Contract dispute over payment when the statute of limitations determines the outcome

It’s not always easy for businesses owed money to reclaim it through legal channels. In practice, many cases—even with a valid contract and acknowledgment of debt—fall into disadvantage simply because they do not fully understand the “statute of limitations,” a seemingly minor legal detail that can dramatically affect the protection of a company’s rights.

What is the statute of limitations and why is it important in commercial contract disputes?
When a dispute arises, correctly identifying the statute of limitations is crucial for the court to review and resolve the case. According to the Civil Code 2015 and the Commercial Law 2005, the statute of limitations for commercial contract disputes is two years, counted from the date when the party’s legitimate rights and interests are violated.

If the limitation period has expired and the claimant cannot provide grounds to extend or restart it, the court may dismiss or suspend the claim, causing the business to lose its right to seek compensation, contract breach fines, or late-payment interest—as seen in a recent Ho Chi Minh City ruling.

Non‑payment on time – consequences go beyond principal debt
In commercial transactions, delayed or unpaid obligations not only strain cash flow but can also disrupt the entire business ecosystem. To ensure compliance, contracts often include clauses for late-payment interest and penalty fees. However, in reality, claiming these amounts is another matter entirely.

According to current law, if the defaulting party fails to fulfill their obligations within the deadline and no extension is agreed, the aggrieved party must initiate legal action within the statutory period. Even if there is an acceptance report, a debt acknowledgment letter, or payment demand notices, the statute of limitations may begin from the date the obligation was breached—not when the letter was sent. This misconception about the timing can lead businesses to lose the right to claim interest and penalties.

How to correctly determine the statute of limitations – What businesses should watch out for
Determining the statute of limitations correctly isn’t just a technical legal skill; it’s a matter of survival in commercial disputes. If you miscalculate the start date or miss the opportunity to “restart” the limitation, your business may lose its right to recoup what you’re owed. Here are key principles businesses must watch to avoid losing leverage in disputes.

1. Starting point of the limitation period
   By law, the limitation begins on the date when the entitled party knows or should know their rights are violated. In commercial contracts, this is typically the payment due date or the contract’s end date.

2. Restarting the limitation period via debt acknowledgment
   If the debtor writes or acts in a way that clearly acknowledges the obligation (e.g., debt confirmation letters, promises to pay), the limitation period restarts from that date. However, proving such acknowledgment clearly and legally requires solid evidence.

3. Limitation only considered upon the defendant’s request
   The court applies the limitation only if the defendant requests it before the first-instance judgment. Once raised correctly, the court will almost certainly dismiss claims beyond that period.

Effective debt recovery strategies for commercial contracts
With experience handling hundreds of commercial disputes, DEDICA shares strategies to help businesses improve debt recovery effectiveness and protect legal rights:

1. Send demand letters with statute of limitations control
   Payment demand letters should clearly outline payment amounts, contractual basis, due dates, and legal consequences. Sending via registered post or confirmed email provides evidence that can reset the limitation period if the debtor acknowledges the debt.

2. Regularly review and update receivables
   Businesses should have periodic reviews of receivables to avoid prolonged debt without legal action. Maintain records like delivery notes, invoices, confirmation emails, and meeting minutes for potential litigation support.

3. Actively file lawsuits before the limitation expires
   As soon as signs of non-cooperation emerge, consult a lawyer to assess risk and timing. Filing early increases the chances of recovery and protects against further losses.

4. Include clear penalty clauses in contracts
   Specify exact amounts for fines, late-payment interest, and deadlines in contracts. Add clauses allowing the aggrieved party to file suit at any time during contract performance to preserve a longer limitation window in some cases.

Conclusion
The statute of limitations isn’t obscure, but misunderstanding or neglecting it can cause businesses to lose their rightful claims. Don’t let delay or confusion over timing cost you your money. Be proactive in preparing documentation, managing risks, and taking legal action as soon as warning signs appear.

DEDICA specializes in resolving contract disputes, debt recovery, and representing businesses in court. With a team of experienced commercial litigation lawyers, we are committed to supporting your business throughout negotiations, mediation, court proceedings, and enforcement.

Contact DEDICA Law Firm today for in-depth legal advice!
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