Abstract: The right to freedom of contract is not only reflected in the fact that the subjects have the right to freely agree to establish, change or terminate the contractual relationship, but also in the fact that the free will of the parties must be respected and guaranteed throughout the contract performance process. The article focuses on clarifying theoretical and practical issues on freedom of contract in current Vietnamese law, comparing it with the laws of some countries, especially in regulating contracts relating to land use rights and assets attached to land - a common type of contract but with many potential conflicts in rights and obligations between the parties. On that basis, the author proposes a number of solutions to improve Vietnam's contract law in order to both ensure freedom of contract and balance the interests of the parties and public interests, contributing to protecting human rights in the economic field in accordance with the spirit of the Constitution and international treaties to which Vietnam is a member.

Keywords: contract, freedom of contract, human rights.

1. Identification of Contracts and the Right to Freedom of Contract

Originating first in Roman law[1] and later introduced into Western Europe through the Renaissance movement, the institution of contract has a long history of formation and development. In the legal systems of various countries, the law of contracts has always been regarded as one of the fundamental institutions, serving as a foundation for promoting civil and commercial exchanges, and bearing the least political imprint. Within this institution, “freedom” is affirmed as a guiding principle in civil and commercial transactions. The entire law of contracts is built upon the foundation of freedom and equality in the expression of will. It can be said that the principle of freedom of will in contract law is a historical product of the theories of liberty in the 18th century. This theory exerted a strong influence on the Civil Codes of countries belonging to the Civil law system, most notably France and Germany, and indirectly shaped Vietnam’s contract law. Over the course of development, together with the refinement of the private law system, the law of contracts has increasingly been recognized as a central and fundamental institution in civil and commercial law.

In order to study freedom of contract, it is essential to first identify the concept of contract. When speaking of contracts, one is referring to “freedom and consensus of will.” Whether in ancient law or modern law, whether under the Civil law or the Common law system, there is unanimous agreement with the view that “a contract is an agreement with legally binding effect.” This means that freedom and consensus of will are fundamental and indispensable elements of a contract; a lawful agreement must exist for a contract to be formed.

In Vietnam’s modern civil law period, legislators have early on recognized the role and significance of the law of contract in operating the elements of a market economy. From the early years of the Đổi Mới (Renovation) period, a series of legal instruments regulating contractual relations were promulgated, most notably the 1991 Ordinance on Civil Contracts, the 1991 Ordinance on Economic Contracts, the 1995 Civil Code, the 2005 Civil Code, and the 2015 Civil Code. The promulgation of these legal instruments can be regarded as important legislative steps, affirming the special role and significance of the law of contracts in social life as well as Vietnam’s determination to build a socialist rule-of-law state and a socialist-oriented market economy. At the same time, in the context of the Fourth Industrial Revolution and the trend of developing a multidimensional economy that facilitates trade between nations and broader international integration, the law of contracts has increasingly been “dynamic,” constantly adapting to new economic trends in a modern Vietnamese society within the process of globalization. In terms of contract performance, one of the provisions designed more clearly and specifically relates to the concept of contract. Particularly, Article 394 of the 1995 Civil Code and Article 388 of the 2005 Civil Code of Vietnam both provided that: “A civil contract is an agreement between the parties to establish, modify, or terminate civil rights and obligations.” Article 385 of the 2015 Civil Code stipulates: “A contract is an agreement between the parties regarding the establishment, modification, or termination of civil rights and obligations.” In all the definitions of contracts under the aforementioned Civil Codes, through the use of the terms “to” (để) and “regarding” (về) when referring to the purpose of a contract in creating legal consequences, it can be seen that the legislator tends to view the binding force of contracts more from the subjective perspective of the consensus of wills than from the objective result of such consensus.

The principle of freedom of contract emerged a long time ago but only developed strongly in the 13th century, based on the doctrine of freedom of will in contract formation and situated within the broader framework of Enlightenment philosophy. According to the principle of freedom of contract, the contracting parties are entitled to decide all matters relating to the contract. The doctrine of freedom of contract flourished in France in the 18th century, under which an individual could only be bound by his or her own will—expressed either directly through contracts or indirectly through the law. The core content of this doctrine is reflected in several main points: human will is supreme and free; only acts arising from a person’s own will may have binding effect upon that person; and each party entering into a contract seeks to satisfy its own interests within the scope of compatibility with the common good and in harmony with opposing interests.

Thus, according to the doctrine of freedom of will, individual liberty is regarded as a sacred and inviolable right. The State’s attitude of respect, as expressed through legal provisions regarding agreement, the choice of contracting parties, the formation, performance, modification, or termination of contracts, demonstrates a clear manifestation of this principle in practice[2]. This doctrine was intended to achieve fairness among individuals through freedom of negotiation and to promote economic development through free competition (laissez-faire)[3]. Today, this doctrine is understood to mean that the economic liberalism of that era was a regime of unlimited freedom, in which fairness was deemed to be a natural outcome derived from an appropriate law of obligations built upon the particular foundation of proper equality. Consequently, private law theories in the 19th century were premised on the supremacy of unlimited individual freedom[4]. These ideas profoundly influenced the German Civil Code of 1900. Thus, both the French Civil Code of 1804 and the German Civil Code of 1900, which served as models for other civil codes, were deeply shaped by the doctrine of freedom of will.

