THE VALIDITY OF THE APPENDIX CONTRADICTING WITH THE CONTENTS OF THE CONTRACT

Question:

My company signed a service contract with Company B. The contract contains a provision that: “This contract is valid from January 01, 2021 until the end of June 30, 2022. This contract can be extended for another 01 year if it is agreed in writing by both parties at least 01 month before the expiry date of the contract”. However, the parties also signed an Appendix extending the contract validity with an extension term of 03 years (until the end of December 31, 2025). Given those contents, is this provision valid? And in case of the contract extension after December 31, 2025, whether the extension term in the next Appendix shall be 01 year or 03 years?

Answer:

Thank you for your question, we would like to give our opinion as follows:

Firstly, regarding the validity of the appendix for extending the contract for a term of 03 years (which is contradictory to the content stipulated in the signed contract)

In accordance with Article 385 of the 2015 Civil Code: “Civil contract means an agreement between parties in relation to the establishment, modification or termination of civil rights and obligations”. This notion of civil contract determines the nature of a contract is an agreement. The contract contents, at the establishment, modification or termination, only require the agreement of the parties and if this agreement satisfies the legal conditions, it shall be apparently valid.

In your case, since all parties agree to approve the appendix while the appendix is inconsistent with the contract, it is the case of agreement on the adjustment of the contract.

According to Article 403.2 of the 2015 Civil Code: “If the parties agree that the terms and conditions of the appendices contradict the terms and conditions of the contract, the terms and conditions of the contract which are contradicted shall be deemed to have been amended”.

Therefore, for the legal perspective, the parties are utterly able to establish and sign the appendices containing contents contradicting to those of the contract.

However, to determine whether your contract extension appendix is valid or not, besides seeking for the legal basis as aforementioned, it is required to determine other factors that meet the validity conditions of civil transactions as prescribed in Article 117 the 2015 Civil Code. Specifically, your Appendix needs to satisfy the following factors:

1. Is concluded by authorized people. For example: The contract was previously concluded by the legal representative of your Company and Company B. Now, the Appendix also needs to be approved and signed by those people, unless the legal representatives of your Company or Company B have a written authorization appointing another person to represent and sign.
2. Guarantee the free will and voluntariness of both parties.
3. The purpose and contents do not infringe the prohibition of law and social ethics.
4. The form of conclusion is consistent with the Contract. In principle, if the Contract is concluded in writing, the Appendix for amending and extending the Contract must also be made in the compatible form, unless otherwise prescribed in the Contract.

Accordingly, if the Appendix meet the aforementioned conditions, it will automatically take effect.

Secondly, after December 31, 2025, whether the parties could sign an appendix to extend the contract for 01 or 03 years?

Remaining the legal basis of contract as an agreement between the parties, the number of contract appendix signed by the parties and their specific extension period depends entirely on the agreement of the parties.

However, in case a stable/regular contract extension mechanism is required, the parties shall implement as follows:

1. In case the Appendix clearly states that the Contract shall be extended for a term of 03 years/time and this clause shall amend/replace the extension clause in the Contract: the 03-year/time extension mechanism shall be applied to subsequent extension appendices.
2. In case the Appendix only provide the extension term of 03 years but do not refer it to the extension term of the Contract as a modification/replacement, it can be understood that the Appendix is ​​only applicable separately for this extension. At that time, the parties could sign a new appendix which clarifies: (i) the continuance in applying the extension clause in the Contract, in this account, the extension period shall be 01 year; or (ii) a new extension term in a particular form (suggested from ATA: “The contract shall be extended by… years from… to…”) or in a regular form for all extension times (suggested from ATA: “The contract could be extended for another… year if it is agreed in writing by both Parties at least one month before the Contract’s expiry date. The number of extension is unlimited").

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