International Sale of Goods Disputes under CISG

A Guide to Resolving International Sale of Goods Disputes under CISG

Vietnam is one of the largest exporting economies in Southeast Asia, with hundreds of thousands of sale-of-goods contracts concluded every year with foreign partners. Since 1 January 2017, when the United Nations Convention on Contracts for the International Sale of Goods (CISG, also known as the Vienna Convention 1980) entered into force in Vietnam, international sale of goods disputes CISG have had an entirely new, unified legal framework. That means: many disputes that Vietnamese companies assume will be governed by Vietnamese law or the counterparty's law are in fact directly governed by CISG — with rules on fundamental breach, avoidance of contract, and damages that differ significantly from domestic law.

This guide covers it all: when CISG applies, how to draft contracts to stay in control, the dispute-resolution process at VIAC arbitration and Vietnamese courts, typical disputes and remedies, and a practical checklist for businesses.

What is CISG and when does it apply in Vietnam
Quick check: does your contract fall within CISG's scope
Drafting contracts to stay ahead of CISG disputes
The CISG dispute-resolution process in Vietnam
Typical disputes and remedies under CISG
Business checklist: before signing and when a dispute arises
Noteworthy legal updates
Frequently asked questions
Related articles

1. What is CISG and when does it apply in Vietnam

Before diving into specific provisions, this section answers three foundational questions: what CISG is, when Vietnam joined and began applying the Convention, and which contracts fall — or do not fall — within its scope.

1.1. Overview of the Vienna Convention 1980

CISG (United Nations Convention on Contracts for the International Sale of Goods) was drafted by the United Nations Commission on International Trade Law (UNCITRAL), adopted in Vienna in 1980 and in force internationally since 1988. It is the most widely applied multilateral trade convention in the world, with nearly 100 member states — including most of Vietnam's major trading partners such as China, the United States, Singapore, Germany, France, Japan, and South Korea.

CISG governs two main areas: (i) the formation of international contracts for the sale of goods (offer, acceptance); and (ii) the rights and obligations of sellers and buyers, and remedies for breach (delivery, payment, non-conforming goods, avoidance, damages). Matters such as the validity of the contract, property rights, or liability for death or personal injury caused by the goods are not governed by CISG — those are decided by the supplementary national law.

1.2. Vietnam's accession and effectiveness

On 18 December 2015, Vietnam formally approved its accession to CISG, becoming the Convention's 84th member state and the second ASEAN country after Singapore. From 1 January 2017, CISG became binding in Vietnam.

The key legal consequence: CISG is part of Vietnamese law. Under clause 1, Article 5 of the Commercial Law 2005, where an international treaty to which Vietnam is a party contains provisions different from those of the Commercial Law, the treaty's provisions apply. Case law has confirmed this — for example, Judgment No. 02/2022/KDTM-ST of 16 March 2022 of the Binh Duong Provincial People's Court applied CISG directly to resolve a sale-contract dispute between a Vietnamese and a Chinese company, holding that CISG was the applicable law in place of national law.

1.3. The two grounds for CISG application under Article 1

CISG applies to contracts for the sale of goods between parties whose places of business are in different States, where:

Article 1(1)(a): those States are both Contracting States. This is the most common case — e.g. a contract between a Vietnamese company and a Chinese company (China has been a member since 1988), or Vietnam–Germany, Vietnam–Singapore.
Article 1(1)(b): under private international law rules, the applicable law is the law of a Contracting State. This arises where one party's place of business is in a non-Contracting State, but conflict-of-laws rules point to the law of a member state.

An important reservation caveat: several member states have declared a reservation under Article 95 CISG, meaning they are not bound by Article 1(1)(b) — including the United States, China, and Singapore. Consequence: if a contract between a Vietnamese company and a Singaporean company chooses Singaporean law, CISG will not apply automatically through the Article 1(1)(b) route. Conversely, Vietnam has made no Article 95 reservation, so both grounds are available before dispute-resolution bodies in Vietnam.

1.4. Vietnam's declaration on contract form (Articles 12 and 96)

A distinctive point every Vietnamese business must remember: Vietnam made declarations under Articles 12 and 96 CISG concerning freedom of form. This means the CISG provisions allowing a contract to be concluded, modified, or terminated in any form (including orally) do not apply to transactions involving a Vietnamese party.

