DOES THE NAME OF THE CONTRACT AFFECT THE VALIDITY OF THE CONTRACT?

In practice, when an individual or organization drafts a contract in any field of civil transactions, it is easy to make a mistake in both the form and content of the contract. Among them, even the name of the contract is wrong, not in accordance with the content of the contract. So, will the contract be invalid or violated when the name is wrong? 

1. The name of the contract and legal regulations on the validity of the contract

a. Conditions for a contract to be valid 

A contract, one of the forms of civil transactions, is an act of making changes or establishing, terminating rights and obligations. Accordingly, the general conditions for a contract to be valid are regulated by law, including:

– Subjects have legal capacity, capacity to act in civil transactions appropriate to the contract to be established.

– Subjects participating in the contract must be completely voluntary.

– The purpose and content of the contract do not violate the prohibition of the law, do not violate social morality.

Regarding the form to establish, the law does not require a contract to have a written form but can also be expressed orally or by specific acts. However, in certain specific areas, there will be separate laws governing the form of the contract.

For example, a land transfer contract must be in writing and must be notarized or authenticated in accordance with the provisions of the law.

b. The issue of naming the contract

From the above content, it can be seen that whether or not a contract is valid will depend mainly on the content of the contract and between the parties participating in the contract. Because the form of the contract does not have a mandatory form, the parties creating the contract can freely present the way of expressing a contract.

For example, in the case of a contract that is created orally, the parties may only state the main content of the contract without mentioning other issues such as the date, month, year, place of establishment, or the language spoken is one or more different languages, etc. Or, in the case of a contract that is created by specific acts, depending on the place, region, or person, they have different ways of expressing the content.

Therefore, for a contract in written form, there are no mandatory regulations on how to present or administrative formality, including naming the contract. In essence, the name is a way of calling something to identify, the purpose of naming the contract is for easy identification of the content, identification of the type of contract.

In addition, naming the written contract is to shorten the time to review the content, helping the reader to quickly grasp the issue, so in general, when the parties establish a written contract in any field, they will usually name the contract in accordance with the content of the contract.

From the above issues, it can be seen that naming the contract incorrectly will not affect the validity of the contract because when reviewing the contract, people often pay attention to the nature and content, not the name. At the same time, naming is also not in violation of the law because there are no laws governing the punishment for naming a contract incorrectly.

2. Consequences of an incorrect contract name in practice

Although naming a contract incorrectly does not affect the validity of the contract as well as does not violate the law. But if because of the wrong name of the contract, leading to consequences in reality, it can be considered for punishment by the state.

In practice, many subjects have taken advantage of the “loophole” of the law to carry out acts of fraud, causing misunderstandings to others to bring benefits to themselves. In which, one possibility that often occurs is that the contracting parties, for different reasons, have unintentionally/intentionally “assigned” the contract a name that is not compatible with the legal nature of this legal relationship.

For example: A lease of land use rights is “transformed” into a joint venture contract, a loan contract into a joint venture contract, a construction contract into a linkage economic contract… In a simple way, the contract, in this case, is “sitting in the wrong class”, or simply put, the contract has a different nature and should be called a different name.

When a dispute arises between the parties in the contract, some issues arise:

– How to determine the basic terms of the contract?

– To what extent is the agreement of the parties in the contract recognized by the law?

– The basis for selecting and applying the discretionary legal rules to this case?

For example:

– In Decision No. 01/2004/HĐTP-KT dated February 26, 2004 on the case of a contract dispute over a production linkage contract, the Supreme People’s Court of Vietnam (SPC) held that: “Although the contract number 01/HT-HQ dated August 29, 1996 is named ‘Production linkage contract’ (signed between X Limited Liability Company and TH Limited Company), the content of Annexes 1 and 2 of the contract shows that the nature of the contract is a lease of a factory building attached to land use rights, not a linkage to establish a new economic unit under the Regulations on economic linkages (issued together with Decision No. 38/HĐBT dated April 10, 1989 of the Council of Ministers).”

– Based on this finding, the SPC upheld the judgment of the appellate court after applying the relevant land law regulations on the procedures for leasing and subleasing land for organizations, without applying the regulations on economic linkages, to determine which party had breached the contract and to resolve the rights and obligations of the parties.

– Thus, in these case, the SPC applied mandatory rules, and in some cases also discretionary rules, to determine the basic terms of the contract and the rights and obligations of the parties. The court did not rely on the agreement of the parties or the way they named the contract, but rather on the nature of the contract, which was determined based on all available evidence, including the content of the contract, the annexes to the contract, and the intent of the parties.

>> IS SIGNING CONTRACT WITH PAYMENT IN FOREIGN CURRENCY ALLOWED? https://linconlaw.vn/is-signing-contract-with-payment-in-foreign-currency-allowed/

>> PROCEDURES FOR REGISTRATION OF FUNCTIONAL FOODS DECLARATION https://linconlaw.vn/procedures-for-registration-of-functional-foods-declaration/

3. Some notes on the form of a contract

In principle, the parties have the right to freely decide the form of the contract. The form of a contract can be expressed orally, in writing, or by specific acts, except in cases where the law requires the contract to be expressed in a certain form to ensure public order, such as a land transfer contract must be in writing and must be notarized.

In addition, the law also recognizes that the form of a contract can be expressed through electronic means in the form of data messages and this form is considered to be a written contract. In cases where the law requires the contract to be in writing with notarization or authentication, registration, or permission, these regulations must be followed.

For example: A contract for the sale of land use rights, a condominium, or the sale of vehicles such as cars and ships must be in writing and must be notarized (in the case of the sale of vehicles such as cars and ships without the seller issuing a red invoice). In many cases, the sale of land use rights, assets that require notarization, but do not have notarization, then when another transaction is established in parallel with this transaction, the transaction with notarization according to legal regulations is protected.

For the creation of a written contract, although the law does not clearly state how the contract should be presented, the parties when entering into a contract can refer to model contracts for similar work scope as regulated by law. Through this, the documents will have a certain consistency, making it convenient for storage and administrative procedures later.