CONDITIONAL CONTRACT

I. Regulation

The  2015 Civil Code

II. Definition of a conditional

A contract is an agreement between parties on the establishment, change, or termination of civil rights and obligations.

Clause 2, Article 402 of the Civil Code stipulates that a conditional contract is a contract the performance of which depends on the occurrence, modification or  termination of a specific event. The 2015 Civil Code does not specify the concept of a conditional contract. However, through this regulation, it can be understood that the nature of a conditional contract is that the performance of the contract depends on the arising, changing, or termination of a specific event.

III. Regulations on conditional contracts

  1.   Regulations on conditional contracts

Conditional contracts are a type of general civil contract. Therefore, a conditional contract must satisfy the conditions for the contract to be valid, including:

  • Participants in the transaction have legal personality and legal capacity in conformity with such transaction;
  • Participants in the transaction act entirely voluntarily;
  • The purpose and contents of the transaction are not contrary to the law and social ethics.
  • In addition, for some civil transactions, the transaction form is required as a condition for the validity of the transaction.

Besides, a conditional contract must ensure that the event is considered a condition for arising, changing, or terminating the contract’s performance. The regulation does not stipulate what a condition is in a conditional contract. A condition in a conditional contract can be understood as a legal event that gives rise to, changes, or terminates a contract’s obligations. In other words, a condition in a conditional contract is a legal fact giving rise to an obligation. According to Article 274 of the 2015 Civil Code, obligations means acts whereby one or more entities (hereinafter referred to as obligors) must transfer objects, transfer rights, pay money or provide valuable papers, perform other acts or refrain from performing certain acts in the interests of one or more other subjects (hereinafter referred to as obligees). Conditional performance of an obligation means that if the parties have an agreement or a law provides for conditions for the performance of an obligation, when such conditions arise, the obligor must perform.

  • Example 1: In a conditional contract for a gift of property, the giver says that she wants to give her grandson property and land on the condition that he has to take care of her until she dies. First, the contract for a gift of property needs to ensure that there are valid conditions in the civil contract in general. In order to incur the obligation to transfer ownership of the property of the giver, the recipient must perform the duty of care – the condition agreed upon in the contract. If the recipient fails to perform the duty of care, the condition does not occur, and the obligation to give the property does not arise.
  • Example 2: A contract for the sale of goods between Company A and Company B, when signing the contract, the parties agree that the seller of Company A is obliged to deliver the goods within 05 days from the date of receipt of payment on the old debts. The obligation to pay old debts is a condition for the performance of a party’s obligations when performing a contract.
  1.   Distinguishing the conditions of a conditional contract from a fundamental obligation

When considering a condition in a conditional contract, it is necessary to distinguish a conditional clause from a fundamental obligation in a contract.

  • For example, if C borrows money from D under a loan contract on January 10, 2023, the contract content has an agreement that the loan term is 06 months, and the deadline is July 10, 2023, and C is obligated to pay D the loan amount and the amount of interest at the agreed interest rate.

The obligation to pay on maturity is the borrower’s obligatory obligation from the time of signing the contract. The fundamental obligation of the contract already exists and has been committed, and the obligee has been bound by the contract in force, regardless of the arising, changing, or termination of certain legal events.

  1.   Legal consequences when the condition occurs or does not occur due to the influence of one party.

Clause 2, Article 120, and Clause 2, Article 284 of the 2015 Civil Code stipulate:

  • In cases where the conditions which give rise to or terminate a civil transaction cannot occur due to the direct or indirect action of deliberate impeding of one party, such conditions shall be considered having occurred.
  • In case if the direct or indirect efforts of one of the parties promotes deliberately promote the occurrence of conditions so as to give rise to or terminate the civil transaction, such conditions shall be deemed not to have occurred.