A shipment arrives three days late, and the buyer deducts the amount straight from the final payment; the seller objects because the contract never allowed that. Who is right? In FLAT's advisory practice, most sales contract disputes in Vietnam do not erupt from headline terms like price or subject matter, but from three seemingly technical clause groups: payment, delivery and warranty. This article guides businesses in drafting these three clause groups solidly, based on the still-effective Commercial Law 2005 and Civil Code 2015.
Contents
- 1. What is a sales contract? Who should care?
- 2. Current legal framework
- 3. Payment terms: drafting them tight
- 4. Delivery terms: place, inspection, risk
- 5. Warranty terms: scope and liability
- 6. Costs, timelines and key milestones
- 7. Common risks and mistakes
- 8. Quick checklist
- 9. Frequently asked questions
- 10. When to work with a lawyer
1. What is a sales contract? Who should care?
Clause 8, Article 3 of the Commercial Law 2005 defines: sale of goods is a commercial activity whereby the seller must deliver goods, transfer ownership to the buyer and receive payment; the buyer must pay the seller, take the goods and take ownership as agreed. In other words, a sales contract is the specific form of the property sale contract under Article 430 of the Civil Code 2015 — the difference lies in the parties and purpose: at least one party is a trader operating for profit, and the relationship is governed by both statutes in parallel.
Every business buying raw materials, selling finished products or distributing consumer goods signs this contract type daily. Those who need special attention are: (i) FDI companies trading with Vietnamese partners for the first time, unfamiliar with domestic payment practices; (ii) distributors and agents signing framework contracts with multiple delivery batches; (iii) importers of high-value equipment and machinery needing tight warranty clauses. For cross-border sales, the 1980 Vienna Convention (CISG) may also apply where the parties agree — beyond this article's scope, and requiring separate advice.
2. Current legal framework
The hierarchy for domestic sales contracts is as follows:
- Commercial Law 2005 (36/2005/QH11), effective 01/01/2006, still in force. The specialized statute directly governing: delivery obligations (Articles 42–49), payment (Articles 50–55), taking delivery and risk transfer (Articles 56–62), and breach sanctions (Articles 294–316). Article 4 also provides: commercial activities not regulated by the Commercial Law are governed by the Civil Code.
- Civil Code 2015 (91/2015/QH13), effective 01/01/2017, still in force. Chapter XVI, Section 1 (Articles 430–454) governs property sale contracts generally: subject matter (Article 431), quality (Article 432), liability for defects (Article 445), warranty (Articles 446–449), installment sales (Article 453).
One point to remember: a contract is the parties' agreement on establishing, changing or terminating civil rights and obligations (Article 385, Civil Code 2015). Within the legal framework, parties are free to agree clause content — and precisely because of that freedom, any clause left vague will, in a dispute, fall back on the law's default rules, which are not always in your favor.
3. Payment terms: drafting them tight
3.1. Price, taxes and price-determination method
Price must be stated clearly. In practice many contracts merely say "price per attached quotation" — but the quotation was never countersigned, so in a dispute each side has its own figure. The price clause should state: unit price, total value, payment currency, whether VAT and other taxes and fees are included, and which party bears transport and insurance costs.
Where the parties cannot fix a price at signing — e.g., a framework contract for year-round raw material supply — the law allows agreeing on a price-determination method instead of a figure. Where there is no agreement on price or method at all, Article 52 of the Commercial Law 2005 provides that the price is determined by the price of such goods under similar conditions of delivery method, timing, geographic market and payment method. This default is the law's "life buoy", but proving "similar conditions" in court is costly and uncertain — best to agree clearly upfront. For goods priced by weight, net weight applies absent other agreement (Article 53).
3.2. Payment method, place and time
The payment method (bank transfer, L/C, cash within statutory limits) should be named explicitly, with beneficiary account details accurate to the character. Place of payment: absent agreement, Article 54 of the Commercial Law 2005 requires the buyer to pay at the seller's business location (determined at conclusion) or at the place of delivery/handover of documents where payment coincides with delivery. FDI companies should also note foreign exchange control rules when paying in foreign currency — a separate compliance matter to check before finalizing the clause.
