Introduction
Retention of title is first mentioned in the Civil Code of Vietnam. The Civil Code of Vietnam was introduced in 1995 and it is the first Civil Code of Social Republic of Vietnam (“Civil Code”). However this issue has not yet developed into a separate concept and is regulated spread. Regulations on retention of title/reservation of ownership can be found in purchase and sale, contract for the sale and purchase of house, goods delivery.
In addition, the retention of title is also regulated in commercial laws. The Commercial Law of Vietnam was passed two years after the Civil Code (10 May 1997). It is also a landmark legal document and plays an important role in regulating commercial activities in Vietnam.
Establishment of ownership rights
According to the Civil Code, the ownership is established under many foundations. For example, establishment of ownership with respect to revenue gained from labor and legal business, in accordance with an agreement, in cases of merger or under a statute of limitations, etc.
In case of establishment of ownership in accordance with agreement, a person to whom a property has been transferred through a contract for the purchase and sale, gift, exchange or loan shall have the right to own such property as from the time of receipt of the property, if not otherwise agreed or the law does not otherwise provide.
Time of ownership transfer
According to the Civil Code, in case of sale and purchase agreement, the moment at which the ownership is transferred is defined in the following cases:
• the moment at which the buyer receives the property;
• the completion of the procedures for registering of ownership rights of such property;
However, except where the laws otherwise provide, the two parties are free to negotiate on the time of ownership transfer, provided that the agreement does not violate the law.
Therefore, the responsibility of bearing risks shall still belong to the seller until the property is handed over to the buyer; whereas the buyer shall bear the risk to the property in question as from the receipt of that property, if not agreed otherwise.
Similarly, in case of property that must be registered of the ownership rights, the seller shall bear the risks until the completion of the registration procedures; meanwhile the buyer shall bear the risk as from the completion of the registration procedures, even when the buyer has not received the property. However, it is noteworthy that the buyer and the seller have their freewill to agree upon the moment for bearing risk.
The Commercial Law also has similar regulation on the moment of transfer of ownership rights (Article 62, the Commercial Law), i.e. the moment when the seller delivers the goods to the buyer unless otherwise agreed upon by the two parties or provided by law. However, the Commercial Law also regulates that, in case where obligatory conditions are agreed upon in the sale and purchase agreement without which the seller shall be unable to deliver the goods, or the buyer shall be unable to receive the same, then the ownership of the goods in question shall be transferred from the seller to the buyer only when such conditions are met (Article 62, Commercial Law).
The obligatory conditions under Vietnam law may be understood as conditions for the transaction to become effective including the conditions on the person participating in the transaction, its purpose, content and the form, and the voluntary of the involving person.
Agreement and Retention of Title/Reservation of Ownership
Ownership is a very developed concept in the civil law branch of Vietnam, however retention of title is regulated scattered. Purchase by deferred payment or payment in installments is the most evident example for retention of title in Vietnam law.
Article 461 of the Civil Code provided that,
“…The seller is entitled to reserve his/her ownership rights to the sold object until the purchaser has made full payment, except in circumstances where otherwise agreed”.
Therefore, in case of deferred payment or payment in installments, the seller is entitled to reserve his/her ownership to sold object until the purchaser has made full payment, except otherwise agreed. The purchaser shall only be entitled to use the object purchased by deferred payment or by payment in installments and must bear the risk during the use period, except otherwise agreed.
Besides, the parties may agree upon the trial use of purchased object by the buyer for a period referred to as the trial use period. In the trial use period, the object shall still remain under the seller’s ownership. The seller shall bear all risks with respect to the object. Within the trial use period, the seller is not permitted to sell, give as gift, lease, exchange, mortgage or pledge of the property or offer it as a guarantee, while the purchaser has not yet replied.
Conclusion
In conclusion, according to Vietnam law, the ownership can be reserved in the following cases:
• the agreement of the related parties;
• the type of the agreement; and
• the prescribed law.
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Please do not hesitate to contact Mr. Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
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