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In many construction projects in Vietnam—especially those involving foreign investors—it is not uncommon to see contracts that exist only on paper. The contract names one party as the contractor, but in reality, the work is performed by another entity. Payments, instructions, and project management may also differ from what the contract states.
When disputes arise, a critical legal question emerges:
If a construction contract is merely formal, who actually bears legal responsibility?
The answer is often more complex—and riskier—than many investors expect.
A construction contract is considered “formal” when:
The named contractor does not perform the actual work
Another entity carries out construction without being a party to the contract
The contract exists mainly to satisfy licensing or regulatory requirements
The real relationship between parties differs from contractual wording
This situation often arises when:
A licensed Vietnamese company signs the contract, but unlicensed entities execute the work
Subcontracting exceeds what is legally or contractually permitted
The investor relies on informal arrangements outside the contract
While these structures may seem convenient during project execution, they create significant legal exposure when disputes occur.
Under Vietnamese law, courts and authorities increasingly assess the actual performance and control of the project, not merely what the contract states.
This means:
The entity that actually performs the work may be deemed legally responsible
The party that exercises control, gives instructions, or receives payment may be treated as the real contractor
Formal contracts may be disregarded if they do not reflect reality
In disputes, courts often examine:
Who managed the site
Who hired workers
Who received payments
Who benefited economically from the project
A “paper contractor” does not automatically shield other parties from liability.
The company named in the contract—even if it did not perform the work—may still face:
Contractual liability for delays or defects
Administrative penalties for illegal subcontracting
Joint liability for safety or labor violations
In many cases, the named contractor becomes legally exposed without having real control over the project, leading to severe financial and legal consequences.
The entity that actually performs the construction work—despite not being named in the contract—may also face legal exposure.
Potential risks include:
Being deemed a de facto contractor
Liability for construction defects or accidents
Labor and safety violations
Tax and licensing penalties
Operating “outside the contract” does not eliminate responsibility—it often increases it.
Investors often assume that responsibility lies solely with the contractor. This assumption is dangerous.
If the investor:
Directly instructs the actual performer
Pays entities not named in the contract
Tolerates or encourages informal arrangements
Then the investor may be considered:
A joint employer
A party exercising effective control
Partially liable for damages or violations
In serious cases, investors may face claims even when they believe they are protected by the contract.
Problems with “formal contracts” often surface only when disputes arise, such as:
Defective works
Delays and liquidated damages
Payment disputes
Worksite accidents
At that stage, parties realize that:
The contract does not match reality
Evidence contradicts contractual structure
Legal responsibility is unclear
This uncertainty significantly weakens dispute resolution outcomes.
Beyond civil liability, formal-only contracts can trigger:
Project suspension by authorities
Administrative fines
Revocation of construction licenses
Delays in project approval or completion
These consequences can affect not only the contractor, but the entire project timeline and investment plan.
Vietnamese courts may disregard a contract when:
It is used to conceal illegal subcontracting
It does not reflect actual performance
It violates mandatory construction regulations
In such cases, courts may reconstruct the legal relationship based on facts and conduct, not contractual wording.
This creates unpredictable outcomes and increases litigation risk.
In practice, formal construction contracts exist because:
Investors prioritize speed over compliance
Legal review is skipped to save costs
Parties assume disputes will not arise
Enforcement risk is underestimated
Unfortunately, when disputes occur, correcting structural mistakes becomes extremely difficult.
Many investors believe that reviewing the contract at signing is sufficient.
However, construction projects evolve:
Subcontractors change
Scope expands
Payment structures shift
Control dynamics change
Without continuous legal oversight, contracts quickly become disconnected from reality.
With ongoing legal consultancy, businesses can:
Align contractual structure with actual execution
Monitor subcontracting and compliance
Adjust contracts as projects evolve
Detect legal risk before disputes arise
This approach prevents the formation of “formal-only” contracts that expose all parties to liability.
Foreign investors face additional challenges:
Limited familiarity with Vietnamese construction regulations
Language barriers
Reliance on local partners
Without continuous legal guidance, informal practices may unknowingly violate local law.
DEDICA provides ongoing legal consultancy services for foreign investors and construction projects in Vietnam, focusing on both contract structure and actual project execution.
DEDICA supports clients by:
Reviewing and restructuring construction contracts
Assessing real-world project arrangements
Advising on subcontracting and licensing compliance
Preventing hidden liability exposure
Supporting dispute resolution when conflicts arise
DEDICA’s approach emphasizes legal substance, enforceability, and risk prevention, not merely formal documentation.
When a construction contract exists only in form, legal responsibility does not disappear—it multiplies.
Vietnamese law looks beyond paper agreements to assess who actually performs, controls, and benefits from construction work. In such cases, contractors, performers, and investors may all face unexpected liability.
By engaging ongoing legal consultancy, businesses can:
Ensure contracts reflect real project execution
Prevent hidden legal responsibility
Reduce dispute and compliance risk
Protect long-term investment value
📞 Hotline: (+84) 39 969 0012 (Available via WhatsApp, WeChat, Zalo)
🕒 Working Hours: Monday – Friday (8:30 – 18:00)
Contact us today for a free initial consultation with our experienced lawyers!
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