal Judgment No. 63/KDTM-PT dated April 5, 2010, the Appeal Court of the Supreme People's Court in Hanoi decided: "Annul the Commercial and Business First Instance Judgment No. 18/2009/KDTM-ST dated September 3, 2009 of the People's Court of Bac Ninh Province. Transfer the case file to the People's Court of Bac Ninh Province for re-settlement according to the provisions of law".

On July 25, 2010, the People's Court of Bac Ninh province issued Official Dispatch No. 110/2010/CV-TA requesting the Chief Justice of the Supreme People's Court to review the appellate judgment according to the cassation procedure.

In the Appeal Decision No. 17/2012/KDTM-KN dated June 25, 2012, the Chief Justice of the Supreme People's Court requested the Council of Judges of the Supreme People's Court to conduct a review trial in accordance with the cassation procedure in the direction of annulling the Business and Commercial Appeal Judgment No. 63/KDTM-PT dated April 5, 2010 of the Supreme People's Court of Appeal in Hanoi; and transfer the case file to the Supreme People's Court of Appeal in Hanoi for re-trial in accordance with the provisions of law.

At the appeal hearing, the representative of the Supreme People's Procuracy agreed with the appeal of the Chief Justice of the Supreme People's Court.

The Council of Judges of the Supreme People's Court determined:

1. From October 2006 to February 2007, Viet Y Steel Company and Hung Yen Metal Company signed 4 economic contracts (No. 03/2006-HDKT dated October 3, 2006, No. 05/2006-HDKT, No. 06/2006-HDKT dated December 20, 2006 and No. 01/2007-HDKT dated February 1, 2007).

At the time the parties signed the contract, on the side of Hung Yen Metal Company, Ms. Le Thi Ngoc Lan was still the legal representative (based on the 5th and 6th amended Business Registration Certificates dated August 12, 2005 and July 6, 2007 of Hung Yen Metal Company and the Decision on changing the content of business registration No. 140/QD-HDCD dated July 2, 2007 of Hung Yen Metal Company). In the Authorization Letter No. 621/UQ-KKHY dated September 10, 2005, Ms. Lan "1. Authorized the management and operation of Hung Yen Metal Joint Stock Company to Mr. Nguyen Van Tinh. 2. Mr. Nguyen Van Tinh is responsible for: a/ Representing the Company in relations with Banks, organizations, individuals and other relevant agencies to ensure the normal operation of the Company; b/ On behalf of the Company, carry out civil, economic and commercial transactions within the scope of the Company's business lines...".. On November 20, 2006, Ms. Lan issued Power of Attorney No. 1296/UQ/HYM authorizing the management and operation of the Company to Mr. Le Van Manh (the content of the authorization is similar to the content of the authorization for Mr. Tinh).

The fact that Ms. Lan has the above authorization papers for Mr. Nguyen Van Tinh and Mr. Le Van Manh (the Deputy General Directors of the Company) to sign economic contracts is completely legal. Mr. Tinh and Mr. Manh are the ones who sign the contracts on behalf of a legal entity, not on behalf of an individual, so they do not have any rights or obligations related to the case. Therefore, it is impossible to determine that Mr. Tinh and Mr. Manh are the ones with rights and obligations related to this case as requested by the defendant as well as the judgment of the Court of Appeal.

The Court of Appeal based on the Agreement on the division of common property during the marriage between Ms. Le Thi Ngoc Lan and Mr. Le Van Dung and the Commitment on the Company's debt between Mr. Le Van Dung and Ms. Nguyen Thi Toan to conclude that Mr. Dung, Ms. Lan, and Ms. Toan are all people with related rights and obligations is also incorrect. Because the division of common property of the couple during the marriage between Mr. Le Van Dung and Ms. Le Thi Ngoc Lan; the agreement between Ms. Nguyen Thi Toan and Mr. Le Van Dung on the responsibility to pay debts is an internal matter of Hung Yen Metal Company. The commitment on the debt between Mr. Dung and Ms. Toan has not been agreed by the entitled party, Viet Y Steel Company. According to the provisions of Clause 1, Article 315 of the 2005 Civil Code: "The obligated party may transfer the civil obligation to the substitute obligor if the entitled party agrees". During the process of resolving the case, Mr. Dung and Ms. Lan gave clear statements about the agreement to divide the couple's common property regarding the signing of the contract with Viet Y Steel Company, regarding the responsibility of Hung Yen Metal Company in performing its obligations under the contract; Mr. Dung also requested not to attend the trial. Therefore, the summoning of Mr. Dung and Ms. Lan to take statements and confront them as determined by the Court of Appeal was unnecessary. From there, the Court of Appeal declared the cancellation of the First Instance Commercial and Business Judgment No. 18/2009/KDTM-ST dated September 3, 2009 of the People's Court of Bac Ninh Province; transferring the case file to the People's Court of Bac Ninh Province for re-settlement was illegal.

2. Regarding the content: During the contract performance, Viet Y Steel Company transferred money by payment order to Hung Yen Metal Company; Hung Yen Metal Company also delivered goods to Viet Y Steel Company (shown through the Delivery Minutes all bearing the seal of Hung Yen Metal Company). According to the provisions of Clause 1, Article 93 of the 2005 Civil Code: "A legal entity must bear civil liability for the exercise of civil rights and obligations established and performed by its representative on behalf of the legal entity". Therefore, in this case, Hung Yen Metal Company must be responsible for paying debts to Viet Y Steel Company.

