Precedent No. 14/2017/AL pertains to the recognition of conditions of Land use right gift contracts, even if the conditions are not specified in said contract.
It is a common occurrence that donors gift property such as land use rights, residential buildings, etc. to other people and the gift contract does not contain provisions on the conditions for gifting. Afterward, the donor requires the recipient to satisfy the gifting conditions. So, what is the solution to this dilemma?
The following article belongs to a series on Precedents, written and assembled by Legal Practitioners of CNC with the sole purpose of informing readers of the necessary data on Precedent No. 14/2017/AL, as well as legal values and the application of this Precedent in practice.
See more: Precedent No. 07/2016/AL on recognition of Sale contracts established prior to July 1st, 1991
Precedent No. 14/2017/AL – General information
Legal issues of Precedent No. 14/2017/AL
The potential of including conditions in gift contracts has been ever present throughout multiple Civil Codes, from Civil Code 1995, 2005 to 2015[1]. However, when gift contracts are considered to have conditions, it is a matter left unresolved by the Civil Code. Are the conditions required to be stipulated in the gift contract, and in cases of non-stipulation, the gift contract is considered to have no condition? Or is the gift contract fundamentally just a simple agreement among parties that prioritize consensus, thereby rendering the presence of stipulations on conditions irrelevant?
Prior to this Precedent, Precedent No. 03/2016/AL mentioned the existence and the effect of gift contracts. Precedent No. 14/2017/AL is considered an addition to the discussion on this particular contract, addressing the question of whether or not gifting conditions need to be stipulated in the gift contract would depend on the relevant circumstances. In particular, the Precedent affirms the existence of gifting conditions even if they are not present in the contract and confirms the validity of some commonly found conditions.
To remedy the ambiguity of the laws, Precedent 14/2017/AL has provided substantial explanations and a source of reference for practical applications.
Summary of the cases
Relative legal provisions of Precedent No. 14/2017/AL
Article 125, Article 126, Article 470 Civil Code 2005 (corresponding to Article 120, Article 121 and Article 462 Civil Code 2015)
The solution given by Precedent 14/2017/AL
In the case of Precedent No. 14/2017/AL, the land use right gift contract does not specify the gifting condition, but other relevant documents do demonstrate that both parties have negotiated and agreed on the gifting condition. The People’s Supreme Court has made several findings that appear advantageous to the plaintiff (Mr. P1) and handed the case over to the People’s Court of Dien Bien Phu City for the reinstatement of the first-instance trial, with the aforementioned findings in mind. Overall, the Precedent had:
Affirmed the existence of gifting condition despite such condition not being specified in the contract;
Confirmed the validity of some commonly found conditions.
Practical application of Precedent No. 14/2017/AL
Commentary on Precedent No. 14/2017/AL
The solution given by Precedent No. 14/2017/AL has the following merits:
Merits of Precedent No. 14/2017/AL
Firstly, provide explanations for ambiguous parts of law provisions
The Civil Code recognizes the presence of gifting conditions in gift contracts but has yet to address the matters relating to the expression as well as the validity of gifting conditions. Gift contracts with no gifting conditions stipulated therein could potentially cause conflict between parties over whether or not gifting conditions exist. This could be seen as a situation where the content of the contract is ambiguous. For such contracts, we could explore the provisions on interpretation of contracts[4].
Civil Code 2015 allows for open interpretation based on the information prior to the conclusion of the contract, at the time of conclusion, and subsequent to the time of conclusion, specifically the period in which the parties execute the contract to decipher the true objectives of parties. In this case, the content of the gift contract does not contain the gifting condition, however, prior to and subsequent to the notarization of the gift contracts, there are other documents explicitly stating these conditions. The application of the gifting condition in these documents is appropriate to and in the spirit of Civil Code 2015.
