The most important obligation of the parties to a commercial
contract is to deliver or provide services and pay in full and on time as
agreed. However, in reality, there are times that one party or the parties fail
to perform their payment obligations, causing damages to the other party. In
particular, in the case of a breach of the payment obligation, the aggrieved
party may request the person having caused damage to pay late payment
obligations interest. Potential dispute on this matter might arise
between parties.
How to Determine Interest Rate for
Late Payment Obligations in Commercial Transaction?
Article 306 of the Commercial Law 2005 provides for the
application of the interest rate due to the delay of payment as follows: Where
a contract-breaching party delays making payment for goods or payment of
service charges and other reasonable fees, the aggrieved party may claim an
interest on such delayed payment at the average interest rate applicable to
overdue debts in the market at the time of payment for the delayed period,
unless otherwise agreed or provided for by law.
The interest rate for late payment of obligations in commercial
business is applied according to the average interest rate on overdue debts in
the market at the time of payment corresponding to the late payment period,
unless otherwise agreed or otherwise provided by law.
However, the Commercial Law 2005 at that time did not have a
specific regulation on the average interest rate of overdue debts on the
market. The Resolution No. 01/2019/NQ-HDTP has detailed instructions on this
interest rate. When determining the interest on late payments, the Court shall
determine the interest rate on late payments on the basis of average interest
rates on overdue debts announced by at least 03 (three) commercial banks (such
as Vietcombank, VietinBank, Agribank, etc.) whose headquarters, branch or transaction
office is located in the same province or central-affiliated city where the
headquarters of the Court in charge of the case is located at the payment date
(the date of first-instance trial), except otherwise agreed upon by the parties
or regulated by laws.
In case of late payment liabilities defined in a contract which
includes the parties’ agreement on interest payment, the judgment debtor is
liable to pay interest on the outstanding judgment debt at the agreed interest
rate which must be conformable with applicable laws; if the agreed interest
rate is not available, the Court shall decide application of the interest rate
prescribed in Clause 2 Article 468 of the 2015 Civil Code. In case interests
are charged on amounts payable to the state budget as regulated by laws, the
judgment debtor is liable to pay an interest on the judgment debt arrears
calculated at the interest rate prescribed in Article 357 or Article 468 of the
2015 Civil Code, unless otherwise prescribed by laws.
In order to protect the best interest of parties, it is important
to consult with dispute lawyers in Vietnam for
advice.
ANT Lawyers is a law firm in Vietnam,
recognized by Legal500, IFLR1000. We are an exclusive Vietnam member of Prea
Legal, the global law firm network covering more than 150 jurisdictions. The
firm provides a range of legal services to multinational and domestic clients.
