Legal remedies can be taken when there is a breach of contract

During the implementation of the contract, when one party does not properly and fully perform its obligations as agreed, the violated party can apply sanctions to protect its legitimate interests. 

According to current law, there are 06 types of sanctions commonly applied by parties including: 

(i) enforce the correct performance of the contract, 

(ii) penalties for violations, 

(ii) compensation for damages, 

(iv) temporary suspension of contract performance, 

(v) suspension of contract performance, 

(vi) cancellation of contract. 

Depending on each act and level of violation, the violated party should consider applying the most appropriate type of sanction. The following article will present the characteristics of each type of sanction above.

1. Force the correct performance of the contract

Forced performance of the contract is a sanction applied when the violated party is more interested in ensuring the quantity and quality of goods and services to maintain and operate production and business than what it will receive. an equivalent amount of money. For commercial contracts, forcing the correct implementation of the contract is a measure to ensure the validity of the contract and preserve the reputation of the trader in business activities.

Forced performance of the contract can be applied in the following cases: missing goods delivered, goods delivered of incorrect quality, service provision not in accordance with the agreement between the parties. When applying this sanction, the violated party needs to extend a reasonable time for the violating party to perform its obligations.

This sanction can be applied concurrently with other types of sanctions according to the provisions of the 2005 Commercial Law.

2. Penalties for violations

Sanctions for violations have the main purpose of influencing the awareness of contract subjects, preventing contract violations and punishing violations. A prerequisite for applying sanctions for violations is that the parties must have agreed in advance on this sanction in their contract. In addition, the agreement between the two parties must ensure the conditions to be legally effective before it can be applied.   

An issue that needs to be kept in mind when applying this sanction is determining what type of relationship is in the contract, whether it is a civil relationship, a commercial business relationship, or a relationship in the construction field, etc. Determining the type of contractual relationship is the basis for the violated party to request an appropriate penalty level as well as the simultaneous application of this sanction with the remaining sanctions.

3. Compensation for damages

Unlike fines for violations, contract damages are sanctions applied to restore and compensate for losses caused by violations to the violated party. This loss includes material and mental loss. Therefore, it is not necessary for the parties to have an agreement on compensation for damages, but the violated party still has grounds to claim its lost rights.

The aggrieved party has the burden of proving its loss and claiming a benefit to which it should be entitled. The basis for claiming compensation for damages is: (i) there is a breach of contract, (ii) there is actual damage, (iii) the breach of contract is the direct cause of the damage.

4. Temporarily suspend contract performance

Suspension of contract performance is a sanction aimed at temporarily suspending the performance of the parties' obligations when there is a violation. When the performance of the contract is temporarily suspended, the contract remains in effect and the violated party can apply other types of sanctions to protect its rights.

5. Termination of contract and cancellation of contract

These two forms of sanctions are aimed at terminating the parties' contractual obligations. When canceling a contract, the contract is no longer effective from the time of conclusion. Meanwhile, contract termination still records the contract performance process up to the time of termination. This difference will lead to different legal consequences for the parties' handling of the obligations that have been performed.

When suspending or canceling a contract, the violated party has the right to request compensation for damages and apply other sanctions to protect its rights.