In practice: an international sale contract with a Vietnamese party on one side — and any amendment, supplement, or termination agreement — should be made in writing or another form with equivalent legal validity under Vietnamese law. Oral agreements or unverifiable messages may not be recognized as to form when a dispute arises.

1.5. Contracts outside CISG's scope (Article 2)

CISG does not apply to: goods bought for personal or family use (unless the seller did not know of that purpose); auctions; stocks, shares, and negotiable instruments; ships, vessels, and aircraft; and electricity. In addition, contracts where the preponderant part of the supplier's obligation is the supply of labour or services — rather than delivery of goods — fall outside the Convention.

2. Quick check: does your contract fall within CISG's scope

Before signing, or when a dispute arises, a business should run through these five conditions:

Places of business in two different States: CISG applies only where the seller and buyer have their places of business in different States. Where a party has more than one place of business, the one with the closest relationship to the contract counts.
At least one of the two Article 1 grounds is met: both States are Contracting States (the common case), or private international law rules point to the law of a Contracting State (mind the Article 95 reservations of countries such as China, the United States, and Singapore).
The subject matter is tangible, movable goods: machinery, equipment, raw materials, agricultural products, consumer goods for import/export. Not purely services, software (debatable, case by case), real estate, or intangible assets.
None of the Article 2 exclusions: as listed in section 1.5.
The parties have not excluded CISG: under Article 6 CISG, the parties may agree to exclude all or part of the Convention. However, the exclusion must be clearly expressed in the contract. Practice shows many businesses wrongly assume that a generic choice-of-Vietnamese-law clause is enough to exclude CISG — a serious mistake, since CISG is itself part of Vietnamese law.

Conversely, the parties may affirmatively choose CISG even where one or both parties have their places of business in non-Contracting States — party autonomy in private international law is widely recognized. This is particularly useful where the counterparty comes from a non-member country such as Indonesia or Thailand.

3. Drafting contracts to stay ahead of CISG disputes

Most expensive CISG disputes start with poorly drafted contracts. These are the clauses businesses should invest in up front:

3.1. Governing-law clause: decide clearly whether to use CISG

Do not leave the governing law ambiguous. Two options:

To apply CISG: state expressly that the contract is governed by CISG (Vienna 1980), and designate the supplementary law for matters CISG does not govern (contract validity, limitation periods, interest rates). Example: "This contract is governed by the Vienna Convention 1980 (CISG); matters not governed by CISG are governed by Vietnamese law."
To exclude CISG: it must be stated clearly, e.g.: "The parties agree to exclude the application of the Vienna Convention 1980 (CISG) in its entirety under Article 6 CISG; the contract is governed by Vietnamese law." A generic choice-of-Vietnamese-law clause that never mentions CISG does not, in principle, exclude the Convention.

3.2. Dispute-resolution clause: arbitration or courts

Commercial arbitration (VIAC in Vietnam, or SIAC, HKIAC for regional transactions) is the popular choice for CISG disputes: fast, confidential, and foreign arbitral awards are recognized and enforceable in more than 170 countries under the 1958 New York Convention, which Vietnam joined in 1995. Specify: the arbitral institution, the seat of arbitration, the language of proceedings, the number of arbitrators, and the applicable procedural law.
Courts: suitable where the parties prefer the national court system, or where interim measures are needed that arbitration cannot easily deliver. If Vietnamese courts are chosen, identify the competent court for a case with foreign elements under the 2015 Civil Procedure Code.

Defective dispute-resolution clauses (unclear whether arbitration or courts, unclear seat) are the cause of many jurisdiction disputes lasting years before the merits are ever reached.

3.3. Written form and contract-amendment procedure

Given Vietnam's declarations under Articles 12 and 96 CISG, the contract should provide that all agreements, amendments, supplements, and terminations are valid only if made in writing and signed by authorized representatives of both parties. This both satisfies the form requirement and creates solid evidence if a dispute arises.

3.4. Goods, delivery, and inspection clauses

Describe the goods in as much detail as possible: type, quality, technical standards, packaging, quantity, and permitted tolerances. Attach Incoterms (the latest version at signing) to pin down the transfer of risk — because CISG has its own rules on risk of loss of or damage to goods (Articles 66 to 70), and clear allocation avoids argument.

