Customer and supplier contracts are the lifeblood of the separated line, but they sit in the old entity’s name. For the line to keep selling and buying without interruption, those contracts must move to the new entity through substitution of the contracting party, commonly called novation. The crux under Vietnamese law is that transferring obligations under a contract cannot be done unilaterally.
Legal basis at the time of writing
Civil Code 91/2015/QH13 separates the two directions of transfer: assignment of claims under Article 365, where the obligee may assign to a substitute and generally must notify the obligor; and transfer of obligations under Article 370, where the obligor may transfer only with the obligee’s consent. Because every commercial contract holds both rights and obligations of the separating business, substituting the entire contracting party in a carve-out effectively always needs counterparty consent, whether the document is called novation, contract transfer or a party-change annex.
A batched transfer process
The safe practice classifies contracts by value and sensitivity, sends consent requests with new-entity information and a full-succession commitment for key contracts before closing day. Small recurring contracts are handled by notice letters with payment-detail annexes. Every consent should be recorded in writing; counterparty silence should not be treated as consent for material contracts, because a transfer of obligations is effective only with clear agreement.
When counterparties refuse or demand new terms
Some counterparties use a carve-out as leverage to renegotiate price or shorten terms. The company needs three fallbacks: keep the contract in the old entity and operate through a back-to-back or agency arrangement during transition, negotiate new terms within a budgeted envelope, or replace the counterparty for non-critical contracts. Keeping contracts in the old entity is only a temporary bridge, because it blurs the very liability perimeter the carve-out is trying to draw, and it needs a firm end date.
Recommended actions
1. Classify every contract of the separated line by value and sensitivity before sending transfer consent requests.
2. Obtain written consents for material contracts before closing day, with the new entity’s succession commitment attached.
3. Prepare transition operating arrangements and replacement counterparties for contracts at risk of refused transfer.
Novation is where a carve-out leaves the internal meeting room and enters the counterparties’ world: every material contract needs its own nod.
Frequently asked questions
How are contracts transferred?
Transfers in a carve-out usually combine two mechanisms: assignment of claims under Article 365 of Civil Code 91/2015/QH13, moving receivables and contract benefits to the new entity; and three-party substitution of the contracting party, where the counterparty agrees the new entity fully replaces the old one, commonly called novation in international deal documents.
Is counterparty consent required?
Counterparty consent is mandatory where the transfer changes who performs the obligations, because Article 370 of Civil Code 91/2015/QH13 requires the obligee’s consent for an obligation transfer. In two-way commercial contracts the separating business is simultaneously an obligor for supply or payment, so in practice every material contract needs written consent before the new entity fully steps in.
What if the counterparty refuses?
If the counterparty refuses, the contract stays with the old entity and the parties choose between renegotiating terms, a transition back-to-back arrangement between the two entities while the original contract stands, or terminating and re-contracting at market terms. Letting the new entity perform without consent risks breach of anti-assignment clauses and contract termination.
What are the risks?
The biggest risks are anti-assignment clauses and change-of-control termination rights, plus losing anchor customers when the consent process becomes their cue to switch suppliers. Mitigate by approaching early, committing to honour current commercial terms for a defined period, and listing unfinished transfers as post-closing covenants with clear deadlines.
This article has been quality-reviewed by the FLAW AI Legal Council