In the Common Law tradition, freedom of contract is a central doctrine of classical contract law. This doctrine flourished and reached its full development in the latter half of the nineteenth century. In this context, the law was created by judges—more precisely, the law was developed through case law (rather than implying that judges had legislative powers)—and legal doctrines were influenced by: (1) the idea of the social contract originating from Locke (John Locke having inherited and developed the Social Contract Theory); (2) classical economic thought; and (3) the conception of voluntary association among parties to a contractual relationship[5]. As a result, contracts came to be viewed as “law” between private individuals. This means that contractual obligations were understood to arise from the will of individuals engaged in a particular contractual relationship. As Adam Smith and Thomas Hobbes stated: “Freedom of contract is a principle under which individuals are free to agree among themselves on the terms of their contract without interference from government. Anything beyond the minimum regulations and taxation can be seen as a violation of the principle. It is the cornerstone of the theory of laissez-faire economics. Economists regard it as a benefit to society because it increases choice and reduces unemployment caused by regulations such as minimum wage laws”[6].

In summary, regardless of the legal system, freedom of will has always been recognized as the foundation of contract law, meaning that freedom of will is the most essential element of a contract. Theoretically, the doctrine of freedom of will gives rise to legal consequences in the formation of contracts and serves as an important theoretical basis for the development of modern contract law by emphasizing the parties’ freedom of will and freedom of contract. It can be understood that: “The right to freedom of contract is one of the fundamental economic rights of human beings, under which contracts are formed based on mutual agreement and free will, and therefore are not subject to external forces such as state intervention, a right that is respected and protected in most countries around the world.”

Although freedom of will is the foundation for the formation of contracts, without freedom of will, contractual relations cannot be established; conversely, freedom of will plays an important role in supporting the transformation of intentions or plans into reality.[7] Freedom of will in general, and freedom of contract in particular, are fundamental human rights, but they are not absolute rights. To ensure harmony between collective interests and individual interests, an absolute freedom of will would fail to reconcile certain transactions that arise in practice. Therefore, the restriction of freedom of will is also relative in nature, yet it is a principle recognized in civil relations.[8] If the doctrine of freedom of will originated from the natural law school with the purpose of protecting individual liberty against state interference, then the restriction of freedom of will concerns balancing the interests of the individual with those of the community. Such restrictions are only legitimate and carry certain positive significance, such as: (i) balancing individual interests with the common interests of society as a whole; (ii) protecting weaker parties in certain transactions; and (iii) ensuring order and providing direction in the development of socio-economic life.[9]

In the process of concluding contracts, in order to maximize their own benefits, the parties not only set forth requirements aimed at limiting the interests of their counterparts, but in many cases, the contracting parties themselves may reach agreements that disregard the fact such arrangements could infringe upon the interests of the State, public interests, or the rights and interests of other parties, all in pursuit of their own advantage. According to the thinker Montesquieu: “Liberty is the right to do everything that the law does not forbid. If a citizen does what the law prohibits, he is no longer free; for if he were free to do so, then everyone would also be free to break the law.”[10]

Thus, although freedom of agreement is a fundamental principle in the establishment of civil legal relations in general, and contractual relations in particular, any agreement must operate within certain limits—namely, the rights and lawful interests of other parties. This limitation is concretely reflected in the principle enshrined in Clause 4 of the 2015 Civil Code, which provides that: “The establishment, performance, and termination of civil rights and obligations must not infringe upon the interests of the nation, the people, public interests, or the lawful rights and interests of others.”[11] To ensure that the conclusion of contracts complies with this principle, the 2015 Civil Code and related legal documents set forth provisions to guide the parties’ agreements within defined limits, compelling compliance. If, in concluding a contract, the parties fail to adhere to these provisions, their agreement will not be recognized or legally enforceable. Accordingly, “in addition to the principle of respecting the parties’ freedom of agreement in transactions, the law also establishes a number of minimum requirements that the parties must comply with—these constitute the conditions for the validity of a transaction.”[12]

Up to the present time, there has not been any legal document that provides a definition of the conditions for the validity of transactions in general, or of contracts in particular. However, based on the foregoing analysis, the conditions for the validity of a contract may be understood as follows: The conditions for the validity of a contract are statutory provisions designed to limit the freedom of agreement by setting forth minimum requirements that the contracting parties must comply with. These conditions serve both to restrict the freedom of agreement and to ensure the protection of the rights and interests of the contracting parties, while at the same time safeguarding the interests of the State, the public interest, and the lawful rights and interests of other subjects.

Therefore, although the freedom of contract originates from the principle of freedom of will—a fundamental cornerstone of modern civil law—it is only recognized, protected, and permitted by law within certain limits, namely within the scope allowed by law. In other words, the freedom of contract is not an absolute right that parties can exercise at will regardless of the consequences or the impact on others or on the public interest. For instance, the parties may not freely agree to enter into a contract for the performance of an unlawful act (such as a contract for the sale of narcotics or illegal weapons), nor may they freely choose as the subject matter of the contract an asset that is under distraint or prohibited from being transacted. If the parties’ agreement goes beyond the boundaries permitted by law, such contract will be deemed invalid. The parties are only free within the limits set by law and remain subject to legal and substantive scrutiny to ensure legality, morality, and conformity with social order.

2. The Law of Certain Countries on the Freedom of Contract

Article 1.1 of the UNIDROIT Principles of International Commercial Contracts 2016 (the most recent consolidated version) provides: “The parties are free to enter into a contract and to determine its content”[13]. Similarly, Article 1.02 of the Principles of European Contract Law (PECL) stipulates: “The parties are free to enter into a contract and to determine its contents subject to requirements of good faith and fair dealing, and the mandatory rules established by these Principles.”[14]. According to Article 2:101 of the PECL, at the time of formation, in order for a contract to be concluded, the parties must comply with the following conditions of contract formation:

“(1) A contract is concluded if:

(a) The parties intend to enter into a contract and to be legally bound by that intention; and

(b) The parties reach an agreement without the need for any further conditions.”