Payment time is the biggest source of disputes. If the contract is silent, Article 55 requires the buyer to pay when the seller delivers the goods or the related documents; where the parties agreed the buyer may inspect before delivery (Article 44), the buyer need not pay until inspection is complete. In practice, businesses often agree payment schedules: a deposit/part prepayment at signing, the balance within X days of delivery or of invoicing. Drafting tip: always tie deadlines to an objective, provable milestone (signing of the delivery record, invoice date) rather than a vague one like "after completion of procedures".
3.3. Prepayment, deferred payment and installment sales
Each payment mechanism allocates risk differently. Prepayment protects the seller but shifts risk to the buyer; deferred payment (trade credit) helps the buyer turn working capital but exposes the seller to collection risk. For installment sales, Article 453 of the Civil Code 2015 allows the seller to retain ownership until the buyer has paid in full — a very strong security tool many contracts forget to include. Note: installment sale contracts must be in writing; during use, the buyer bears the risk, unless agreed otherwise.
Whatever the mechanism, the clause should answer three questions: (1) how much each installment is and when it falls due; (2) the conditions for each installment to mature (full delivery? successful acceptance?); (3) whether a late installment affects subsequent installments and deliveries. Many contracts say "payment in 3 installments" without stating each installment's conditions, producing endless arguments when delivery falls short.
3.4. Right to suspend payment and late-payment interest
Article 51 of the Commercial Law 2005 gives the buyer an important "brake": the right to suspend payment upon evidence that the seller committed fraud, the goods are subject to dispute, or the delivered goods do not conform to the contract — and only until the dispute is resolved or the non-conformity remedied. But this right has a sting: if the evidence proves unfounded and causes damage to the seller, the buyer must compensate and bear sanctions. When invoking suspension, therefore, gather solid evidence (inspection records, photos, survey results) and notify the seller in writing, rather than silently withholding payment.
On late-payment interest, Article 306 of the Commercial Law 2005 entitles the aggrieved party to interest on the late amount at the average market overdue-debt interest rate at the time of payment, for the duration of delay — unless the parties agreed otherwise. Note: the law sets no fixed figure; the rate depends on market rates at payment time. Court practice commonly references Case Law 09/2016/AL (taking the average overdue rate of three major commercial banks). Businesses should agree a specific rate in the contract upfront to avoid calculation disputes, but should have its suitability reviewed against the law at the time of application — a point to discuss with counsel before finalizing.
4. Delivery terms: place, inspection, risk
4.1. Place, time and method of delivery
The delivery place determines who bears transport costs and risk. Contracts should state a specific address (whose warehouse, which port, which Incoterms for import/export goods such as EXW, FOB, CIF). For multiple batches, a detailed delivery schedule per batch is needed. The delivery clause should cover the obligation to hand over related documents (bill of lading, certificates of origin, quality certificates): Article 42 of the Commercial Law 2005 requires the seller to deliver documents at the agreed time, place and method; absent agreement, within a reasonable time and at a reasonable place so the buyer can take the goods.
Delivery time should be a specific date or defined period ("within 15 days of receiving the deposit"), with a mechanism for lateness: how much penalty, whether the buyer may cancel the late portion, and how long a delay counts as fundamental breach justifying termination. Sellers should also anticipate force majeure/exemption clauses consistent with Articles 294–296 of the Commercial Law 2005 for situations like natural disasters, epidemics or sudden export/import bans.
4.2. Inspection of goods before delivery
Article 44 of the Commercial Law 2005 allows the parties to agree that the buyer (or representative) may inspect goods before delivery, with the seller facilitating inspection. Inspection must be done within the shortest time practically possible; where the contract includes transport, inspection may be deferred until arrival at destination.
The legal consequences of inspection deserve attention: the seller is not liable for defects the buyer knew or should have known but did not notify within a reasonable time after inspection. Conversely, for defects undetectable by ordinary means that the seller knew or should have known but concealed, the seller remains liable. The inspection/handover record is therefore key evidence: buyers should note the goods' condition at receipt (quantity complete, packaging intact, any visible defects), with photos where needed. Signing "goods received in full, quality satisfactory" hastily without inspection is a common mistake that forfeits the buyer's later right to complain.