Spell out the goods-inspection procedure and the deadline and form of notice upon discovering non-conformity — tied directly to the buyer's inspection duty (Article 38) and notification duty (Article 39) under CISG, analyzed in detail in section 5.

3.5. Payment, penalties, and damages

CISG has no contractual-penalty regime — the Convention provides only damages (Article 74). If a business wants penalties in line with Vietnamese law practice, the penalty rate must be agreed expressly in the contract, bearing in mind compatibility with the supplementary applicable law, since not every legal system recognizes penalties in international commercial contracts.

On damages, Article 74 CISG limits recovery to losses the breaching party foresaw or ought to have foreseen at the time of contracting, based on facts it knew or ought to have known. The parties should therefore list in advance the particular types of loss that may arise (cost of substitute goods, storage costs, lost profit on resale contracts) to widen the recoverable scope.

4. The CISG dispute-resolution process in Vietnam

CISG disputes in Vietnam typically move through four stages — negotiation and mediation, commercial arbitration, the courts, and finally recognition and enforcement of awards and judgments abroad. Each stage has its own advantages, drawbacks, and limitation periods that businesses need to master.

4.1. Negotiation and mediation: steps worth keeping

Most international commercial contracts require the parties to negotiate for a set period (usually 30–60 days) before litigation. Even without such a clause, negotiation is the cheapest option — especially where the parties want to preserve a long-term business relationship. Commercial mediation — including mediation at VIAC — is a useful intermediate step before adversarial proceedings.

4.2. Commercial arbitration

Applicable law in arbitration: Under clause 2, Article 14 of the 2010 Law on Commercial Arbitration, for disputes with foreign elements the arbitral tribunal applies the law chosen by the parties; absent an agreement on applicable law, the tribunal decides which law it considers most appropriate. Where CISG applies under Article 1, a tribunal in Vietnam has a basis to apply the Convention directly — VIAC practice already includes cases analyzing and applying CISG to international sale disputes.

Limitation period: note carefully that the limitation period for arbitration is 2 years under Article 33 of the 2010 Law on Commercial Arbitration (unless a specialized law provides otherwise). CISG has no limitation rules, so this is governed by supplementary law — businesses should not confuse the two and miss the deadline.

4.3. Vietnamese courts

Vietnamese courts have jurisdiction over sale-of-goods disputes with foreign elements under the 2015 Civil Procedure Code (Chapter XXXVII on procedures for civil cases with foreign elements), where the parties have no arbitration agreement or the agreement is invalid.

CISG case law in Vietnamese courts is growing. Besides the 2022 Binh Duong judgment above, even before Vietnam joined CISG, courts had referenced the Convention — such as the appellate case between Tanico (Tay Ninh Trading Company) and NG Nam Bee (Singapore) in 1996. Vietnamese courts are no strangers to CISG.

Limitation period: for contract disputes in court, the limitation period is 3 years under Article 429 of the 2015 Civil Code. However, determining when time starts to run and cases involving foreign law can be complex — counsel should assess each case specifically.

4.4. Recognition and enforcement of awards and judgments abroad

Winning is only half the journey; enforcement is the real result:

Foreign arbitral awards are recognized and enforced in Vietnam under the 1958 New York Convention — through the recognition procedure before Vietnamese courts under the Civil Procedure Code. Conversely, VIAC awards are enforceable in most Convention member states.
Foreign court judgments are recognized in Vietnam only on the basis of bilateral judicial assistance treaties or reciprocity — a much narrower scope than arbitration. This is the strategic reason many businesses prefer an arbitration clause in CISG contracts.
Domestic enforcement follows the civil enforcement procedure: where the losing party does not comply voluntarily, the enforcing party may request the civil enforcement agency to compel enforcement under the law.

5. Typical disputes and remedies under CISG

Drawing on case law and arbitral practice, the six dispute types below account for most CISG cases involving Vietnamese parties — together with the corresponding remedies businesses should know by heart, both to prevent problems and to respond when they arise.