Thus, in contractual relations, freedom and voluntary commitment and agreement are essential criteria for the parties to establish, perform, and terminate the rights and obligations stipulated in their contract. It can be said that this is a fundamental requirement as well as the core principle underlying all civil relations in general and contractual relations in particular. Voluntariness is a sign of a subjective element; therefore, if it is not manifested outwardly, it cannot be recognized. When entering into a contract, each party is free to express its will without being subject to any influence that would cause it to express its will inaccurately or incompletely. In addition, according to the above provision, a contract is concluded if the parties have reached an agreement without the need for any further conditions.

- Regulations on the Right to Freedom of Contract in France

For a long period, freedom of contract was not recognized as an individual right protected by the Constitution. However, in 2000, the French Constitutional Council recognized the constitutional value of freedom of contract, affirming it as one of the individual rights set forth in Article 4 of the Declaration of the Rights of Man and of the Citizen [15]. By 2016, Ordinance No. 2016-131 of February 10, 2016, on the reform of contract law, the general regime of evidence, and obligations [16], for the first time explicitly recognized freedom of contract as one of the fundamental principles of contract law. The provision on freedom of contract is codified in Article 1102 of the French Civil Code, placed immediately after Article 1101 on the definition of a contract. This arrangement reflects the significance of freedom of contract within contractual relations. The French Civil Code is considered one of the most influential civil codes in the continental European legal tradition. Since its promulgation, many other countries within the Civil Law system have developed their own civil codes modeled upon, or even directly referencing, the French Civil Code. According to the provisions of the French Civil Code, “A contract is an agreement of wills between two or more persons intended to create, modify, transfer, or extinguish obligations” (Article 1101) [17]. This definition clearly identifies the essence of a contract as an agreement—a convergence of wills between two or more parties—where the subject matter of the contract may be a thing or an act, and the parties must comprise at least two sides. While simple, this definition encapsulates the essential characteristics of a contract.

At the same time, under the provisions of the French Civil Code, every person has the freedom either to enter into or to refrain from entering into a contract, to choose the contracting party, and to determine the content and form of the contract in accordance with the law; however, the freedom of contract must not contravene rules of public order [18]. The conditions for a contract to be valid under the Code include: (1) the parties must voluntarily and freely agree; (2) the parties must have full legal capacity; and (3) the object of the contract, if it concerns a thing, must actually exist, or if it concerns an act, such act must be capable of being performed. Moreover, the principle of freedom of contract in the French Civil Code is also placed in “Book I: On Persons” with legal language that is simple, concise, and easily understandable for all. This legislative choice reflects the view that the individual constitutes the foundation and the cornerstone for the exercise of contractual relations.

- Regulations on the Right to Freedom of Contract in Germany

Similar to the French Civil Code, the German Civil Code (BGB) also emphasizes the right to human freedom, with contracts being concluded based on the agreement of each individual. The BGB was likewise shaped by the principle of individual liberty, safeguarding private property rights and the freedom of contract [19]. According to Article 305 of the BGB (1896, as amended in 2002), a contract is considered a necessary condition to establish or alter an obligation arising from the lawful transactions of the parties, except where otherwise provided by law. With respect to the conditions for a contract to be effective, Article 306 of the BGB stipulates: “A contract is valid only if it is capable of being performed; a contract that cannot be performed shall be deemed non-existent, which is almost equivalent to the Roman law requirement that the act or undertaking in a contract must be capable of being carried out". However, unlike the French Civil Code, specific provisions on freedom of contract are strictly embedded within the section on the Law of Obligations, which encompasses both the Law of Contract and Tort. In this respect, the German Civil Code reflects a bourgeois perspective on freedom and equality of the parties in contractual relations and the obligation to respect contracts, articulated in academic language that is, at times, somewhat difficult for lay readers to comprehend.

- Regulations on the Right to Freedom of Contract in Japan

The Japanese Civil Law introduces the concept of contract and emphasizes the freedom of will as well as the element of agreement in contracts: “A type of civil transaction that reflects the unity of will between two or more parties. The purpose of a contract is ordinarily to give rise to obligations.” From this definition, it can be observed that the Japanese Civil Code also regards the freedom of will as a principle in the conclusion of contracts. The freedom of conclusion here includes the freedom to offer and to accept the conclusion of a contract, treating the contract as a legal relationship and also as a common and important basis for the creation of obligations, such as the marital relationship, which is considered a contractual transaction but does not give rise to obligations. From this, it can be seen that the Japanese Civil Code is strongly influenced by the Civil Law tradition. However, the law concerning the rights and obligations of citizens, which has a constitutional nature, is not permitted to be violated under the sources of Common Law. Nevertheless, the fundamental principle of freedom is still grounded in Japan’s longstanding traditional norms, expressed through the requirement that the conclusion of contracts must be lawful, not contrary to social morals, public order, or prohibitive provisions of law.

