Vietnamese partners citing “financial difficulties” to delay or avoid payment often cause serious concerns for businesses about capital loss and reputational damage. Is this merely a temporary risk, or a deliberate act of capital appropriation? How should businesses respond to protect their rights without escalating the dispute unnecessarily?
In business operations, late payment by partners is not uncommon. However, when a Vietnamese partner repeatedly uses “financial difficulties” as an excuse to postpone payment obligations, many businesses find themselves in a passive position. Should they continue to trust the partner and grant further extensions, or is it time to take firmer action?
In practice, not all financial difficulties are the same. Some partners genuinely suffer from market fluctuations, while others exploit the counterparty’s leniency to deliberately prolong capital occupation. If not handled properly from the outset, businesses may face the risk of losing the entire receivable.
Under Vietnamese law, payment obligations arise from legally valid contracts. Financial difficulties alone are not automatically considered a legal ground for exemption or reduction of payment obligations, unless otherwise agreed in the contract.
Many businesses mistakenly believe that once a partner proves losses or cash flow problems, they may indefinitely request payment deferrals. In reality, if the contract does not allow for extension or exemption in such circumstances, failure to pay still constitutes a breach of contract.
Accepting prolonged payment deadlines without clear binding measures involves significant risks:
Receivables become increasingly difficult to recover as the partner’s solvency deteriorates.
Cash flow is disrupted, affecting other business operations.
The statute of limitations for initiating legal action may expire if disputes are delayed too long.
The partner may dissipate assets before the business can take legal action.
These risks may not materialize immediately, but once they do, the consequences are often difficult to remedy.
Early risk identification is only the first step. More importantly, businesses need a tailored strategy for each stage and each specific partner. Acting too aggressively too early may damage business relationships, while excessive delay may result in loss of control.
The first step is to review all contracts, appendices, acceptance records, invoices, and communications related to payment obligations. Businesses should clearly determine:
Whether the payment deadline has already passed.
Whether there are clauses on extension, late payment penalties, or damages.
Whether any obligations are conditional upon unmet requirements.
Such review helps businesses understand their legal position before making any decisions.
Negotiation should still be prioritized at the early stage, but it must be grounded in a clear legal framework. Instead of merely “sympathizing” with the partner’s difficulties, businesses should:
Require a concrete payment plan with specific timelines.
Record meetings or extension agreements in writing.
Link extensions to security measures such as deposits, guarantees, or asset collateral.
This approach demonstrates goodwill while preventing irresponsible delays.
If the partner continues to claim financial difficulties but fails to honor revised commitments, businesses should consider stronger legal measures, such as:
Sending a formal payment demand letter outlining legal consequences of continued breach.
Suspending or terminating contract performance in accordance with the law.
Initiating litigation or arbitration if agreed in the contract.
Early and proactive action increases debt recovery prospects and creates legal pressure for compliance.
In many cases, self-handling leads to procedural or strategic mistakes that significantly reduce recovery chances. Corporate lawyers can assist by:
Assessing recovery feasibility and legal risks.
Drafting legally sound payment demands and correspondence.
Representing clients in negotiations to avoid unnecessary conflicts.
Designing effective litigation or enforcement strategies when disputes arise.
This is why many businesses opt for ongoing legal advisory services to prevent risks early, rather than seeking legal help only when disputes become severe.
“Financial difficulties” may be genuine, but they can also be a pretext. Businesses should not let emotions or personal relationships cloud legal judgment. Every delayed decision may gradually erode their rights.
In practice, businesses that handle receivables decisively yet lawfully tend to achieve higher recovery rates and face fewer prolonged disputes. Being proactive does not mean confrontation—it means controlling the situation with appropriate legal tools.
If your business is dealing with a Vietnamese partner who refuses to pay due to “financial difficulties” and you are unsure whether to continue negotiations or initiate legal action, DEDICA Law is ready to support you. With experienced lawyers specializing in corporate advisory and contract dispute resolution, DEDICA helps you build an effective legal strategy, maximize protection of your rights, and optimize legal costs.
Contact DEDICA Law Firm for in-depth legal consultation!
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