I. Current situation relating to invalid contracts for the sale and purchase of goods

Contracts for the sale and purchase of goods are among the most common types of contracts in commercial transactions. However, such contracts do not always possess legal validity. A contract for the sale and purchase of goods may be declared invalid in various circumstances, causing serious legal consequences for the parties involved. In order to protect their lawful rights and interests, the parties should clearly understand the legal provisions governing invalid contracts, including the circumstances under which a contract may be declared invalid, the legal consequences of a contract lacking legal validity, and common issues such as the authority to declare a contract invalid, whether payment in foreign currency is lawful, and the validity of contracts entered into by persons under the age of 18.

Legal advisory services also play an important role in assisting parties to understand and resolve issues arising from invalid contracts for the sale and purchase of goods, thereby ensuring transparency and legality in commercial transactions.

II. Legal provisions relating to invalid contracts for the sale and purchase of goods

1. What constitutes an invalid contract for the sale and purchase of goods?

A contract for the sale and purchase of goods may be declared invalid in certain circumstances. Where a contract fails to comply with legal regulations or contains serious violations, it shall have no legal effect, meaning that it does not arise rights and obligations for the parties. Factors such as violation of prohibitions of law, contravention of social ethics, sham transactions, or establishment by a person lacking civil act capacity may render a contract invalid.

2. Cases in which contracts for the sale and purchase of goods are invalid

Common cases in which contracts for the sale and purchase of goods are declared invalid include:

  • Violation of prohibitions of law or contravention of social ethics: Where the purpose or contents of a contract violate prohibitions of law or contravene social moral standards, the contract shall be deemed invalid.
  • Sham contracts: If a contract is established to conceal another transaction, such contract shall be invalid. However, the concealed transaction may remain valid if it does not violate legal provisions.
  • Contracts established by persons lacking civil act capacity: If a contract is entered into by a minor or a person who has lost civil act capacity, the contract may be declared invalid. Nevertheless, certain exceptions apply, such as contracts entered into to meet the essential needs of such a person.
  • Contracts affected by serious mistake: If there is a serious mistake regarding the subject matter of the contract, resulting in one party failing to achieve the purpose of the transaction, the contract may be declared invalid.
  • Deception, threat, or coercion: A contract may also be declared invalid if one party enters into the contract as a result of deception, threat, or coercion.
  • Non-compliance with formal requirements: If a contract fails to comply with statutory requirements on form (for example, where the contract is required to be made in writing but such requirement is not satisfied), the contract may be deemed invalid, unless at least two-thirds of the contractual obligations have already been executed. 

3. Legal consequences of invalid contracts for the sale and purchase of goods

When a contract for the sale and purchase of goods is declared invalid, the following legal consequences shall arise:

  • No establishment of civil rights and obligations: An invalid contract does not arise, modify, or terminate civil rights and obligations of the parties from the time the transaction is established.
  • Restoration to the original state: The parties must return to each other what they have received under the invalid contract. Where restitution in kind is not possible, restitution must be made in monetary value.
  • Compensation for damages: The party at fault causing damage as a result of the invalid contract must compensate the injured party.
  • Fruits and profits: A bona fide party that has received profits arising from the invalid contract is not required to return such profits.

III. Questions relating to invalid contracts for the sale and purchase of goods

1. Is the contract for the sale and purchase of goods invalid if it provides for payment in foreign currency?

Under Vietnamese law, payment in foreign currency may be deemed invalid if it violates regulations on foreign exchange control in Vietnam. However, in certain cases, the parties have a clear agreement and such agreement does not violate regulations on foreign currency transactions, the contract may still remain legally valid.

2. Authority to declare the contract for the sale and purchase of goods invalid

The Court has the competence to declare a contract invalid. If the parties dispute the legality of a contract, they may request the court to examine and declare the contract invalid.

3. Is the contract for the sale and purchase of goods entered into by a person under the age of 18 invalid?

The contract entered into by a person under the age of 18 may be declared invalid, unless such contract serves the person’s essential daily needs or solely raises benefits for such a person.

In addition, if upon reaching the age of 18 the person acknowledges the validity of the contract, the contract shall become effective.

4. Is notification required when the contract for the sale and purchase of goods is invalid? Will failure to notify result in sanctions?

Notification of an invalid contract is not mandatory. However, if failure to notify causes damage, the party at fault may be subject to sanctions or required to compensate for damages.

IV. Legal advisory services relating to invalid contracts for the sale and purchase of goods

The above constitutes all detailed information provided by NPLaw to assist our valued clients regarding issues relating to invalid contracts for the sale and purchase of goods. Should you have any further questions regarding the above matters or other legal issues, please contact NPLaw immediately so that our team may provide direct consultation and guidance.