How does professional contract drafting differ from using pre-made templates?

Many foreign businesses, when drafting contracts in Vietnam, often choose the quickest method: downloading a pre-made contract template and filling in the information. While this may save initial time, it carries significant risks in case of disputes. In reality, many businesses have transferred money and signed contracts, yet still cannot protect their rights.

So, what is the difference between a professionally drafted contract and a template contract? The answer lies not just in the form, but in the ability to protect the business in worst-case scenarios.

1. Disadvantages of using standard contract templates

Standard contracts are often designed to be general in nature, making them lacking in depth when applied to specific real-world transactions.

The content is too general, making it difficult to handle when problems arise

In many cases, standard contracts only describe obligations at a basic level without going into detail. When things go smoothly, this is not a problem. But when disputes arise, this lack of clarity becomes a major weakness.

Businesses often fail to clearly define:

• When is a breach of contract considered?
• Criteria for evaluating the quality of goods or services
• Conditions for requesting a refund or compensation

According to the 2015 Civil Code, a contract can still be valid even if its content is not detailed. However, when it lacks specificity, proving a breach and claiming compensation becomes very difficult in practice.

Not in line with Vietnamese law and practice

A common problem is using standard contracts from foreign countries without adapting them to Vietnamese law. This can lead to certain clauses being unrecognized or unenforceable.

For example, the 2005 Commercial Law allows for penalties for breach of contract, but there are certain limitations in some cases. If businesses are not aware of these limitations, they may include clauses in contracts that seem strict but are invalid when disputes arise.

A dispute can last from several months to several years, depending on its complexity. During that time, businesses must dedicate resources to pursuing the case, while also facing pressure on cash flow and business plans. Costs are not only in lawyers or court fees, but also include opportunity costs – something many businesses only realize once they are involved in a dispute.

Even with a favorable ruling, recovering the money remains a difficult task. There are numerous cases where the partner:

• Cease operations after receiving payment.
• No longer owns assets registered under the legal entity's name.
• Delaying or evading performance obligations.

In that case, a well-prepared contract from the start – with payment control mechanisms and accountability clauses – will be far more valuable than trying to deal with it later.

2. What are the benefits of having a professional contract drafted?

Unlike standard contract templates, drafting a professional contract doesn't start with a pre-made form, but rather begins with analyzing the actual risks of the transaction.

The contract is designed based on a real-world situation

Lawyers will ask questions that businesses often don't consider: what happens if the partner doesn't deliver, how are delays handled, and do they have the right to refuse delivery if the quality is substandard?

From there, contracts are drafted to handle situations such as:

• Delayed delivery or no delivery
• Failed to meet the promised quality standards
• Late payment or evasion of obligations
• A dispute arose, but one party refused to cooperate

The key point is that each risk has a clear mechanism for handling it, instead of leaving businesses to "fend for themselves" when problems arise.

This provision is enforceable in Vietnam

A good contract is not only legally sound, but also practically enforceable.

This includes drafting clauses that comply with current regulations regarding:

• Contract validity
• Penalties for violations and compensation for damages
• Dispute resolution mechanism (court or arbitration)

More importantly, these clauses need to be designed so that when disputes arise, businesses can use them immediately without having to re-explain them from scratch.

From experience working with many foreign businesses in Vietnam, it can be seen that most risks do not come from the absence of a contract, but from contracts that are not properly prepared. It is important to note that no contract can guarantee the recovery of money or winning a lawsuit in every case. Each case depends on many factors such as the partner, assets, and the ability to enforce the judgment.

If your business is working with partners in Vietnam, using a standard contract template might be a quick option, but it's not a safe one. The real difference lies in whether the contract is designed to protect your business.

Are you preparing to sign a contract with a partner in Vietnam? Or are you concerned about risks but don't know what to check? Contact DEDICA Law for advice and to develop a suitable legal strategy from the outset.

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