Hung Yen Metal Company did not fulfill its commitment as stated in the contract (did not deliver enough goods to Viet Y Steel Company), so Viet Y Steel Company filed a lawsuit requesting the Court to force Hung Yen Metal Company to refund the amount of goods received (equivalent to the amount of goods not yet delivered), interest due to late payment, contract penalty, compensation for damages (due to failure to deliver goods, Viet Y Steel Company had to buy from another unit and had to pay a higher price than the price agreed with Hung Yen Metal Company) which is based on the provisions of Article 34, Clause 3, Article 297, Articles 300, 301, 302, 306, 307 of the Commercial Law 2005.

However, when deciding on the amounts that Hung Yen Metal Company must pay to Viet Y Steel Company, the Court of First Instance calculated incorrectly, specifically as follows:

Regarding the advance payment without receiving the goods of the 4 Economic Contracts, the Court of First Instance correctly determined the amount and forced Hung Yen Metal Company to return it to Viet Y Steel Company. However, when calculating the interest due to late payment of the above amount, the Court of First Instance, although applying Article 306 of the 2005 Commercial Law, did not take the average overdue interest rate on the market at the time of payment (first instance trial) to calculate, but applied the basic interest rate announced by the State Bank at the time of the first instance trial at the request of the plaintiff to apply the overdue interest rate (10.5%/year), which is incorrect. In this case, the Court needs to take the average overdue interest rate of at least three local banks (Vietnam Bank for Agriculture and Rural Development, Vietnam Joint Stock Commercial Bank for Foreign Trade, Vietnam Joint Stock Commercial Bank for Industry and Trade...) to recalculate the interest due to late payment in accordance with the provisions of law.

Regarding the penalty for breach of contract: the two parties agreed: Party B must pay a penalty of 2% of the confirmed order value when Party B violates one of the following cases: delivering the wrong type of goods, not delivering goods. Thus, Hung Yen Metal Company does not deliver enough goods to Viet Y Steel Company, so it must pay a penalty of 2% on the value of the breached contractual obligation according to the provisions of Article 300 and Article 301 of the 2005 Commercial Law. The Court of First Instance accepted the request for a penalty for breach of contract of Viet Y Steel Company as having grounds, however, calculating interest on the amount of the penalty for breach of contract is incorrect.

Regarding the amount of compensation for damages: According to the presentation of the representative of Viet Y Steel Company, because Hung Yen Metal Company violated the contract by not delivering enough goods, Viet Y Steel Company had to buy steel billets from another manufacturer to ensure the production and business of the Company at a higher price. The Court of First Instance only relied on the Steel Billet Purchase Contracts that Viet Y Steel Company signed with other manufacturers to force Hung Yen Metal Company to pay Viet Y Steel Company the difference due to having to purchase goods at a higher price, but did not consider and clarify whether the purchase of goods from this other manufacturer was to compensate for the missing goods due to Hung Yen Metal Company not delivering enough to ensure production and business according to the set plan or not. Regarding this issue, the Court needs to request Viet Y Steel Company to provide documents and evidence (such as orders from third parties, production and business plans, etc.) to prove the actual damage that occurred, from which there is a basis to force Hung Yen Metal Company to pay the appropriate amount of compensation for damages. In addition, the Court of First Instance also calculated interest on the compensation for damages, which is not in accordance with the provisions of Article 302 of the 2005 Commercial Law.

For the above reasons, based on Clause 3, Article 291, Clause 3, Article 297, Article 299 of the Civil Procedure Code (amended and supplemented in 2011),

DECISION

Annul the Commercial and Business Appeal Judgment No. 63/KDTM-PT dated April 5, 2010 of the Appellate Court of the Supreme People's Court in Hanoi and the Commercial and Business First Instance Judgment No. 18/2009/KDTM-ST dated September 3, 2009 of the People's Court of Bac Ninh Province; transfer the case file to the People's Court of Bac Ninh Province for retrial in accordance with the provisions of law.

CONTENT OF PRECEDENT

“Regarding the advance payment without receiving the goods of the 4 economic contracts, the Court of First Instance correctly determined the amount and forced Hung Yen Company to return it to Viet Y Company. However, when calculating the interest due to late payment of the above amount, the Court of First Instance, although applying Article 306 of the 2005 Commercial Law, did not take the average overdue interest rate on the market at the time of payment (first instance trial) to calculate, but instead applied the basic interest rate announced by the State Bank at the time of the first instance trial at the request of the plaintiff to apply the overdue interest rate (10.5%/year), which is incorrect. In this case, the Court needs to take the average overdue interest rate of at least three local banks (Vietnam Bank for Agriculture and Rural Development, Vietnam Joint Stock Commercial Bank for Foreign Trade, Vietnam Joint Stock Commercial Bank for Industry and Trade...) to recalculate the interest due to late payment in accordance with the provisions of law".

“The court of first instance accepted the request for a penalty for breach of contract by Viet Y Company as well-founded, however, calculating interest on the amount of the penalty for breach of contract is incorrect.” “The court of first instance also calculated interest on the amount of compensation for damages, which is not in accordance with the provisions of Article 302 of the 2005 Commercial Law.”

Major