Vietnam Sales Contracts: Key Clauses to Avoid Losing Money

What clauses must a sales contract in Vietnam include to avoid losing money? This is one of the most common questions foreign businesses ask before entering into agreements with Vietnamese partners. If you do not understand Vietnamese law or fail to control contractual risks, even a single missing clause can result in financial loss with little chance of recovery. So, what are the key “safeguard clauses” you need?

Why do many foreign businesses lose money due to contracts in Vietnam?

Many foreign companies assume that having a signed contract is enough to ensure safety. In practice, however, in Vietnam, a contract is only the starting point—your ability to protect your rights depends heavily on what is written inside it.

The risk lies not in having a contract, but in its content

Under the Vietnam Civil Code 2015 and the Commercial Law 2005, a contract is valid when it satisfies requirements on parties, intention, and content. However, the law does not automatically protect you if your contract lacks proper risk control mechanisms.

In practice, DEDICA has seen many cases where:

• 30–50% deposits were paid without binding delivery obligations
• Suppliers delayed performance without clear penalty clauses
• No clear product specifications → difficult to prove breach
• No dispute resolution clause → costly and time-consuming litigation

As a result, even with a contract in place, businesses still struggle to recover their money.

Litigation in Vietnam is more complex than you think

A common assumption is: “If I have a contract, I can sue and recover my money.”

The reality:

• Disputes may take 6 months to several years to resolve
• Legal fees, court costs, and enforcement expenses can be significant
• Even if you win, enforcement is not always effective

In many real cases:

• The Vietnamese company has ceased operations
• There are no remaining assets to enforce
• Assets are transferred before enforcement

The key takeaway:

Prevention through a well-drafted contract is far more cost-effective than dispute resolution later.

Key clauses in a sales contract to avoid financial loss

From a lawyer’s perspective, a safe sales contract in Vietnam does not need to be overly long—but it must include the right and sufficient key clauses.

Payment terms – the “lifeline” of the contract

This is where most risks arise.

You should ensure:

• Clear definition of:
  • Deposit amount
  • Payment milestones
  • Conditions for each payment
• Link payments to performance:
  • For example, payment only after quality inspection
• Avoid large upfront payments without safeguards

Practical solutions include:

• Using an escrow mechanism
• Paying based on production progress
• Retaining a portion of the payment

Without strong payment terms, you effectively lose control over your cash flow.

Quality & acceptance clause – preventing disputes

Many disputes arise simply because standards were never clearly defined.

The contract should include:

• Detailed description of:
  • Technical standards
  • Product specifications
  • Inspection procedures
• Clear rules on:
  • Acceptance timeline
  • Right to reject goods
  • Repair or replacement obligations

Without this, it becomes very difficult to prove a breach.

Penalty & damages clause

Under the Commercial Law 2005, contractual penalties in commercial agreements cannot exceed 8% of the breached obligation value.

Therefore, your contract should:

• Clearly define:
  • When penalties apply
  • Specific penalty rates
• Distinguish between:
  • Contractual penalties
  • Compensation for damages

Important note:

If not clearly stated, you may lose the right to claim penalties.

Termination & refund clause

One of the most critical concerns:

“If the other party fails to perform, can I get my money back?”

The answer depends on this clause.

Your contract should include:

• Clear conditions for termination
• Refund obligations
• Mechanisms:
  • Timeline for refund
  • Whether interest applies

Without this clause, recovering money often depends on lengthy legal proceedings.

Dispute resolution clause – critical for enforcement

This clause is often overlooked but extremely important.

You need to specify:

• Dispute resolution body:
  • Vietnamese courts
  • Arbitration (e.g., VIAC or international arbitration)
• Governing law
• Language

Practical considerations:

• Arbitration is typically faster but more expensive
• Courts are less costly but slower

Most importantly:
Choosing the wrong dispute mechanism may prevent you from effectively enforcing your rights.

Practical solutions from DEDICA – protect yourself before signing

After handling numerous disputes, DEDICA has observed a clear pattern:

Up to 90% of risks can be prevented at the contract drafting stage.

Contract review – identifying risks early

A contract that appears “fine” may still contain hidden risks:

• Ambiguous clauses
• Weak payment protection
• Non-compliance with Vietnamese law

DEDICA supports clients by:

• Reviewing each clause in detail
• Highlighting specific risks
• Providing practical revisions (not theoretical advice)

Contract drafting – legally sound and practical

Unlike generic templates, a proper contract must be:

• Tailored to:
  • Your industry (manufacturing, outsourcing, etc.)
  • Your specific Vietnamese partner
• Optimized for:
  • Enforceability
  • Recovery in case of disputes

Most importantly:

A contract is not meant to look good—it must work when problems arise.

Lawyer’s perspective: No contract is 100% risk-free

It is important to understand:

• Each transaction has unique characteristics
• Each partner carries different risk levels
• No contract can guarantee full recovery in all cases

However, a well-drafted contract will:

• Significantly reduce risks
• Strengthen your negotiation position
• Improve your chances of protecting your rights

Conclusion: Don’t wait until you lose money to fix your contract

If you are:

• About to sign a contract with a Vietnamese partner
• Unsure whether your contract contains risks
• Already facing issues and unsure how to proceed

Now is the time to act.

Prevention is always cheaper than dispute resolution.
A single contract review can help you avoid losing tens or even hundreds of thousands of dollars.

Contact DEDICA Law Firm for Professional Legal Support

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