- Regulations on the Right to Freedom of Contract in the UK

In the legal system of the United Kingdom, the freedom of contract is recognized as a fundamental principle of contract law. This right was formed and developed on the basis of common law (case law), while also being influenced by the idea of individual liberty and the principle of the free market. Accordingly, the parties in a contractual relationship have the freedom to establish legal agreements on the basis of voluntariness and legal equality. First of all, the freedom of contract under English law is manifested in the parties’ freedom to decide whether or not to conclude a contract. No individual or organization may be compelled to enter into a contract against their will, unless there is a specific statutory provision imposing such an obligation (for example, in cases relating to public service obligations). This reflects the basic idea in common law of respecting voluntary agreement and the genuine intention of the contracting parties.

The legal system of the United Kingdom does not impose any restrictions on the choice of contracting parties, provided that the parties possess full legal capacity as prescribed by law. The freedom to choose contractual counterparts ensures fair competition and is consistent with the principle of the free market. In addition, the law of the UK recognizes the freedom to determine the content of the contract. The parties are entitled to agree on terms such as price, payment conditions, performance period, the responsibilities of the parties, and other related matters. The courts intervene only in exceptional circumstances, such as when there is fraud, duress, fundamental mistake, or when the contract contains provisions that are unlawful or contrary to public morals. Furthermore, certain mandatory rules are also applied to consumer contracts or contracts involving special legal obligations, in order to protect the interests of the weaker party.

In addition, the law of the United Kingdom allows the parties to freely choose the form in which a contract is expressed. In most cases, a contract is not required to be in writing but may be concluded orally, through conduct, or by other means, provided that it meets all statutory requirements for validity. However, with respect to certain special types of contracts, such as contracts for the transfer of ownership of real property, the law requires that they must be made in writing in accordance with the provisions of the Law of Property (Miscellaneous Provisions) Act 1989 [20].

Although the freedom of contract is widely recognized, the law of the United Kingdom also prescribes certain limitations in order to ensure public order, social morals, and the protection of the weaker party. For instance, under the Unfair Contract Terms Act 1977 [21] and the Consumer Rights Act 2015 [22], certain disadvantageous, unfair, or significantly imbalanced terms regarding the rights and obligations of the parties may be declared void. This serves as a necessary control mechanism to ensure fairness in the conclusion and performance of contracts, while at the same time remedying the shortcomings of the principle of absolute freedom. At the same time, according to United Kingdom case law, the courts do not interfere with the content of a contract unless there are signs of illegality or the requirements of consent are not satisfied. A prominent precedent can be seen in the case of L’Estrange v. F. Graucob Ltd (1934) [23], in which the court affirmed that a person who signs a contract will be bound by its terms even if they have not read the contents, provided that there is no fraud or duress.

In general, the freedom of contract under the law of the United Kingdom is established as a fundamental principle, reflecting the emphasis on the will and voluntariness of the parties participating in civil transactions. However, this principle is not absolute but is regulated by legal provisions in order to protect the public interest, safeguard consumers, and ensure fairness within society. The approach of the law of the United Kingdom both reflects the characteristics of the common law system and ensures flexibility and adaptability to the practical demands of modern contractual relations.

- Regulations on the Right to Freedom of Contract in Canada

In the Canadian legal system, the freedom of contract is recognized as a fundamental principle governing civil and commercial legal relations. Canada is a country with a mixed legal system of common law and civil law, in which most provinces and territories apply the common law system, except for the province of Québec where the civil law system is applied [24]. Although there are differences in legal form, both systems ensure the principle of freedom of contract as a core legal institution. First of all, the freedom of contract under Canadian law includes the freedom to enter into or not to enter into a contract. The parties have full discretion to decide whether to participate in a contractual relationship, except where they are bound by a statutory legal obligation or a special social obligation. The law does not interfere with whether or not the parties conclude a contract, but only regulates the legal consequences of the contract once it has been established. Canadian law also recognizes the freedom to choose contractual partners, with the choice of counterparties being entirely based on each party’s subjective evaluation and economic interests. Legal provisions do not restrict the subjects eligible to participate in contracts, provided that the conditions of legal capacity are satisfied and that no prohibitive provision of law is violated.

At the same time, the parties may agree on rights and obligations, time, place, price, remedies, and other related terms. The courts do not interfere with the content of a contract unless the contract shows signs of unfairness, illegality, or contravention of the public interest. However, in certain specific areas such as consumer contracts, Canadian law establishes specific limitations to protect consumers against disadvantageous or unfair terms. For example, the Consumer Protection Act of the province of Ontario [25] provides that unfair terms in consumer contracts shall have no legal effect. Similarly, Article 1437 of the Civil Code of Québec [26] stipulates that a court may annul a contractual term if it creates a significant imbalance between the rights and obligations of the parties, thereby violating the principle of good faith and fairness. In addition, a contract may be concluded orally, in writing, or through specific conduct expressing the intention to contract, except where the law requires a written form (such as contracts relating to real estate or transactions of high value). The law does not impose a fixed form, provided that the validity requirements of the contract are satisfied, including consent, legal capacity, lawful subject matter, and a purpose not contrary to law.

However, the freedom of contract is not absolute in Canadian law. Certain limitations are established in order to protect the public interest, ensure legal order, and prevent abuse in the conclusion of contracts. The courts may refuse to enforce a contract in cases involving fraud, duress, fundamental mistake, or provisions that cause significant harm to one party without reasonable justification [27]. Doctrines such as the doctrine of unconscionability and the doctrine of public policy are applied flexibly to control contracts that risk infringing upon the public interest or contravening social morals.