Moreover, upon closer inspection of Article 466 of Civil Code 1995, Article 462 of Civil Code 2005 and other relevant legal provisions, there are no stipulations that mandate the compulsory expression of property gifting conditions in general and land use rights gifting conditions in particular in gift contracts, for these contracts to come into effect. In simple terms, whether it is conditional property gifting or conditional land use rights gifting, the gifting conditions could be specified either in the gift contract or another document, and both are considered part of the contract and upon the satisfaction of the conditions, the gift contract shall be valid[5]. The fact that Precedent No. 14/2017/AL affirms the existence of gifting conditions even when they are specified externally is convincing and in compliance with the law.
Secondly, confirming the validity of some commonly found conditions.
Precedent No. 14/2017/AL not only affirms that gift contracts could contain gifting conditions but also affirms the validity of these conditions. Reviewing the cases, the father gifted his son the land use rights with 3 (three) conditions attached: (i) Build a house for the donor’s accommodation, (ii) look after the donor and (iii) look after the donor’s parents. The Civil Code stipulates that the gifting conditions must not be forbidden by the law nor contrary to the moral standard of society[6]. So, the question is whether or not the above conditions are legal.
The three conditions above could be considered commonly found conditions, and due to the affirmation of Precedent No. 14/2017/AL based on the spirit of honoring agreements of the Civil Code, no further doubt nor debate pertaining to the validity of such conditions is required upon similar encounters. For example, regarding the gifted property, which are the land use rights in the case of Precedent No. 14/2017/AL. In practice, the gifted property could either be immovable property aside from land use rights – such as apartments or movable property – and Precedent No. 14/2017/AL applies accordingly. Moreover, the gifting conditions are discovered in external documents and proven via written evidence. This Precedent could also be applied to other forms of gifting conditions not specified in the contract such as oral agreements which could be proven by witnesses, recordings,[7]etc. Regarding the type of gifting conditions, the Precedent affirms the validity of the following conditions: building a house for the donor’s accommodation, along with taking care of the donor and his parents. Therefore, the Precedent could also be applied to other conditions such as caretaking, nurturing, or other responsibilities according to the traditional family beliefs[8]…
This could be seen as the most significant contribution of Precedent No. 14/2017/AL to the discussion on the validity of some commonly found gifting conditions.
Aside from the aforementioned merits, Precedent No. 14/2017/AL has several demerits to be considered upon application:
Reminder regarding the application of Precedent No. 14/2017/AL
First of all, the Precedent only recognizes the non-adherence of Mr. P2 to the conditions as the basis for Mr. P1’s rights to rescind the property. Obviously, if Mr. P2 intentionally refuses to meet the conditions despite being fully capable of doing so, Mr. P1 is undoubtedly entitled to rescind the gifted property. However, what if a force majeure is involved in this case and prevented Mr. P2 from meeting the conditions, does Mr. P1’s right to rescind the property remain intact? The Precedent has yet to address exceptions in which Mr. P1 is entitled to rescind the gifted property as long as Mr. P2 does not satisfy the gifting conditions regardless of the cause. And force majeure events might be the basis for Mr. P2’s relief from the responsibility[9]. Therefore, the consequences of Mr. P2’s intentional failure to comply with the condition should differ significantly from that of failure due to force majeure events.
Secondly, the Precedent has yet to consider the situation in which Mr.P1 partially completes the conditions. Mr. P1 gifts Mr. P2 the land use rights under the conditions that Mr. P2 must look after Mr. P1 for the rest of Mr. P1’s life. During the duration of fulfilling the conditions, Mr. P2 is not considered to be “failing to perform the gifting conditions” but rather “failing to fulfill the gifting conditions”. The relative question that must be addressed, on this matter, is whether or not Mr. P1 is entitled to rescind his property from Mr. P2 if Mr. P2 does indeed complete some parts of the gifting conditions upon receipt of the gifted conditions. Article 351 of Civil Code 2015, to a certain extent, does address this question by specifying the following: “Breach of obligations means that the obligor fails to perform the obligations on time, perform the obligations incompletely or incorrectly.” Accordingly, Mr. P1 is only entitled to rescind the gifted property if Mr. P2 does not complete any of the conditions. If Mr. P2 does perform some part of the conditions, Mr. P1 would not be able to rescind the property. The fact that the property would be returned to Mr. P1 despite Mr. P2 having completed the majority of the gifting conditions would directly affect Mr. P2’s legal rights and benefits.
