What Should You Do If You Paid in Advance but Did Not Receive Goods from Vietnam?

Have you transferred payment in advance but failed to receive goods from Vietnam? Is your Vietnamese partner remaining silent, delaying shipment, or giving reasons beyond their control? This is a serious legal risk in commercial contract disputes in Vietnam. What should your company do to protect its interests without escalating the situation unnecessarily?

Paying in Advance but Not Receiving Goods: A Legal Perspective under Vietnamese Law

When payment has been made but goods are not delivered, the first reaction is usually concern:

• Can the transferred money be recovered?
• Is it complicated to initiate legal proceedings in Vietnam?
• Does Vietnamese law protect foreign businesses?

In practice, Vietnamese law provides a relatively clear legal framework governing sale of goods contracts, particularly in international trade and FDI-related transactions.

1. Delivery Obligations and Liability for Breach of Contract

Under the 2005 Commercial Law (Articles 35 and 50), the seller is obligated to deliver goods in accordance with the agreed timeline, quantity, quality, and place of delivery.

If the seller fails to deliver, delivers late, or cannot rely on valid grounds for exemption from liability, such conduct may constitute a breach of contract.

Additionally, under the 2015 Civil Code (Articles 351 and 360), a breaching party must bear civil liability, which may include:

• Specific performance (requiring proper performance of the contract);
• Contractual penalties (if agreed);
• Compensation for damages;
• Refund of received payments.

However, not every case of advance payment without delivery is straightforward. Businesses should carefully review:

• Whether the contract clearly regulates payment and delivery terms;
• Whether penalty clauses are included;
• Whether there is an arbitration clause or Vietnamese court jurisdiction clause;
• Whether payment was made via international bank transfer or intermediary arrangements.

A strategic legal assessment at the outset is critical before deciding to initiate formal proceedings.

2. Are Foreign Businesses Protected in Disputes in Vietnam?

Under the 2015 Civil Procedure Code, foreign enterprises may initiate lawsuits before Vietnamese courts if:

• The defendant is headquartered in Vietnam; or
• The contract is performed in Vietnam; or
• The parties agreed to Vietnamese court jurisdiction.

If the contract contains an arbitration clause, the dispute may be resolved under the 2010 Law on Commercial Arbitration at a domestic or foreign arbitration center.

It is important to understand that Vietnamese law does not discriminate between domestic and foreign enterprises in terms of litigation rights. However, procedural requirements, timelines, and enforcement strategy must be carefully prepared.

In practice, many foreign companies do not fail because of weak legal grounds, but because they:

• Fail to collect sufficient evidence;
• Choose the wrong forum or lack jurisdictional clarity;
• Do not assess enforcement feasibility;
• Allow the statute of limitations to expire (generally two years for commercial disputes under the Commercial Law).

Roadmap for Handling Disputes After Advance Payment Without Delivery

Before immediately filing a claim, it is essential to build a structured dispute resolution strategy in Vietnam.

DEDICA typically advises clients through a four-stage roadmap rather than rushing into litigation.

1. Legal Review and Strategic Assessment

The first step is not filing a lawsuit.

Businesses should review:

• The commercial contract;
• Appendices and email correspondence;
• Payment documents;
• Bills of lading and export documentation;
• Force majeure clauses.

Lawyers will assess:

• Whether a breach has legally occurred;
• Whether there is a basis for claiming a refund;
• Whether contractual penalties can be applied;
• Whether negotiation should be attempted first.

In many cases handled by DEDICA for FDI companies and foreign investors, a carefully drafted bilingual legal demand letter has resulted in successful recovery without formal litigation.

2. Negotiation and Mediation: A Cost-Effective Strategy

Litigation in Vietnam may require time, depending on the complexity of the dispute.

Therefore, negotiation is often a strategic first step. A well-structured demand letter supported by legal arguments can create substantial pressure on the counterparty.

At this stage, businesses should avoid:

• Sending aggressive or threatening emails without legal basis;
• Publicizing the dispute on social media;
• Completely cutting off communication.

A controlled and strategic approach helps preserve legal standing if the matter later proceeds to arbitration or court.

3. Arbitration or Court? The Right Choice Determines Half the Outcome

If negotiation fails, the next step is choosing the dispute resolution mechanism.

Commercial Arbitration

• Confidential
• Flexible procedures
• Suitable for international contracts

Vietnamese Courts

• Applicable where no arbitration clause exists
• Clear state-backed enforcement mechanisms

The decision depends not only on the contract clause but also on:

• Where the breaching party’s assets are located;
• Whether there are foreign elements involved;
• The practical enforceability of a judgment or award.

This is a critical stage often overlooked by businesses, yet it significantly affects actual recovery prospects.

4. Enforcement – The Final but Most Crucial Stage

Even if you obtain a favorable judgment or arbitral award, recovery may be difficult if the breaching party lacks assets or has dissolved.

Therefore, before initiating proceedings, it is advisable to investigate:

• The legal status of the Vietnamese company;
• Actual contributed charter capital;
• Current assets and business operations;
• Risks of asset dissipation.

A sound legal strategy always considers enforceability from the beginning.

Common Mistakes Foreign Businesses Make in Vietnam Disputes

Based on practical experience in resolving commercial contract disputes in Vietnam, common mistakes include:

• Not signing a detailed written contract and relying solely on emails;
• Paying 100% in advance without security measures;
• Failing to verify the counterparty’s legal status;
• Omitting clear dispute resolution clauses;
• Waiting too long and missing the limitation period.

These mistakes significantly weaken a company’s legal position when disputes arise.

When Should You Engage a Lawyer in Vietnam?

You should consult a lawyer when:

• The counterparty stops responding after receiving payment;
• There are signs of capital appropriation;
• The contract involves foreign elements;
• You are unfamiliar with the Vietnamese legal system;
• You are considering arbitration or litigation.

An experienced commercial dispute lawyer will not simply assess whether you can “win.” Instead, they will analyze:

• Costs, time, and risk exposure;
• Realistic recovery prospects;
• Impact on your ongoing business in Vietnam;
• Confidentiality considerations.

Please note that each case has its own specific circumstances. This article provides general guidance only and does not constitute specific legal advice.

Strategic Legal Solutions for Foreign Businesses in Vietnam

With extensive experience advising on contract disputes, corporate disputes, and international commercial matters, DEDICA approaches each case with:

• Bilingual legal analysis;
• Multi-layered strategy (negotiation – arbitration – court);
• Enforcement-focused planning;
• Strict confidentiality protection.

DEDICA is a professional law firm based in Ho Chi Minh City, with lawyers who have previously worked at international law firms and multinational corporations. We understand the mindset of foreign investors handling disputes in Vietnam — it is not only about legal rights, but also about commercial risk and reputation.

Contact DEDICA Law Firm for Professional Legal Support

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