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Foreign businesses can lose money, lose control, and face serious legal risks if contracts in Vietnam are not properly drafted. Understanding the practical legal risks before signing any agreement is essential.
A poorly drafted contract in Vietnam can cause foreign businesses to lose money, goods, and the ability to recover damages when disputes arise. Many companies only realize the risks after their Vietnamese partner delays payment, stops operations, or refuses to perform its obligations.
Many foreign companies entering the Vietnamese market often believe that a “reputable” partner, competitive pricing, or prior cooperation with other companies is enough to safely sign a contract. However, in practice, what causes businesses to lose money is not the initial promises or relationship — it is the contract itself.
DEDICA Law has supported many foreign companies in manufacturing, sourcing, logistics, and outsourcing transactions, and we have observed one common issue: most disputes originate from contracts that lacked proper risk control mechanisms from the beginning.
Many businesses use international contract templates designed for multiple jurisdictions without adapting them to Vietnamese law. Others rely only on email exchanges or simple Purchase Orders (POs) without including dispute resolution clauses, penalty provisions, or payment protection mechanisms.
When business operations run smoothly, these weaknesses may not become visible. But once a partner delays delivery, fails to pay, or suddenly stops cooperating, companies realize they have almost no legal protection to defend their interests.
One of the biggest risks is that foreign businesses do not fully understand how Vietnamese law operates in practice.
For example, many companies assume that once a contract is signed, they can easily sue and recover damages if a breach occurs. In reality, the situation is far more complicated.
Under the 2015 Civil Code and the 2005 Commercial Law of Vietnam, a contract may become legally enforceable if it satisfies conditions regarding legal capacity, content, and voluntary agreement between the parties. However, to effectively protect a business during disputes, the contract must carefully address:
Many contracts contain vague language such as “the parties shall resolve disputes in good faith.” In practice, this is rarely sufficient when a dispute arises.
In addition, in Vietnam, even if a business wins a lawsuit, recovering money may still be difficult if the counterparty has no assets, has ceased operations, or has disappeared.
This is a critical issue that many foreign businesses underestimate before signing contracts.
Another common risk is transferring deposits too early without sufficient legal safeguards.
In manufacturing and sourcing transactions in Vietnam, many foreign companies agree to pay deposits of 30%–50% of the order value so factories can begin production. However, the contracts often fail to clearly regulate:
When problems arise, foreign businesses often lose leverage because the money has already been transferred while the contract lacks strong legal tools to pressure the supplier.
DEDICA Law has handled many cases where Vietnamese partners delayed projects for months, yet the contracts failed to define “material breach” or provide specific timelines to determine serious violations.
As a result, foreign companies faced major difficulties when attempting to terminate the contract or claim compensation.
Many companies assume that filing a lawsuit is enough to solve a dispute. However, the practical reality in Vietnam requires a more careful assessment.
Commercial disputes can take months or even years depending on the complexity of the case, the available evidence, and the cooperation level of the breaching party.
In addition to legal fees, businesses must also consider:
This is why “winning a case” and “actually recovering money” are two completely different matters.
A common misconception among foreign businesses is that obtaining a court judgment or arbitral award automatically guarantees recovery.
In reality, enforcement depends on many practical factors, including:
Many businesses in Vietnam stop operations, change their legal representative, or no longer possess substantial assets after disputes arise.
In such cases, even if a foreign business wins the dispute, recovering damages can remain extremely difficult.
This is why prevention during the contract drafting stage is usually far less expensive than dealing with litigation afterward.
A weak contract often leaves businesses unable to effectively manage problems when disputes arise.
For example, the contract may fail to include:
This issue becomes especially serious when foreign companies hire freelancers or remote personnel in Vietnam.
Many businesses fail to properly control:
When personnel resign or disputes occur, companies often discover that the contract provides little actual protection.
This is one of the most common questions DEDICA Law receives from international clients.
In reality, contract review is not simply about “checking wording.” It is about assessing the entire risk control structure of the transaction.
Before signing a contract, businesses should verify:
In many cases, the counterparty signing the agreement is not the proper legal entity or lacks sufficient capacity to perform the transaction.
This can make dispute resolution significantly more complicated.
This is one of the most critical parts of almost every commercial contract.
A well-drafted contract should clearly regulate:
Under Vietnamese Commercial Law, contractual penalties in commercial agreements are generally capped at 8% of the value of the breached obligation, except for certain specific cases regulated by law.
However, if the contract is drafted too vaguely, businesses may face difficulties enforcing compensation claims in practice.
Many businesses only contact lawyers after disputes have already occurred. By then, the available legal options are often much more limited.
In contrast, the cost of reviewing and strengthening a contract at the beginning is usually far lower than the cost of litigation and commercial losses later.
DEDICA Law regularly supports foreign businesses with:
Every transaction has its own characteristics depending on the industry, contract value, and business model. Therefore, there is no “one-size-fits-all” contract that guarantees absolute safety in every situation.
However, involving legal counsel from the beginning can significantly reduce the risk of losing money, wasting time, and losing control when working with partners in Vietnam.
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