DISPUTES OVER CREDIT AGREEMENT AND NOTES WHEN RESOLVING DISPUTES IN COURT

1. Credit agreement and its main contents
   • Credit agreement

A credit agreement is an agreement between a credit institution and borrower which is an individual or an organisation, whereby the credit institution delivers a sum of monies to the borrower for a specified purpose within a certain period as agreed in the principle of repayment of both principal and interest[1]. In essence, the credit agreement is the contract for loan of property as prescribed in Section 4 Chapter XVI of

• The main contents of the credit agreement

The credit agreement shall be made in writing, containing the key contents, as follows:

• Information related to the subjects of the contract;
• Purposes of using the loan;
• Loan amount, loan limit for cases as prescribed;
• Measures to secure the loan (if any);
• Loan period and method;
• Loan interest rate as agreed; interest rate applicable to the deferred payment interest; type of fees related to the loan and the applicable fee;
• Rights and obligations of the parties;
• Liability for breach of agreement;
• Applicable law and dispute settlement resolution; and
• Other contents as specified in Article 23.1 and 23.2 of Circular 39/2016/TT-NHNN.

2. Disputes over credit agreements

Disputes over credit agreements are conflicts, disagreements between parties in the relation of credit agreement which are the credit institutions and the borrowers regarding performance or non-performance of the contractual rights and obligations. There are many types of disputes over credit agreements such as disputes over breach of obligations by one party or parties in the contract; disputes over the implementation of security for credit agreements having collateral; disputes over the subject of concluding and performing the contract; disputes over valuation, handling of collateral for credit agreements, etc. Among the afore-mentioned types of dispute, the most common disputes over credit agreements are those related to the performance of the borrowers’ obligation to repay the principal, interest to the credit institution, the loan interest rate and the security for performance of obligation in the credit agreements.

3. Notes when resolving disputes over credit agreements in court

Firstly, pursuant to Article 12.1 of Resolution 01/2019/NQ-HDTP, if the credit agreement has an agreement to deal with the borrower’s act of non-payment of debts on time, the court shall consider and decide on the principle of only handling once for each act of non-payment of debt on time.

Secondly, according to Article 12.2 of Resolution 01/2019/NQ-HDTP, if a credit agreement has both agreements on penalties for breach and interest on the overdue principal or another form applicable to the borrower’s act of non-payment on time, the court shall base on the corresponding provisions of the Civil Code, the Law on Credit Institutions and legal instruments which regulate in detail and guide the application of the Civil Code and the Law on Credit institutions at the time of entering into the contract and the time of interest calculation to consider and decide to handle acts of non-payment of debt on time according to the principle of only handling once for each act of non-payment of debt on time.

Thirdly, when resolving disputes over credit agreements, the court applies the provisions of the Law on Credit Institutions and legal instruments which regulate in detail and guide the application of the Law on Credit Institutions to resolve the disputes without applying the provisions on interest rate limits of the Civil Code 2015 to determine interest and interest rates[2].

Fourthly, at the time of first instance court, interest on principal, interest on the overdue principal, deferred payment interest and interest rates in the credit agreements which are established as of 01 January 2017 will be determined according to Article 8.2.(b) of Resolution 01/2019/NQ-HDTP..

Above is an overview article about disputes over credit agreements and notes when resolving disputes in court by Phuoc & Partners. If you are having difficulty finding a lawyer to advise a resolution on disputes over credit agreements or seek legal advice related to credit agreements, please feel free to contact us. Phuoc & Partners is a law professional consulting firm established in Vietnam and which currently has many nearly 100 members working in offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also considered as one of the leading consulting and litigation firms specialising in the marriage and family sector in Vietnam, in addition to the leading practice areas in the legal market such as Labour and Employment, Taxes, Mergers and Acquisitions as well as Litigation. We are confident to bring the best service to our clients in the above areas./.

[1] Article 2.1 of Circular 39/2016/TT-NHNN

[2] Article 7.2 Resolution 01/2019/NQ-HDTP