Commercial Dispute – Late Payment Interest in Construction Contracts: Trade Law or Construction Law? - THE LAM LAW

📌Commercial Dispute – Late Payment Interest in Construction Contracts: Trade Law or Construction Law?

💡 Should late payment interest in construction contracts be governed by the Commercial Law or Construction Law? How should courts handle disputes over unpaid amounts and overdue interest? 🤔

📖 In Case No. 50/2024/KDTM-PT, the subcontractor (Company G VN) filed a lawsuit against the main contractor (Company V) for:

🔹 Unpaid construction work: VND 15,405,003,000

🔹 Late payment interest: VND 6,239,825,000

⚖ Court’s Key Rulings:

✅ Trial Court Decision:

Applied Article 306 of the Commercial Law 2005, setting a late payment interest rate of 11.9% per year (based on an average of three commercial banks’ overdue rates).

Ruled that the main contractor must pay the outstanding amount and interest for late payment.

✅ Appeal Court Decision:

– The main contractor argued that the contract falls under the Construction Law, not the Commercial Law, and that there was no agreed-upon interest rate in the contract.

– The court adjusted the late payment interest rate based on the bank lending rate (10.7% per year) and overdue interest (16.05% per year).

– The ruling reinforced that the contractor was liable for delayed payments and corresponding interest, even without an explicit agreement on late payment terms.

🔎 Key Takeaways from the Case:

* Clearly define late payment interest in contracts to avoid ambiguity and legal disputes.

* Failure to specify interest terms may lead courts to apply different legal frameworks (Commercial Law vs. Civil Code), affecting the final interest calculation.

* Timely payment processing by main contractors is crucial to avoid financial liabilities and potential litigation.

💬 Have you encountered similar disputes? In construction contracts, should courts apply the Commercial Law (which provides explicit interest rules) or rely on the Civil Code/Construction Law? Pls share your thoughts! 👇

Link PDF: https://drive.google.com/file/d/1CVsGKGM4xG359IrUjRBqyntxnXcEJXLd/view?usp=sharing

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