It can be seen that Canadian law recognizes and protects the freedom of contract as a cornerstone of the private law system. However, this right is exercised within a strict legal framework in order to balance individual freedom with the protection of the public interest. The adjustment of the limitations on the freedom of contract is designed to be flexible and highly adaptive to practical contexts, thereby contributing to legal certainty for contracting parties and strengthening confidence in the judicial system.

- Regulations on the Right to Freedom of Contract in the US

According to US case law, a contract is understood as one or more promises for the breach of which the law provides a remedy, or the performance of which the law in some way recognizes as a duty [28]. Under the US Uniform Commercial Code, however, a distinction is made between an “agreement” and a “contract.” Accordingly, an agreement is the actual bargain between the parties as found in their language or by implication from other circumstances (Section 1-201(3)), whereas a “contract” is the total legal obligation that results from the parties’ agreement as determined by this Act, and as supplemented by other law (Section 1-201(12)) [29]. Ultimately, in essence, the understanding of the concept of “contract” under US case law and under the Uniform Commercial Code is substantially consistent. At the same time, US case law provides that a person competent to enter into a contract must be of the age of majority (18 years old), act with freedom of choice (that is, not under compulsion or undue influence), and possess sound mind at the time of contracting. In general, under US case law, a contract is valid when the following conditions are satisfied: (1) There is an agreement, a voluntary consensus of the parties’ wills; (2) The parties have the legal capacity to contract; (3) There is consideration, except in certain exceptional cases; (4) The purpose of the contract must be lawful or not contrary to public policy; and (5) The form of the contract must comply with statutory requirements.

In summary, in different countries, the origins of the concept of the freedom of contract share both commonalities and distinctive features. However, in essence, it remains consistent and unchanged, namely, the freedom of will in the conclusion of contracts. The freedom of contract is the ability of the parties to freely choose to enter into a contract, to choose the counterparty in the contractual relationship, to freely determine the content of the contract, and to freely choose the form of the contract. The freedom of contract is one of the fundamental human rights and must be protected. Nevertheless, such freedom must exist within certain limits. In addition to safeguarding their own rights, parties must also aim to ensure the rights of others as well as the interests of society as a whole. Therefore, the freedom of each party must be “not contrary to law and social morals.” This is also the fundamental purpose consistently pursued by Vietnamese civil law. As a matter of principle, the law of Vietnam, the laws of other countries around the world, as well as international law, all respect the freedom of will of the parties entering into a contract.

3. Regulations of Vietnamese Law on the Freedom of Contract

The freedom of contract under the 2013 Constitution is indirectly recognized for all individuals through the right to freedom of business, whereby the right to freedom of business may be understood as “the ability to act, the ability to choose and decide, in a conscious manner, of an individual or enterprise in matters related to and within business activities; for instance, the freedom to make decisions when establishing an enterprise; the choice of scale and business sectors; the freedom of contract, the freedom to choose business partners and counterparts in business; and the freedom to select mechanisms for dispute resolution…” [30]. At the same time, the freedom of contract is a fundamental right in the conclusion of contracts between parties and is reflected in the content of normative legal documents. Vietnam has established a relatively comprehensive legal framework to regulate contractual relations and the freedom of contract, including the 2015 Civil Code, the 2005 Commercial Law, and other specialized laws.

3.1. The Right to Freely Choose Contractual Partners

The choice of contracting parties is also emphasized in legal studies and reflected in substantive law. No one is compelled to enter into a contract with a person with whom they do not wish to contract. The compulsion to conclude a contract constitutes a violation of the right to personal freedom and may be considered an unlawful act. At the same time, the parties have the right to choose their contractual partners on the basis of reputation, capacity, and the ability to perform contractual obligations. Business entities only need to rely on the relevant legal provisions corresponding to the content of the contract to negotiate and comply with when concluding and performing the contract.

Vietnamese law provides conditions for entities to have the right to conclude different types of contracts. According to Article 16 of the 2015 Civil Code: “Civil act capacity of an individual means his/her capability by his/her acts to establish and perform civil rights and obligations.” In order to distinguish the ability to participate in civil transactions, Vietnamese law is based on the age of the individual: “A person who is full 18 years old or older is an adult; a person under 18 years old is a minor” (Article 20 of the 2015 Civil Code). The civil act capacity of an adult is full capacity for civil acts, except in cases where the law provides that the person has lost civil act capacity or has restricted civil act capacity. A person with full civil act capacity is allowed by law to freely conclude civil contracts in accordance with legal provisions, without restriction (Article 21 of the 2015 Civil Code). With respect to the legal capacity of a juridical person, pursuant to Clause 2 of Article 86 of the 2015 Civil Code, the civil legal capacity of a juridical person arises from the time it is established or permitted to be established by a competent state authority; if the juridical person is required to register its operation, its civil legal capacity arises from the time of entry into the register.

In addition, the current legal system does not provide that individuals, juridical persons, traders, employers, or employees are entitled to enter into contracts with one another. This demonstrates the respect for the right of business entities to choose their contractual partners.

3.2. The Right to Freely Negotiate the Content of a Contract

The right to freely negotiate the content of a contract is one of the fundamental principles of civil and commercial law. This principle affirms that the parties to a contract have the right to freely agree on the content of the contract they wish to conclude, provided that such agreements do not violate prohibitive provisions of law and are not contrary to social morals. The 2015 Civil Code does not prescribe the essential content of a contract, but the parties are entitled to agree on its content. Article 398 of this Code provides that a contract may contain the following terms: the subject matter of the contract; quantity, quality; price, method of payment; time limit, place, and manner of performance of the contract; rights and obligations of the parties; liability for breach of contract; and methods of dispute resolution. In addition, the content of the contract must not contravene prohibitive provisions of law and must not be contrary to social morals as provided in Point c, Clause 1, Article 117 of the 2015 Civil Code. A contract is established on the basis of the parties’ agreement, and the Civil Code also emphasizes the freedom and voluntariness of such agreements; however, all agreements remain subject to the control and supervision of law and moral standards. Accordingly, the right of the parties to freely negotiate the content of a contract is limited by legal provisions in order to ensure that their agreements do not infringe upon the interests that the law seeks to protect or public order (the fundamental principles of law).

