Regulations On Compensation For Physical Damages

There are differences in the regulations on compensation for physical damages between the Civil Code 2015 and the Civil Code 2005. The Civil Code 2015 creates unity in regulations on liability for compensation for damage in general, and the regulations on compensation for physical damages and mental damages in particular, whereas, the Civil Code 2005 only listed liabilities for compensation for damages, provided the grounds giving rise to liability for compensation for mental damages and defined physical damages. Specifically, under the Civil Code 2015, the grounds giving rise to liability for compensation for damages, in general, include (i) a breach of obligation. The obligation shall be known as a contractual obligation or a statutory obligation; (ii) actual damage; (iii) causal relationship between the breach of obligation and actual damage[1]. The regulations on compensation for physical damages define the physical damages means actual material losses which can be determined, comprising the loss of property, reasonable expenses incurred in preventing, limiting, and/or redressing the damage, and the actual loss or income lost or reduced[2]. It is said that the regulations on compensation for physical damages only refer to damages due to property infringed, do not refer to damages due to life, health, honour, dignity, prestige infringed.

The regulations on compensation for physical damages in the field of compensation for non-contractual damages provide more particularly about actual material losses that a property is lost, destroyed, or damaged and interests associated with the use and the exploitation of the property is lost or declined (not only actual income). The application of the regulations on compensation for physical damages shall comply with the following principles:

• Actual damage must be compensated in full and promptly. Parties may agree on the amount of compensation; on the form of compensation or the method of compensation.
• The person responsible for compensation may be reduced the compensatory amount if such person has no fault or has an unintentional fault and the damage is very large in comparison to the financial positions of such person.
• If the amount of compensation determined becomes unrealistic, the aggrieved person, or the person having caused damage, has the right to request a court or another competent authority to change the amount of compensation.
• If the aggrieved party is partly his/her fault for causing the damage, that part of the damage shall not be compensated.
• The party having rights and interests infringed shall not be compensated if such damage incurs due to his/her failure to adopt necessary measures to prevent the damage.

The grounds giving rise to liability for compensation for damage due to a property infringed under the regulations on compensation for physical damages include the following factors[3]:

• An illegal act infringing a property;
• Actual material damage due to a property infringed; and
• A cause-and-effect relationship between the actual damage and the illegal act.

Exceptionally, the person causing damage shall be discharged from liability for compensation for damage in case of incurred damage due to a force majeure event or an emergent situation or entire fault of the aggrieved party.

Above is an overview of the regulations on compensation for physical damages. If you have trouble with legal issues regarding the regulations on compensation for physical damages, please contact us: Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms specializing in business law in Vietnam that has leading practice areas in the legal market such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.

[1] Article 360 of the Civil Code 2015.

[2] Article 361.2 of the Civil Code 2015.

[3] Article 585 of the Civil Code 2015.