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Foreign companies signing contracts in Vietnam often overlook critical legal risks, leading to lost deposits, payment disputes, delivery delays, and difficulties recovering money when Vietnamese partners fail to perform their obligations.
When entering the Vietnamese market, many foreign businesses focus heavily on pricing, production capacity, delivery schedules, or supplier relationships. However, one of the most important factors is often underestimated: the legal structure of the contract itself.
In practice, having a signed contract does not automatically mean your interests are fully protected in Vietnam.
DEDICA Law has assisted many foreign companies facing situations such as delayed delivery, suppliers refusing refunds, service providers breaching agreements, or Vietnamese partners suddenly ceasing operations after receiving advance payments. In many of these cases, the core issue was not the absence of a contract, but rather the lack of proper legal review and risk allocation from the beginning.
Vietnam is an attractive destination for manufacturing, sourcing, outsourcing, and cross-border business cooperation. However, the legal environment and business practices in Vietnam can differ significantly from those in the US, EU, Japan, Korea, or China.
Many foreign companies assume that a standard international contract template will be sufficient. Unfortunately, this assumption can create major legal and commercial risks later on.
One of the most common mistakes is signing contracts based solely on email communications, messaging apps, or supplier introductions without conducting proper legal verification.
Before signing, companies should verify:
Many foreign businesses only discover problems after the Vietnamese partner stops responding, delays performance indefinitely, or becomes impossible to locate.
From a practical perspective in Vietnam, suing a company that has already ceased operations or has no remaining assets can significantly increase legal costs while offering little realistic chance of recovering funds.
This is why even a basic legal due diligence process before signing a contract is often far more valuable than trying to resolve disputes afterward.
Another common issue is the use of foreign contract templates that are not properly adjusted to Vietnamese law.
Examples include:
Under Vietnamese law, certain commercial penalties may be subject to statutory limitations. For example, the Commercial Law 2005 generally limits contractual penalties in many commercial transactions to 8% of the breached contractual obligation.
As a result, contract terms drafted under US or EU legal standards may not always function as expected when disputes arise in Vietnam.
More importantly, a contract that appears comprehensive in wording may still fail to provide effective protection in actual enforcement proceedings.
Many serious disputes originate from very basic drafting mistakes or missing protective mechanisms in the contract.
Having a lawyer review the agreement early can often save significant time, money, and operational disruption later.
Many foreign companies transfer deposits or advance payments to Vietnamese suppliers without including proper protection mechanisms such as:
When problems arise, buyers often face difficult practical questions:
In Vietnam, the real issue is often not whether you can win the case, but whether you can actually recover money afterward.
This distinction is extremely important.
If the counterparty has already stopped operating, transferred assets, or lacks sufficient financial capacity, enforcement proceedings can become lengthy and commercially inefficient.
For this reason, foreign companies should prioritize preventive legal strategies rather than relying entirely on litigation after disputes occur.
Many contracts contain vague language such as:
“The parties shall negotiate in good faith to resolve disputes.”
However, they fail to specify:
As a result, parties may spend substantial time and legal costs arguing over procedural issues before addressing the actual dispute.
For foreign companies, this often increases:
In some cases, the total litigation cost may exceed the realistic amount recoverable from the dispute itself.
That is why many businesses adopt a risk-control approach at the contract stage rather than depending solely on future legal action.
Many foreign businesses only seek legal support after problems have already escalated. By that stage, however, significant risks may already be unavoidable.
A properly reviewed contract can help companies:
In practice, contract review costs are often substantially lower than:
For companies without an in-house legal team in Vietnam, external legal counsel should be viewed as a risk management investment rather than simply a legal expense.
DEDICA Law frequently advises foreign companies on contracts involving:
Common disputes involve:
Typical risks include:
Many foreign companies hire Vietnamese freelancers or remote workers without properly addressing:
This may later lead to disputes over ownership of source code, creative work, or customer data.
Before entering into agreements with Vietnamese partners, companies should at least:
Particular attention should be paid to:
Companies should establish:
A lawyer familiar with Vietnamese business practices can often identify practical risks that foreign companies may overlook during negotiations.
In Vietnam, many commercial disputes do not arise from sophisticated fraud schemes, but from contracts that fail to provide realistic legal protection.
Foreign companies often realize this only after:
Given the realities of litigation costs, enforcement challenges, and business disruption in Vietnam, the most effective strategy is usually not “winning a lawsuit,” but minimizing legal risk from the very beginning of the transaction.
Every case has unique factors involving industry practices, contract structure, and enforcement realities. Legal advice should therefore be tailored to the specific transaction and business model involved.
If your company is preparing to sign contracts with Vietnamese partners or is already facing contractual disputes in Vietnam, early legal guidance can significantly reduce commercial and operational risks.
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