3.3. The Right to Freely Negotiate Amendments to the Content of a Contract During Its Performance

The right to freely modify the content, suspend, or terminate a contract during its performance is evidence of the freedom of contract of business entities when concluding and performing contracts. This emphasizes the importance of respecting the decisions of the parties involved, including amending part of the contract or terminating it when both parties agree. According to the 2015 Civil Code, the conditions for amending or terminating a contract before its expiry are also recognized; however, specific provisions on the modification of civil contracts (Article 421) and the termination of civil contracts (Article 422) are separately stipulated. The parties shall agree on these matters during the performance of the contract. In addition, the 2005 Commercial Law also provides regulations on the adjustment of rights and obligations in commercial contracts in cases where the parties have not made specific agreements on such matters.

3.4. The Right to Freely Negotiate Security Conditions for the Performance of a Contract

Security conditions for the performance of a contract are a fundamental factor determining the success of the contract, ensuring that the rights and obligations of the parties are fulfilled through forms such as mortgage of property, payment guarantees from credit institutions, or guarantees from third parties by real property or money from bank accounts. This is of great importance with respect to the limited financial liability arising under a contract [31]. In civil relations, the parties may agree to secure part of an obligation when the obligor does not have sufficient assets to secure the entire obligation. The parties may also choose security measures appropriate to the nature of the obligation and their asset capacity, or in accordance with legal provisions in cases where the law requires security measures. The secured obligation may be a present obligation, a future obligation, or a conditional obligation.

3.5. The Right to Freely Agree on the Adjudicating Authority and the Governing Law for the Settlement of Contractual Disputes

In the event of a dispute, the parties may decide to resolve it by one of the following methods: negotiation, conciliation, arbitration, or court proceedings [32]. In addition, relevant legal documents also recognize the right to freely choose the method of dispute resolution. Furthermore, Article 7 of the 2015 Civil Code provides that: “In civil relations, reconciliation between the parties in accordance with the provisions of law shall be encouraged.” Thus, the provisions of Vietnamese law encourage and prioritize methods of dispute resolution through negotiation and conciliation.

For the method of dispute resolution through court proceedings, the parties may agree with each other on the settlement of the case; participate in conciliation conducted by the court [33]; and the court has the responsibility to conduct conciliation and create favorable conditions for the litigants to reach an agreement on the settlement of the civil matter [34]. This provision contributes to ensuring the right of the parties to freely choose the method of dispute resolution.

With respect to arbitration, when the adjudicating authority chosen is commercial arbitration: (i) For disputes without foreign elements, Vietnamese law shall apply to resolve the dispute; (ii) For disputes with foreign elements, the law chosen by the parties shall apply; (iii) If the parties have no agreement on the applicable law, the arbitral tribunal shall decide the law to resolve the dispute; (iv) In cases where Vietnamese law or the law chosen by the parties contains no specific provisions relating to the subject matter of the dispute, the arbitral tribunal may apply international customs to resolve the dispute, provided that such application or the consequences of such application are not contrary to the fundamental principles of Vietnamese law [35].

4. Evaluation of Vietnamese Legal Regulations on the Freedom of Contract and Certain Recommendations for Improvement

The freedom of contract, as a fundamental principle of modern civil law, requires that the law must guarantee that the parties to a contractual relationship are free to establish, perform, and terminate contracts on the basis of voluntariness, equality, and without unnecessary interference from the State. However, Vietnamese law, despite having made significant progress, still contains certain bottlenecks that hinder the full realization of the value of the freedom of contract, particularly in areas relating to land, housing, electricity, and water, as these essential sectors are subject to strong State intervention.

First, there remain contradictions and overlaps among legal provisions, particularly between the provisions of the 2015 Civil Code and those of specialized laws in regulating contracts in general and the freedom of contract in particular, specifically:

- The 2015 Civil Code provides rather flexible provisions regarding the content of contracts in order to ensure the parties’ freedom of contract, following the principle of giving priority to the parties’ agreement over statutory provisions. However, the current Vietnamese legal system still contains contradictions and overlaps between the 2015 Civil Code and specialized laws in regulating contractual matters, thereby restricting the parties’ freedom of agreement in many cases. With its orientation as a framework law, the 2015 Civil Code has created a broad legal space for the freedom of contract by respecting the parties’ agreement, intervening only when such agreement violates prohibitive provisions of law, is contrary to social morals, or aims to evade obligations to the State. Nevertheless, many specialized laws such as the Law on Housing 2023, the Law on Real Estate Business 2014, the Law on Electricity 2024, and the Law on Insurance Business 2022 stipulate a number of mandatory provisions requiring the parties in contractual relations to comply with certain contents and forms, thereby significantly narrowing the space for freedom of agreement. For example, Article 164 of the Law on Housing 2023 requires that housing sale and purchase contracts must be notarized or certified in order to be valid, even where the parties have voluntarily concluded and performed the contract, giving rise to actual rights and obligations. In judicial practice, there have been not a few cases where the court was compelled to declare contracts void due to non-compliance with the notarization formality, even though the parties had fully performed obligations up to 100% of the contract value, causing serious harm to bona fide parties and running counter to the objective of protecting the freedom of contract [36]. Therefore, the provisions of specialized laws need to be harmonized with the 2015 Civil Code. Accordingly, the provisions on contracts in specialized laws should only focus on regulating specific matters relating to each particular sector without repeating the existing provisions of the 2015 Civil Code. At the same time, such provisions must comply with the principle of freedom of contract.