Thirdly, the Precedent does not provide solutions for situations in which the gifted property has been transferred to a third party prior to Mr. P1’s request for property retrieval and the remedy for the possession’s correct transaction (purchase and sale, trade, gift) or guarantee measures (pledge, collateral, deposit, etc.) established by Mr. P2 pertaining to the gifted property. There are multiple legal issues that emerge from this situation, namely (i) The legality of the transaction or measures established by Mr. P2 using the gifted property (ii) Is Mr. P1 responsible for the established obligations toward the third party pertaining to the gifted property?
Finally, suppose that after Mr. P1 has transferred the gifted property over to Mr. P2, and Mr. P2, at his own expense, increases the value of the gifted property. “What’s the approach to the added value when Mr. P1 demands the return of the property?”, is the question that needs to be addressed in this situation. Cases in which the added value could be separated without affecting the gifted property, the added value is separated from the gifted property. However, the Precedent does not consider the situation in which the added value is an inseparable part of the gifted property. Similarly, suppose that there are additional benefits and revenue resulting from the gifted property within the duration of when the gifted property belonged to Mr. P2, which party would be the rightful owner of the additional benefits and revenue? The Precedent should give reasonable solutions for these issues.
Examples of citing Precedent No. 14/2017/AL in practice
In a dispute pertaining to land use rights gift contract and claiming the value of the property arising from the land use rights gift contract[10], the People’s Court of Kien Giang Province has applied Precedent No. 14/2017/AL during the trial. To be specific:
The origin of the building and land at the address of 80 Le PH, VB Ward, RG City, Kien Giang was a purchase made by Ms. Bui Thi H using the money from the sale of a resettlement house in 2000. On October 29th, 2007, Mrs. Bui Thi H was granted the land use right certificate with her name on it. In 2007, Ms. H signed a document to hand over the land use rights to Ms. Ly Thuy N (daughter of Ms. H) under the condition that Ms. N care for Ms. H for the remainder of Ms. H’s life. However, ever since the date Ms. N’s name is specified on the land use right certificate, Ms. N did not uphold her promise to care for Ms. H and actually mistreated Ms. H instead. Therefore, Ms. H requests the Court to rescind the gift contract and force Ms. N to return the gifted building and land.
The People’s Court of Kien Giang province based on Articles 125, 126, and 470 of Civil Code 2005, and Precedent No 14/2017/AL found that: Although Ms. N does not admit that both parties have agreed on the condition to care for Ms. H, Ms. H has gifted Ms. N the land use rights, which are the sole property of Ms. H. Moreover, Ms. H was no longer employed to earn a living but lived off of the accumulated and nurturing money from her children and grandchildren. As such, it is reasonable that Ms. H gifted Ms. N the land use rights under the conditions Ms. N is obligated to look after Ms. H. Therefore, the first-instance judgment decided that the gift contract between Ms. H and Ms. N is a conditional gift contract; the finding based on Precedent No. 14/2017/AL that this is a conditional property gift contract and the conditions are affirmed even if these conditions not specified in the contract are reasonable.
However, the People’s Procuracy of Kien Giang province insisted that: The findings on land use rights gifting made in the first-instance judgment are sentimental, there is not enough evidence to substantiate that there are conditions attached to the gifting of land use rights and building to Ms. N. The content of the case in question is not similar to the content of Precedent No. 14/2017/AL, so the Precedent should not and would not be applied.
