Shipyard Contract Disputes in Vietnam and Legal Lessons Learned

Is your business considering signing a high-value shipyard contract worth billions? Or are you struggling because your partner is delaying delivery or missing payments? In the complex field of shipbuilding, even a small oversight in the contract can lead to multi-year disputes. This article helps you understand hidden risks and legal responses to avoid unnecessary litigation cycles.

Legal Basis for Shipyard Subcontracting Contracts

Shipyard subcontracting is a specialized field. Businesses need not only technical capacity but also strong legal frameworks. Under the current Civil Code and Commercial Law, a subcontracting contract involves a subcontractor building a product per the client's requirements for remuneration. In large-scale shipbuilding, such contracts typically include payment schedules, penalty clauses, damage compensation, and dispute-resolution mechanisms.

Practical Lesson from a Shipyard Contract Dispute

A recent judgment by the People’s Court of Hai Phong City illustrated hidden risks if a business lacks strict contract control. In this case, the buyer and shipyard entered a construction contract and disbursed over VND 20 billion. However, after many years, the vessel was not delivered. A dispute followed over contract termination, reimbursement of advances, interest, penalties, and other costs.

The court dismissed most of the buyer’s claims because the buyer had formally agreed to continue the project after the alleged delivery delay. Moreover, disbursements were found to have been properly used for construction and backed by stage-completion confirmations. The court noted that termination or reimbursement claims lacked a legal basis while the contract remained in effect and unliquidated.

This shows that continuing to execute the contract after a delay may cancel the right to penalties or compensation. Also, courts rely heavily on approval documents, communications, and financial records to determine whether advances were used appropriately.

Risk-Mitigation Strategies in High‑Value Contracts

When entering high-value subcontracting projects like shipbuilding, a minor mistake in the contract can result in losses of tens of billions. Thus, businesses should prioritize legal safeguards, not just technical capacity. Below are practical strategies to minimize dispute risk and protect business rights from signing to project handover.

Clear Obligations and Conditions in the Contract
Contracts should clearly specify each party's obligations, delivery timeline, acceptance criteria, payment conditions, interest on late payments, and penalty clauses. Include force majeure clauses and mechanisms to address technical changes or design adjustments to avoid disputes when unexpected events occur.

Track and Archive Legal Documentation Rigorously
During contract performance, store acceptance records, communications, payment requests, invoices, and financial documents. Categorize them by project stage to facilitate later review. A well-organized file greatly aids lawyers in building a strong case.

Be Cautious When Reaffirming or Continuing the Contract
Signing addenda or continuing performance after a breach may invalidate the right to claim penalties or compensation. Good intentions may inadvertently waive legal rights—courts may interpret continued performance as acceptance of delay or waiver of liability.

Seek Legal Advice Early
Engaging legal counsel during negotiation and drafting helps identify risks, define appropriate clauses, and protect long-term interests. Legal professionals guide contract structuring and negotiation to balance parties’ rights. A well-prepared contract from the start is key to avoiding disputes later.

DEDICA is an experienced partner in advising, drafting, and resolving subcontracting disputes, especially in construction, engineering, and maritime sectors. We are ready to support businesses at every project stage to ensure legal security and commercial success.

Contact DEDICA Law Firm for specialized legal guidance!
📞 Hotline: (+84) 39 969 0012 (WhatsApp, WeChat, Zalo)
🏢 Head Office: 144 Võ Văn Tần Street, Võ Thị Sáu Ward, District 3, Ho Chi Minh City
🕒 Working Hours: Monday – Friday (8:30 – 18:00)
Get your first legal consultation free from our professional team!