5.1. Non-conforming goods

This is the most common dispute type. Article 35 CISG requires the seller to deliver goods of the quantity, quality, and description required by the contract and fit for ordinary or any particular purpose known to the seller. The seller remains liable for non-conformity existing at the time risk passes, even if discovered later (Article 36).

The procedural crux: the buyer must examine the goods within as short a period as practicable (Article 38) and notify the seller of any non-conformity within a reasonable time after discovery or deemed discovery (Article 39). In any event, the right to complain ends if notice is not given within 2 years from delivery, unless the contract provides a longer warranty. Many Vietnamese buyers lose their right to complain simply through late notice — a practice gap to fix immediately.

5.2. Fundamental breach and the right to avoid

CISG does not allow avoidance for every breach. Under Article 25, only a fundamental breach — one that substantially deprives the other party of what it was entitled to expect under the contract — permits the aggrieved party to declare the contract avoided (Article 49 for buyers, Article 64 for sellers).

Example: delivery a few days late where time is not of the essence is usually not fundamental; but delivery of goods entirely unusable, or late delivery of seasonal goods (Tet holiday goods, harvest-season goods), may amount to fundamental breach. Before avoiding, the aggrieved party should consider fixing an additional reasonable period for performance — consistent with the CISG spirit and strengthening its legal position if the dispute drags on.

5.3. Damages and the duty to mitigate

Article 74 CISG provides damages for actual loss and loss of profit, capped at losses the breaching party foresaw or ought to have foreseen at contracting, based on facts it knew or ought to have known.

In parallel, Article 77 imposes a duty to mitigate: the aggrieved party must take reasonable measures to limit loss; failing that, the breaching party may claim a corresponding reduction of damages. In practice: when the counterparty breaches, the business should immediately source substitute goods and keep full records of costs — both to reduce real loss and to prove mitigation when claiming damages.

5.4. Exemption for impediments beyond control

Article 79 CISG exempts a party from liability for non-performance if it proves the failure was due to an impediment beyond its control, which it could not reasonably have been expected to foresee at contracting and could not reasonably have avoided or overcome. Natural disasters, war, government embargoes, or supply-chain breakdowns from force majeure events are classic examples.

Caveat: the party invoking the impediment must notify the other party within a reasonable time; otherwise it remains liable for loss caused by the failure to notify. COVID-19 generated a wave of Article 79 disputes worldwide — the lesson is to include a detailed force majeure clause listing specific events and notification procedures.

5.5. Late delivery and late payment

CISG allows the affected party to require performance and, where the delay amounts to fundamental breach (or after an additional reasonable period has been fixed and still not met), to declare the contract avoided. For late payment, the seller may claim payment plus interest — noting that CISG sets no specific interest rate; this is governed by supplementary law.

5.6. Risk of loss or damage in transit

Articles 66 to 70 CISG allocate the moment risk passes from seller to buyer, tied to handing goods to the first carrier or to the buyer's taking over, depending on delivery terms. Loss or damage after risk has passed does not relieve the buyer's payment obligation — unless caused by the seller's conduct. A clear Incoterms clause (section 3.4) makes these provisions work smoothly.

6. Business checklist: before signing and when a dispute arises

Before signing:

Identify the counterparty's place of business and check whether that country is a CISG member
Decide clearly: apply or exclude CISG — in an express, unambiguous clause
Choose the dispute-resolution mechanism (arbitration/courts), seat, language, supplementary law
Put the contract in writing; require all amendments and terminations to be in writing
Describe goods, quality standards, and delivery terms under Incoterms in detail
Set the goods-inspection procedure and notice deadline for non-conformity
Agree on penalties (if desired) and recoverable categories of damages
Add a detailed force majeure clause consistent with Article 79 CISG

When a dispute arises:

Inspect the goods immediately and notify the counterparty in writing as soon as possible
Preserve all evidence: contract, appendices, emails, delivery records, inspection reports
Take immediate mitigation measures (source substitute goods, reduce storage costs)
Review limitation periods (2 years for arbitration, 3 years for court under the Vietnamese framework — counsel to confirm precisely)
Negotiate within the contractual deadline before suing
Prepare the filing for arbitration or court per the agreed clause

7. Noteworthy legal updates

As of this writing (September 2026), Vietnam has issued no new instrument amending the CISG-related framework; the Convention, the 2005 Commercial Law, the 2010 Law on Commercial Arbitration, the 2015 Civil Code, and the 2015 Civil Procedure Code all remain in force. Businesses should track new Vietnamese court judgments and arbitral decisions applying CISG, as case law is taking shape and carries important reference value.