- The current law still allows for deep State intervention in contractual relations in sectors that, by their very nature, are already strictly regulated by market mechanisms. A typical example is the field of electricity and clean water business: contracts for the supply of electricity and water remain subject to imposed contract templates and mandatory clauses, leaving enterprises and consumers with virtually no bargaining power. This is a “remnant” of the subsidized economy’s legal mechanism, when the State directly managed and heavily intervened in civil transactions with the objective of social management rather than the protection of the parties’ freedom. In practice, disputes arising in this field (for example, contracts for the supply of residential electricity in rural, remote, and mountainous areas) are often incapable of being resolved on the basis of the parties’ agreement but are entirely dependent on the imposition of the monopolistic supplier, rendering the freedom of contract virtually incapable of being realized in a substantive manner.

Second, the practical enforceability remains limited . According to Article 129 of the 2015 Civil Code, even when specialized laws require the parties to comply with a specific form of contract and the parties, for some reason, fail to do so, the contract may still become effective if the following conditions are satisfied: first, the parties have performed two-thirds or more of the contractual obligations; second, there is a request for the court to recognize the validity of the contract; and third, the court issues a decision of recognition. In such a case, although the contract initially failed to comply with the formal requirements, it may still take effect. Accordingly, Clause 2 of Article 117 of the 2015 Civil Code, together with a number of specialized laws, imposes virtually no strict obligation on the parties to comply with the form of the contract (except for certain mandatory form requirements under the Commercial Law).

In many types of civil and commercial contracts, the obligations of the parties are not limited to obligations to pay money or to deliver property (which can be easily quantified), but also include composite obligations, ancillary obligations, and qualitative obligations. For instance, in a housing sale contract, apart from the obligation to deliver the house and pay the price, there are also obligations to ensure the legal status of the property, to provide warranty, and to hand over relevant documents. Such obligations cannot readily be converted into specific percentages in order to determine whether “two-thirds” of the obligations have been performed. Similarly, in service contracts or agency contracts, obligations often consist of performing a certain task or achieving a certain result, which makes quantification even more difficult. In practice, courts have often struggled when assessing the extent to which the parties have performed in order to determine whether to recognize or not to recognize the validity of the contract. This lack of clarity creates a legal loophole that a non-bona fide party may exploit to request the declaration of invalidity of a contract, even though the transaction has in substance been almost fully performed and the voluntary intention of the parties has been fully expressed.

In addition, the current law has also not clearly and consistently determined the time at which a contract takes effect in cases where Article 129 of the 2015 Civil Code is applied. As a matter of principle, determining the time at which a contract takes effect is a crucial factor in ensuring the freedom of contract, as it decides from which point the rights and obligations arise and establishes the legal boundary for protecting bona fide parties. However, the law provides no specific guidance: whether the contract is deemed effective from the initial time of conclusion, from the time when two-thirds of the obligations have been performed, or from the time when the court issues a decision of recognition.

Third, at Point a, Clause 1, Article 117, the Civil Code provides on the capacity of subjects: “A subject must have civil legal capacity and civil act capacity appropriate to the civil transaction to be established.” The subject here may be understood as either the contracting party or the person directly participating in the conclusion and performance of the contract. With such an unclear provision, in many cases it may be misinterpreted, leading to incorrect application. However, in my personal view, whether it is the legal capacity of the contracting party or of the person directly concluding the contract, both must meet the requirement of legal capacity, while with respect to civil act capacity, the requirement must be satisfied by the person directly establishing the contract in accordance with the civil contract. Thus, the Code only provides a general rule regarding the subject, which may lead to multiple interpretations and, consequently, to inaccurate application in practice. Therefore, it may be amended to read “the subject carrying out the establishment of the transaction.”

Fourth, learning from the experience of other countries’ legal systems is necessary in order to enhance the freedom of business and the freedom of contract of domestic enterprises when cooperating with international partners. The process of assimilating foreign law during Vietnam’s current stage of digital transformation and integration brings significant practical and economic benefits. This will help Vietnam to build a modern, fair, and secure legal system, facilitating the conclusion of contracts and providing a reasonable basis for the resolution of disputes, if any. In doing so, risks can be reduced and business disputes caused by conflicts of laws can be avoided.

5. Conclusion

The freedom of contract is a fundamental principle of civil law, playing a role in ensuring the voluntariness and equality of the parties in contractual relations. Vietnamese law, particularly the 2015 Civil Code, has introduced progressive provisions to safeguard this principle. However, in practice, the freedom of contract has not yet been fully guaranteed due to limitations within the legal system. The lack of consistency between the Civil Code and specialized laws, together with unnecessary requirements on the content and form of contracts, has restricted the parties’ freedom of agreement. In order for the freedom of contract to be truly promoted, it is necessary to improve the law in the direction of ensuring consistency between the Civil Code and specialized laws, clarifying the method for calculating the proportion of obligations performed and the time at which a contract recognized by the court takes effect, thereby contributing to the protection of human rights in the economic sphere and fostering the development of a socialist-oriented market economy.

