5 Common Contract Mistakes in Vietnam: What Businesses Should Review

Business or Commercial contracts support every stage of a business’s operations in Vietnam, from appointing suppliers and distributors to securing premises and engaging service providers. Clear agreements help businesses protect cash flow, maintain operational continuity and manage their commercial relationships with confidence.

For FDIs businesses, challenges often arise when global contract templates do not reflect local requirements or when the terms agreed during negotiations are difficult to apply in practice. Unclear signing authority, loosely defined deliverables or incomplete termination provisions can leave businesses exposed when a relationship encounters difficulties.

An effective contract brings legal requirements and operational expectations together. This article explores five common contract mistakes in Vietnam and the practical steps businesses can take to strengthen their agreements.

What makes business contracts effective in Vietnam?

Vietnam’s contractual framework includes the Civil Code 2015, the Commercial Law 2005 and legislation specific to the transaction or industry. Businesses should assess both the applicable legal requirements and how the agreement will operate throughout the commercial relationship.

Under the Civil Code, validity generally depends on the parties having the necessary capacity, participating voluntarily and agreeing to a lawful purpose and content. Specific requirements concerning contractual form may also apply.

Beyond these requirements, a well-prepared agreement should give management, finance and operational teams clear answers to the following questions:

Area	What businesses should establish
Parties and authority	The entities entering into the agreement, authorised signatories and required approvals
Scope and performance	Deliverables, specifications, responsibilities, milestones and change procedures
Price and payment	Fees, taxes, invoicing requirements, payment deadlines and financial protections
Delivery and acceptance	Inspection procedures, acceptance criteria and the transfer of title and risk
Risk and remedies	Warranties, liability allocation, penalties, damages and corrective action
Disruption and termination	Procedures for suspension, force majeure, termination and handover
Law and disputes	Governing law, contractual language and a workable dispute-resolution mechanism

The following five mistakes can undermine these foundations.

Failure to Verify the Contracting Entity and Signing Authority

A recognized brand name does not always identify the entity responsible for fulfilling a contract. A parent company, subsidiary, branch or representative office may use the same commercial identity while having different legal powers and responsibilities.

This distinction matters when determining who must deliver the goods or services, issue invoices, receive payments and respond to a claim.

Before signing, businesses should verify:

• The counterparty’s registered legal name, enterprise code and address;
• Its current registration status and relevant licences;
• The identity and authority of the proposed signatory;
• Any transaction-specific corporate approvals; and
• Its operational and financial capacity to fulfil the agreement.

Signing authority should be supported by appropriate documentation. Depending on the transaction, this may include registration records, relevant charter provisions, corporate resolutions or a valid power of attorney.

Under Articles 142 and 143 of the Civil Code, transactions entered into without authority—or beyond the scope of authority—may not bind the represented party, although statutory exceptions can apply. Businesses should resolve authority questions before signing instead of relying on later recognition of the agreement.

What businesses should do: Introduce a pre-signing verification process and retain the supporting records with the contract executed. Apply additional scrutiny where the contracting entity, invoicing entity and payment recipient differ.

Failure to Adapt Global Contract Templates to Vietnam’s Requirements

Global templates can provide consistency across a corporate group. However, provisions developed for another jurisdiction may require adjustment to reflect Vietnam’s legal, tax and operational environment.

Effective localisation goes beyond translation. It considers how the agreement will be performed, how payments will be processed and how contractual rights can be exercised locally.

Separate governing law from dispute resolution

A governing-law clause identifies the law used to interpret the agreement. A dispute-resolution clause establishes the process for resolving disagreements.

Businesses should review these provisions together and confirm that the chosen approach is suitable for the transaction. Where arbitration is selected, the agreement should clearly identify the institution or rules, seat, language and arrangements for appointing arbitrators.

The location of the counterparty’s assets also matters when assessing the practical route to enforcement.

Address international sales rules

The United Nations Convention on Contracts for the International Sale of Goods, commonly known as the CISG, may apply to qualifying international sales transactions. Businesses should assess whether it applies and expressly address any intended exclusion.

Vietnam’s declaration under Articles 12 and 96 also makes written documentation an important consideration when assessing contract formation, amendments and termination by agreement.

Make supporting documents accessible

Specifications, pricing schedules, purchase orders and general terms often contain essential obligations. They should be clearly identified, available to both parties and consistent with the main agreement.

For bilingual contracts, businesses should also establish which language prevails if the versions differ, subject to applicable requirements.