The case above gives birth to two contradicting perspectives, one from the Court and the other from the Procuracy, while both the first-instance court and the appellate court found that the gift contract between Ms. H and Ms. N was a conditional gift contract, the Procuracy advocates that this is just a normal gift contract and recommended that the Court refuse all of the plaintiff’s requests. In conclusion, the Appellate Court decided not to accept the recommendation of the Procurator General of the People’s Procuracy of RG City, Kien Giang Province and upheld the first-instance judgment.
Recommended Improvement to Precedent No. 14/2017/AL
Due to the above-stated demerits, Precedent No. 14/2017/AL should consider more situations so as to increase the effectiveness and reasonability of practical applications. To be specific:
Firstly: cases in which the recipients do not perform their obligations, the donor is entitled to rescind the gifted property and claim compensation for damages, unless the gifting conditions were unable to be performed due to force majeure events or due to the donor’s intentional faults.
Secondly: cases in which the recipients do not complete any gifting condition, the donors are entitled to rescind the gifted property. Cases in which the recipients complete some portion(s) of the gifting condition, the recipients might calculate the expenses for the completed conditions and request that the donors reimburse these expenses upon the donor rescinding the gifted property.
Thirdly: the donor is not responsible for the obligations agreed upon by the recipients and third parties pertaining to the gifted property.
Finally: cases in which there are additional benefits or revenue, the recipients are the rightful owners of the additional benefits or revenue produced from the gifted property during the duration of the recipients’ possession. Cases in which the gifted property’s value has been increased at the recipients’ own expense, the recipients may request that the donor reimburse the amount of the added value.[11]
Conclusion
Through a timely and reasonable approach, the promulgated Precedent No. 14/2017/AL manages to resolve some problems revolving around the external gifting conditions and their validity. However, Precedent No. 14/2017/AL remains to have some shortcomings and demerits – especially when considering the everchanging legal framework.
Therefore, the contributions, and comments of our readers, researchers, and legal practitioners support the growth of precedents pertaining to the above types of contracts, so that a further comprehensive and more notable precedent ensures consistent application.
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[1] See Article 466 of Civil Code 1995, Article 470 of Civil Code 2005, Article 462 of Civil Code 2015.
[2] “Although the document is named Transfer of Rights, the content is about the gifting made by Mr. P1 to Mr. P2 and his wife”, citing the finding made at the cassation trial, 14/2017/AL (toaan.gov.vn), accessed on August, 03rd, 2022.
[3] The Judge Committee of People’s Supreme Court (2011), Cassation decision No. 02/2011/DS-GDT on the case “Request to rescind the land use rights transfer contract” in Dien Bien, the Civil Court of People’s Supreme Court of Vietnam
[4] See Article 121, clause 1 Article 404 of Civil Code 2015.
[5] Tuong Duy Luong “Commentary on Precedent No. 14/2017/AL: land use rights gift contract with external gifting conditions”, Legislation Research Magazine No 02 + 03 (402+403) February 2020, [http://www.lapphap.vn/Pages/TinTuc/210487/Binh-luan-ve-An-le-so-14-2017-AL–hop-dong-tang-cho-quyen-su-dung-dat-ma-dieu-kien-tang-cho-khong-duoc-ghi-trong-hop-dong.html]
[6] See clause 1 Article 462 of Civil Code 2015.
[7] See Judgment No. 103/2018/DS-ST dated May 21st, 2018 on land use rights gift contact dispute and claiming the property value arising from the use rights gifts contract.
[8] See Judgment No. 101/2019/DS-PT dated September 19th, 2019 on the dispute over property gift contract.
[9] Clause 2 Article 351 of Civil Code 2015: “In cases where the obligor failed to perform the obligations due to force majeure events, the obligor shall not be held liable unless agreed otherwise or the laws specified otherwise”
[10] See Judgment No. 103/2018/DS-PT on the dispute pertaining to land use rights gift contract and claiming the property value arising from the land use rights
[11] Bui An Gion, “Precedent No. 14/2017/AL – “, People’s Court Digital Magazine, [https://tapchitoaan.vn/an-le-so-142017al-mot-so-van-de-goi-mo-va-de-xuat-kien-nghi].