TÀI LIỆU THAM KHẢO

2. Civil Code 2015

3. Commercial Law 2005

4. Civil Procedure Code 2015

5. Law on Commercial Arbitration 2010

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*Assoc. Prof. Dr. Trần Thị Huệ, Senior Lecturer, Hanoi Law University. Approved for publication on 29/7/2025. Email: tranthihuehlu@gmail.com

[1] 5th–4th Century BC

[2] HOÀNG THẾ LIÊN (Chief Editor), Scientific Commentary on the Civil Code 2005 (Volume III), Part Three: Civil Obligations and Civil Contracts (Revised and Supplemented Edition), Institute of Legal Science (2014)

[3] VŨ VĂN MẪU, An Outline of Vietnamese Civil Law – Volume II: Obligations and Contracts (First Edition), National Ministry of Education Publishing House, Saigon, p. 84 (1963)

[4] Andreas Abegg and Annemarie Thatcher, Review Essay – Freedom of Contract in the 19th Century: Mythology and Silence of the Sources, German Law Journal, No. 1 (2004)

[5] Lee Boldeman, The Cult of the Market: Economic Fundamentalism and Its Discontents, Publisher: ANU E Press (2008)

[6] Richard A. Epstein, Contracts Small and Contract Large: Contract Law Through the Lens of Laissez-Faire, Coase-Sandor Institute for Law & Economics Working Paper No. 49 (1997)

[7] NGÔ HUY CƯƠNG, Textbook on Contract Law, Vietnam National University, Hanoi, p. 25 (2013)

[8] NGÔ HUY CƯƠNG, ibid. [7], p. 25

[9] NGUYỄN TRỌNG ĐIỆP and CAO THỊ HỒNG GIANG, Limitations on Freedom of Will and the Issue of Consumer Protection under Current Vietnamese Law, Journal of Science, Vietnam National University, Law Studies, Vol. 32, No. 2, p. 12 (2016)

[10] HOÀNG THANH ĐẠM (Trans.), The Spirit of Laws (Montesquieu), Education Publishing House, Hanoi, p. 99 (1996)

[11] Clause 4 Article 3 Civil Code 2015

[12] Hanoi Law University, Textbook on Vietnamese Civil Law (Volume 1), People’s Public Security Publishing House, p.142

[13] UNIDROIT Principles of International Commercial Contracts 2016, https://www.unidroit.org/english/principles/contracts/principles2016/principles2016-e.pdf, accessed on 12/5/2024

[14] Principles of European Contract Law, https://www.trans-lex.org/400200/_/pecl/#head_4, accessed on 12/5/2024

[15] Cons. const. No. 2000-437 dated 19/12/2000, paragraph 37, https://www.conseil-constitutionnel.fr/decision/2000/2000437DC.htm, accessed on 12/5/2024

[16] https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000032004939, accessed on 12/5/2024

[17] Embassy of France in Vietnam, Translation of the French Civil Code (2018)

[18] Embassy of France in Vietnam, Translation of the French Civil Code, Article 1102 (2018)

[19] Civil Code of the Federal Republic of Germany, available at: https://www.gesetze-im-internet.de/englisch_bgb/, accessed on 12/5/2024

[20] Law of Property (Miscellaneous Provisions) Act 1989

[21] Unfair Contract Terms Act 1977

[22] Consumer Rights Act 2015

[23] L’Estrange v E. Graucob Ltd [1934] 2 KB 394, https://www.lawteacher.net/cases/lestrange-v-graucob.php, accessed on 12/5/2024

[24] Sébastien Lafrance, The Codification of Civil Law in Quebec: An Example for Vietnam?, VNU Journal of Science: Legal Studies, Vol. 40, No. 1 (2024) 50-60 (2024)

[25] Consumer Protection Act, 2002

[26] Civil Code of Québec

[27] Uber Technologies Inc. v. Heller (2020), https://decisions.scc-csc.ca/scc-csc/scc-csc/en/item/18406/index.do, accessed on 12/5/2024

[28] American Restatement 2nd of the Law of Contracts, https://www.trans-lex.org/450300/_/american-restatement-2nd-of-the-law-of-contracts/, accessed on 12/5/2024

[29] Uniform Commercial Code, http://www.law.cornell.edu/ucc/ucc.table.html, accessed on 12/5/2024

[30] MAI HỒNG QUỲ, "Some Issues on Freedom of Business and Freedom of Contract in Vietnam", Journal of Legal Science, No. 2, p.3 (2012)

[31] Security measures for the performance of obligations specifically provided in the Civil Code 2015, including: pledge of property (Articles 309–316); mortgage of property (Articles 317–327); deposit, escrow, collateral (Articles 328–334); guarantee (Articles 335–343); credit guarantee (Articles 344–345); retention of property (Articles 346–350)

[32] Article 317, Commercial Law 2005

[33] Clause 11 Article 70, Civil Procedure Code 2015

[34] Article 10, Civil Procedure Code 2015

[35] Article 14, Law on Commercial Arbitration 2010

[36] NGUYỄN TRẦN NGÀ, Civil Transactions Invalid Due to Non-Compliance with Formal Requirements and Practical Settlement of Disputes, Journal of the Courts (2023), https://tapchitoaan.vn/giao-dich-dan-su-vo-hieu-do-khong-tuan-thu-quy-dinh-hinh-thuc-va-thuc-tien-giai-quyet-tranh-chap9342.html