A Gentleman’s Agreement

Dear Hadrien, I lent my wife’s nephew USD5,000 to start a new business. We wrote out an agreement, which we both signed. It’s now been a year past the repayment due date and while I think he has the money to pay me back, he doesn’t seem to want to. Is there any legal recourse for me to try and get that money back?

Under Vietnamese law, the agreement that you signed with your wife’s nephew is called a civil contract and the Vietnamese Civil Code governs your rights and obligations regarding this contract. It was a good idea to write out the agreement and to make sure that both parties signed it. In general, the parties to a civil contract are free to determine its content and, unless the law specifically provides otherwise, such contracts may be entered into verbally or in writing. Two clear advantages of a written agreement over a verbal one are (1) that it proves its own existence without the need for other evidence, such as a testimony or audible materials; and (2) that it expresses and specifies the parties’ intentions and their rights and obligations.

According to Article 412 and Article 414 of the Civil Code, civil contracts must, among other things, be performed in compliance with their agreed subject matter and time limit, meaning the most important obligation of your wife’s nephew is to repay the money that he has borrowed from you on or before the agreed date. The fact that he has still not repaid the money, one year after the due date in the agreement, means that he has obviously failed to perform his obligations and the question of whether or not he has the money to pay you back is not even relevant in this case. What can be done to get your money back? Before turning to any legal recourse, it is advisable to try and settle this matter amicably and in good faith, especially considering the relationship between you and your wife’s family, and the time and money that could be involved when taking legal steps.

The first step would be to send a formal written notice to your wife’s nephew requesting him to fulfill his obligations under the agreement. In the notice, you should include a clear deadline and possibly mention that if he does not repay the money within that deadline you will consider taking legal steps. The Vietnamese Civil Code states that when a party is late in fulfilling their contractual obligation to repay a loan, the other party shall be entitled to claim interest on the late amount for the period of the delay at the basic rate announced by the State Bank of Vietnam at the time of payment (at the date of writing, this was 9%). You may want to remind your wife’s nephew of this. If all amicable solutions fail, then you can think about commencing legal proceedings before a civil court.

Even though it may seem that you have a clear case, proceedings before a civil court always involve some uncertainty and especially in Vietnam, legal proceedings and the enforcement of a civil judgment can take a long time and may be costly. If you consider filing a civil lawsuit, please keep in mind that Article 427 of the Civil Code limits the period for initiating legal action before a court to resolve a dispute such as yours to two years from the date on which your rights and interests were infringed, i.e. from the moment that your wife’s nephew was late in repaying the money he borrowed from you. In a case like yours it is often advisable to first try to settle the issue amicably. A practical step to prevent such situations in the future is to include a few extra provisions in your agreement, such as a penalty for late payment, a fixed interest rate and a provision on how to settle a potential dispute.

If you have any legal questions you want answered, send them to legal@ oivietnam.com

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