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Leaving deliverables and acceptance criteria unclear

Terms such as “satisfactory quality” (Chất lượng đạt yêu cầu) or “delivery as soon as possible” (Giao hàng sớm nhất có thể ) can leave each party with a different understanding of its obligations.

These gaps become particularly costly when payment depends on acceptance, production relies on timely delivery, or several teams share responsibility for implementation.

Contracts should translate commercial expectations into measurable obligations.

For goods	For services
Product specifications and approved samples	Defined deliverables and completion milestones
Quantity and quality tolerances	Responsibilities and required client inputs
Delivery dates and agreed delivery terms	Timelines, reporting and escalation procedures
Inspection and testing procedures	Acceptance tests and approval deadlines
Rejection and replacement procedures	Correction procedures for incomplete or defective work
Warranty coverage and response times	Change requests and their effect on fees and timing

A clear order of precedence should explain which document controls if the agreement, quotation, technical schedule or purchase order contains conflicting terms.

Changes also need a defined approval process. Informal instructions can affect scope, cost and timing without reaching the people responsible for managing the contract.

What businesses should do: Involve the teams responsible for delivery, acceptance and payment before finalising the agreement. Appoint a contract owner and retain inspection records, approvals, delivery confirmations and relevant correspondence throughout performance.

For example, a manufacturing equipment contract should establish the installation and testing requirements that must be met before acceptance and final payment.

Relying on penalties instead of protecting payment

A contractual claim has limited commercial value if the counterparty cannot pay. Businesses should therefore assess payment exposure before committing significant resources or extending credit.

Depending on the transaction, appropriate safeguards may include:

• Advance payments or milestone-based billing;
• Credit limits and payment checkpoints;
• Bank guarantees or documentary credits;
• Parent-company guarantees;
• Escrow or credit insurance; and
• Clearly defined suspension rights for overdue payments.

Each measure should be assessed for its legal effectiveness, cost and practical operation.

Businesses should also distinguish contractual penalties from damages. Under the Commercial Law, an agreed penalty is generally limited to 8% of the value of the breached portion of the contractual obligation, subject to applicable exceptions. The calculation is therefore generally different from applying 8% to the entire contract value.

Claims for commercial damages require evidence supporting the breach, recoverable loss and causal connection. The injured party must also take reasonable measures to limit its loss.

What businesses should do: Align payment terms with counterparty risk and the resources committed at each stage. Finance and commercial teams should agree when additional security, tighter credit terms or escalation is required.

For example, a supplier producing customised goods may reduce its exposure by linking staged payments to procurement, production and shipment milestones.

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Agreeing to termination terms that are difficult to use

A business may have strong commercial reasons to end a relationship, but it still needs an applicable contractual or legal basis and must follow the required procedure.

An incomplete termination clause can create uncertainty over notice periods, outstanding payments, unfinished work and the return of business information.

Under Article 428 of the Civil Code, unilateral termination may be available for a serious breach, an agreed contractual trigger or another statutory basis. Notification obligations apply, and termination without sufficient grounds can expose the terminating party to liability.

A workable termination clause should address:

• Events that permit termination;
• Whether a cure period applies and when it begins;
• Any agreed right to terminate for convenience;
• Notice requirements and the effective termination date;
• Payment for completed work and committed costs;
• Treatment of outstanding orders, deposits and assets;
• Return or handling of confidential information and data;
• Transition assistance and handover responsibilities; and
• Obligations that continue after termination.

Exit planning is especially important where a supplier or service provider supports a critical business function. The agreement should provide a practical route for transferring responsibilities and maintaining continuity.

What businesses should do: Review the relevant trigger, supporting evidence and notice procedure before taking action. Coordinate legal, finance and operational input so the termination process addresses both contractual obligations and business continuity.

Strengthening contract management across your Vietnam operations

Contract management continues after signature. Businesses need a consistent process for approving agreements, monitoring obligations, recording changes and identifying issues before they escalate.

For foreign-invested companies, practical priorities include:

• Establishing approval limits and signing-authority controls;
• Maintaining a central register of contracts and key deadlines;
• Connecting payment approvals to agreed deliverables and acceptance records;
• Reviewing renewals, guarantees and termination notice periods; and
• Updating templates as regulations and business requirements evolve.

These controls help leadership teams gain clearer oversight of commitments, protect working capital and support more predictable operations.

Ascentium Vietnam supports businesses in navigating the corporate, accounting, tax and operational requirements of doing business in Vietnam. By bringing these considerations into commercial planning, companies can build a stronger foundation for their business relationships and continued growth.

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