Regulations on risk responsibility in processing contracts

A processing contract is an agreement between the ordering party and the processing party to produce or complete the product as requested. Responsibility for risk in processing contracts plays an important role in protecting rights and ensuring transparency between parties. This responsibility regulation helps clearly determine who will be responsible when unexpected incidents occur, thereby minimizing disputes and enhancing trust in the cooperation process.

What is a processing contract?

A processing contract specified in Article 542 of the Civil Code 2015 is an agreement between the parties, whereby the processing party performs work to create products according to the requirements of the ordering party and the ordering party. product recognition and payment of wages. Meanwhile, according to Articles 178 and 179 of the Law on Commercial 2005, a processing contract is a document expressing the agreement between the processing party and the ordering party. Accordingly, the processing party uses part or all of the raw materials and materials of the ordering party to perform one or more stages in the production process at the request of the ordering party to receive remuneration.

Responsibility for risk in processing contracts

The ordering party

According to the provisions of Article 548 of the Civil Code 2015, the outsourcing party is responsible for bearing the following risks:

• After receiving the product: If the processing party has delivered the product to the ordering party, all risks will belong to the ordering party.
• Before receiving the product: In case the ordering party must bear the risk for raw materials or products created from materials of which the ordering party is the owner, this risk will be borne in advance when the product is delivered.
• Delay in receiving the product: If the ordering party is late in receiving the product, during that delay, the ordering party must be solely responsible for all risks that occur, regardless of whether the processed product was created from raw materials of the receiving party or not.

Processing party

According to Article 548 of the Civil Code 2015, the risk responsibilities of the processing party are specified as follows:

• Before delivering the product: During the time before the product is delivered to the ordering party, the processing party must only bear risks related to the raw materials or products of which the processing party is the owner.
• Delay in product delivery: If the processing party is late in delivering the product, during the delay, the processing party must be responsible for compensating the ordering party if any damage occurs to the processed product.

Resolve disputes about risk responsibilities in processing contracts

Resolve disputes in commercial arbitration

For commercial processing contracts, before or after a dispute occurs, the parties can choose to resolve the dispute by commercial arbitration according to the provisions of Clause 1, Article 5 of the Law on Commercial Arbitration 2010.

The parties can agree to determine the Court with jurisdiction over arbitration activities (Provincial Court) or the determination of the Court is carried out according to the provisions of Clauses 2 and 3, Article 7 of the Law on Commercial Arbitration 2010.

Resolve disputes in Court

Pursuant to Clause 3, Article 26 of the  Code of Civil Procedure 2015, Article 6 of the Law on Commercial Arbitration 2010, disputes about risk responsibilities in processing contracts can be resolved in Court if:

• The parties do not have an agreement to resolve disputes by commercial arbitration or;
• The parties have an agreement to resolve disputes by arbitration but the arbitration agreement is invalid or the arbitration agreement cannot be performed.

Consulting services on risk responsibilities in processing contracts

When entering into a processing contract, clearly determining the risk responsibilities between the parties is a prerequisite to protect rights and avoid arising disputes. At Long Phan, we provide comprehensive solutions, helping to effectively manage risks throughout the contract implementation process.

• Consulting on legal regulations related to processing contracts.
• Assess possible risks during the processing process, from raw materials to finished products.
• Support in drafting processing contracts, ensuring terms related to risk responsibilities are clearly and specifically stated.
• Consulting and support in the contract negotiation process between the ordering party and the receiving party.
• Consulting on types of insurance that can be applied to minimize risks in processing contracts, including cargo insurance, product liability insurance, etc.
• Provide advice on related dispute resolution methods.
• Consulting on other related issues.

Understanding and determining risk responsibilities in processing contracts is very important to protect the interests of related parties. When using professional legal consulting services, parties can build strict contracts, effectively manage risks and minimize the possibility of disputes. Consulting services on risk responsibility in processing contracts at Long Phan will help you feel secure with clear and fair terms and ensure maximum benefits. To receive detailed advice, please contact us via hotline: 0906735386.