A distinction to keep in mind: this article focuses on dispute resolution under CISG. General updates on CISG application (new interpretations, international case law) are covered in our separate update series.

8. Frequently asked questions

Does a sale contract between a Vietnamese company and a Chinese company automatically fall under CISG?

Yes, if the contract was concluded after 1 January 2017 and the parties have not excluded CISG. Both China (a member since 1988) and Vietnam are CISG member states, so CISG applies directly under Article 1(1)(a), displacing national law on the contract of sale.

Does a generic choice-of-Vietnamese-law clause exclude CISG?

No. CISG has been part of Vietnamese law since 1 January 2017. A general choice of Vietnamese law is not enough to exclude CISG; exclusion must be expressly stated in the contract under Article 6 CISG.

Must an international sale contract involving a Vietnamese party be in writing?

It should be in writing. Vietnam made declarations under Articles 12 and 96 CISG, so the Convention's freedom-of-form provisions do not apply to transactions involving a Vietnamese party. The contract — including any amendment or termination — should be recorded in writing or an equivalent form with legal validity.

For a CISG dispute, should we go to VIAC arbitration or the courts?

It depends on the strategy for each case. VIAC arbitration is fast, confidential, and awards are easily enforceable abroad under the 1958 New York Convention; the courts suit cases requiring interim measures or where there is no arbitration agreement.

Does CISG allow contractual penalties for breach?

No. CISG provides only damages (Article 74), not penalty clauses. If you want penalties to apply, the parties must agree expressly in the contract and check compatibility with the supplementary applicable law.

How long do I have to complain after discovering non-conforming goods?

The buyer must examine the goods and notify the seller of any non-conformity within a reasonable time (Articles 38 and 39 CISG). In any event, the right to complain ends if notice is not given within 2 years from delivery, unless the contractual warranty period is longer.

What kind of breach allows contract termination under CISG?

Only a fundamental breach under Article 25 CISG — a breach that substantially deprives the other party of what it was entitled to expect under the contract. The aggrieved party may also grant an additional reasonable period for performance before terminating.

Satellite articles in the same CISG topic cluster — being finalized in the same batch; link wiring pending at publish. Status checked 29/09/2026: none of the 5 is live yet (curl 404); kept as PLANNED.

PLANNED: Civil and commercial enforcement: procedure and what to do when the losing party does not comply voluntarily (T-234) — link wiring pending at publish
PLANNED: FAQ: how court and arbitration fees are calculated in 2026 (T-252) — link wiring pending at publish
PLANNED: FAQ: bilingual contracts in disputes — which version prevails (T-253) — link wiring pending at publish
PLANNED: Scenario: sued in China — what a Vietnamese company must do (T-293) — link wiring pending at publish
PLANNED: Interim measures in commercial litigation (T-239) — link wiring pending at publish

Need in-depth advice on international sale of goods disputes?

Every CISG dispute has its own particulars of evidence, applicable law, and litigation strategy. FLAT Law Firm's lawyers are ready to support your business from contract drafting and negotiation through dispute resolution in arbitration and court. Call our hotline 0988424851 for a consultation.

References

United Nations Convention on Contracts for the International Sale of Goods (CISG), adopted in Vienna 1980
Commercial Law 2005 (36/2005/QH11); Law on Commercial Arbitration 2010 (54/2010/QH12)
Civil Code 2015 (91/2015/QH13); Civil Procedure Code 2015 (92/2015/QH13)
"Applying CISG case law to resolve international commercial contract disputes at commercial arbitration centers in Vietnam", danchuphapluat.vn
"Applying foreign law in Vietnam — benefits and disadvantages of Vietnam's participation in the Vienna Convention 1980", moj.gov.vn
Commercial Arbitration section, Vietnam International Arbitration Centre (VIAC)
"5 Contract Mistakes to Avoid in Vietnam", vietnam-briefing.com (2026)

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