CONSULTATION ON RESOLVING PAYMENT AND WARRANTY DISPUTES

Matter in Brief:

On April 24, 2022, B.T Company (hereinafter referred to as “B.T”) and T.A Company (hereinafter referred to as “T.A”) entered into a Commercial Contract (hereinafter referred to as the “Contract”). The primary terms of the Contract were as follows: (i) B.T was to install a sand conveyor system with a capacity of 50 tons per hour for T.A; (ii) the total value of the Contract was VND 3.725.300.000; (iii) B.T was to complete the delivery and installation of the system within 75 days of signing the Contract upon receipt of the first advance payment from T.A; and (iv) B.T was obligated to provide a full warranty for the entire conveyor system and conduct regular maintenance (every 3 months) for a period of 2 years from the date of delivery.

On August 1, 2022, B.T completed the installation of the sand conveyor system for T.A in accordance with the terms of the Contract. The parties executed an inspection report confirming that the entire system was operating at the required capacity and was free from defects or deficiencies. During this period, T.A paid B.T a total of VND 2.611.000.000 (equivalent to 70% of the Contract value).

On November 30, 2023, B.T sent a Debts Reconciliation Report to T.A requesting a reconciliation and payment of the outstanding balance of VND 1.114.300.000. B.T further stated that if T.A failed to make payment, B.T would suspend warranty and regular maintenance services for the entire conveyor system.

On January 15, 2024, T.A responded to B.T stating that it was unable to make the payment due to the impact of the global economic downturn, which had severely affected its financial situation. T.A requested that B.T continue to provide warranty and regular maintenance services as agreed upon in the Contract. T.A further stated that if B.T failed to do so and T.A suffered any losses, B.T would be liable for damages.

Client’s Request:

B.T has contacted TAPHALAW seeking legal advice on the following matters:

(i) Whether the demands made by T.A are legally sound;

(ii) Whether B.T is entitled to suspend their maintenance and warranty obligations until T.A has fulfilled their payment obligations;

(iii) Advise on the best course of action to compel T.A to pay the outstanding balance in full, including any accrued interest.

B.T notes that the parties have had a longstanding business relationship spanning more than 10 years. T.A is a significant customer of B.T, and the parties have entered into numerous transactions, some of which are still ongoing.

Attorney’s Work Performed:

After reviewing the case file and relevant legal provisions, the attorney has prepared a consulting report for B.T, providing legal advice to resolve the aforementioned issues. A summary of the advice is as follows:

1. The attorney determined that B.T has fully and timely performed its obligations under the Contract. Therefore, T.A is obligated to pay B.T the remaining amount of 1.114.300.000 VND. T.A’s reasons for the delayed payment are unfounded.

2. Regarding the suspension of the contract performance, the attorney opines that B.T has grounds to suspend the contract with T.A. However, this action has certain advantages and disadvantages that B.T needs to consider. Regarding the option to compel T.A to pay the entire outstanding amount and late interest, the attorney has proposed solutions that B.T can implement, analyzing the advantages, disadvantages, and procedures of each option. First, the attorney recommends a meeting with T.A to find the best solution together.

Based on the attorney’s advice, B.T has requested TAPHALAW to represent B.T and issue a response to T.A. In the response, TAPHALAW’s Lawyer has clearly analyzed: (i) The reasons given by T.A for the delayed payment are unfounded; (ii) The measures that B.T will take if T.A is not willing to pay the outstanding amount; (iii) A request for T.A to have a direct meeting to discuss, share, and cooperate to resolve the matter in order to avoid damaging the more than 10-year business relationship between T.A and B.T.

Outcome: Upon receipt of the document from B.T., T.A proactively requested a meeting with B.T., who in turn invited TAPHALAW Attorney to participate. At the meeting, the Attorney provided analyses, advice, and proposed solutions aimed at safeguarding B.T’s interests and persuading T.A to agree. At the conclusion of the meeting, T.A pledged to liquidate certain assets to offset the outstanding debt immediately and to continue paying the remaining amounts in installments over the next three months. B.T. agreed to continue providing regular warranty and maintenance services as per the agreed-upon terms. The Attorney documented the parties’ consensus, outlining the terms of the agreement in a detailed and clear written document for future reference. At the end of the meeting, both parties read and signed the Meeting Minutes, which recorded the agreed-upon terms as drafted by the TAPHALAW’s attorney.