DISPUTE OF A OFF-PLAN HOUSING PURCHASE AGREEMENT

Dispute: A dispute over the penalty for breach of contract in a housing purchase agreement between Mr. Ngo Van D and Company A.

Facts of the Case:

In 2020, Mr. Ngo Van D and Company A entered into three off-plan housing purchase agreements. The contract values were VND 25,926,000,000, VND 43,242,700,000, and VND 25,926,000,000, respectively. The parties agreed that the contract value would be paid in three installments. Mr. Ngo Van D made timely and full payments for the first installment (30% of the value upon signing the contract) and the second installment (65% of the value within 2 days of signing the contract). Regarding the third installment (5% of the value within 7 days of receiving notice that the competent authority had issued a certificate of ownership), according to Company A’s notice, Mr. Ngo Van D had a payment obligation for the third installment of all three contracts from April 26, 2023. However, due to personal reasons, Mr. D did not have enough money to pay. Subsequently, based on the signed contracts, Company A imposed a late payment penalty of 1% per day on Mr. D. As of May 17, 2024, Company A requested Mr. Ngo Van D to pay a total late payment penalty of VND 14,232,877,363 for the three contracts.

After receiving notices requesting payment of the late payment penalty from Company A on May 17, 2024, August 21, 2024, and August 22, 2024, Mr. Ngo Van D paid the full amount of the third installment and made a partial payment of the penalty at a rate of 0.5% per day.

Client’s Request:

Mr. Ngo Van D requests that TAPHALAW provide an implementation plan and legal basis to request that Company A reduce the late payment penalty for all three apartments to 0.05% per day.

Work Performed by the Attorney:

(1) The attorney reviewed the file provided by Mr. Ngo Van D, analyzing the Off-plan Housing Purchase Agreement entered into by the parties and the applicable legal provisions (Civil Code 2015; Real Estate Business Law 2014; Housing Law 2014; Consumer Protection Law 2010) to determine the viability of Mr. Ngo Van D’s claim. Specifically, the attorney determined:

(i) Validity of the liquidated damages clause in the Agreement:

Although Mr. D considers the liquidated damages rate of 1% per day to be excessive, Article 418, Paragraph 2 of the Civil Code 2015 stipulates that the liquidated damages rate shall be agreed upon by the parties. Moreover, there are no other provisions limiting the maximum liquidated damages rate in the Agreement. Therefore, the stipulated liquidated damages rate of 1% per day in this case is in accordance with the law. Company A’s demand for Mr. A to pay liquidated damages for late payment at a rate of 1% per day is justified under the Agreement and the Civil Code 2015.

(ii) Whether Company A has breached its obligation to complete the ownership certification procedure:

Clause 7 of the Off-plan Housing Purchase Agreement stipulates that “The issuance of the ownership certificate shall be subject to the decision of the competent state agencies.” Therefore, Company A has not breached its obligation to complete the ownership certification procedure.

(2) Based on the analysis in section (1), finding that Company A’s demand for payment of liquidated damages for late payment at a rate of 1% per day is justified, the attorney advised Mr. Ngo Van D to negotiate and propose to Company A a reduction in the liquidated damages rate.

(3) The attorney drafted a document requesting Company A to reduce the liquidated damages rate as demanded by Company A. In this document, the attorney analyzed, argued, and presented a viewpoint to persuade Company A to reconsider the application of the liquidated damages penalty.

Resolution: Following the receipt of a formal request from Mr. Đ, drafted and advised upon by his legal counsel, Company A proposed a meeting between the two parties. Mr. Đ requested that TAPHALAW Law Firm represent him in the meeting with Company A. During the meeting, based on the legal advice and input provided by the attorney, Company A agreed to adjust the late payment penalty to 0.05% per day. Mr. Đ will remit the remaining balance of the penalty, calculated at a rate of 0.05% per day, to Company A. In return, Company A will assist Mr. Đ in obtaining the certificate of ownership for the property. The dispute between the parties has been successfully resolved in accordance with Mr. Đ’s objectives.