4.3. Excess, short and non-conforming delivery
Actual delivery rarely matches the contract 100%. Article 43 of the Commercial Law 2005 handles excess delivery: the buyer may refuse or accept the excess; if accepted, payment follows the agreed price, unless agreed otherwise. For short or non-conforming delivery, the seller may deliver the shortfall, replace or remedy within the remaining contract time — but if remedying causes the buyer disadvantage or unreasonable cost, the buyer may require the seller to bear it.
Contracts should pre-agree permitted tolerances (e.g., ±3% quantity for bulk or agricultural goods), complaint procedures (written notice within how many days of discovery), and the buyer's rights: demand make-up delivery, proportional price reduction, or cancellation of the non-conforming portion. The more these situations are left to "later negotiation", the weaker the company's position once the relationship has soured.
4.4. When risk and ownership pass
These are two different moments, and many contracts conflate them. On transfer of risk of loss or damage, Articles 57–61 of the Commercial Law 2005 provide detail per situation: with a defined delivery place, risk passes when goods are handed to the buyer or authorized person at that place (Article 57); where goods are transported without a defined delivery place, risk passes when handed to the first carrier (Article 58); goods in transit pass risk from contract conclusion (Article 60). Notably, Clause 3, Article 50 provides the buyer must still pay if goods are lost or damaged after risk passed — except where caused by the seller's fault.
On ownership, Article 62 provides ownership passes from seller to buyer when the goods are handed over, unless the law provides otherwise or the parties agree otherwise. The parties may thus agree to retain ownership until full payment (consistent with the retention-of-title mechanism in Article 453 of the Civil Code 2015). In parallel, the seller must warrant that the buyer's ownership is undisputed by third parties, the goods are lawful and the transfer lawful (Article 45); where goods are subject to security measures (mortgage, pledge), the seller must notify the buyer and obtain the secured party's consent (Article 48).
5. Warranty terms: scope and liability
5.1. When warranty obligations arise
Under Article 446 of the Civil Code 2015, the seller must warrant the sold goods for a period (the warranty period) where warranty is agreed by the parties or prescribed by law. Article 49 of the Commercial Law 2005 also provides: where goods are warranted, the seller must honor the agreed warranty content and duration. For ordinary commercial goods, warranty is thus primarily a matter of agreement — unwritten, it is very hard to claim.
The warranty clause should define: (i) warranty scope — which defects are covered (technical, material, manufacturing defects) and excluded (normal wear, misuse damage, natural disasters); (ii) warranty duration — from when (under Article 446, from the time the buyer is obliged to take the goods) and for how long; (iii) warranty form — repair, replacement, or refund. For imported machinery and equipment, tie the warranty start to successful acceptance and trial operation rather than delivery date, since equipment may sit in storage for months before installation.
5.2. Buyer's rights upon discovering defects
During the warranty period, upon discovering defects, Article 447 of the Civil Code 2015 gives the buyer the right to demand: free repair, price reduction, replacement with non-defective goods, or return of the goods for a refund. Article 448 details: the seller must repair to the committed quality standard or characteristics, bearing repair and two-way transport costs; the buyer may demand completion within the agreed or a reasonable time — if repair is impossible or overdue, the buyer may switch to demanding price reduction, replacement or return for refund.
Beyond warranty, Article 445 of the Civil Code 2015 provides general defect liability: upon discovering defects that destroy or reduce the goods' use value, the buyer must notify the seller promptly and may demand repair, replacement, price reduction or damages. The seller is exempt where: the buyer knew or should have known the defects when buying; the goods were auctioned or sold as second-hand; or the buyer caused the defects. The contractual warranty complaint procedure should set: notification form (written/email), notification deadline after discovery, and the seller's response deadline — avoiding unacknowledged oral complaints.
5.3. Warranty costs and damages
The general rule: the seller bears warranty costs, unless agreed otherwise (Clause 3, Article 49, Commercial Law 2005; Clause 2, Article 448, Civil Code 2015). "Costs" here include repair and two-way transport to the repair site. When negotiating, consider: for low-value goods, two-way transport sometimes exceeds the goods' value — agree on on-site warranty or replacement instead of send-back repair.
More seriously, Article 449 of the Civil Code 2015 provides that beyond warranty measures, the buyer may also claim damages caused by technical defects during the warranty period — e.g., faulty machinery halting a production line. The seller is exempt only by proving the damage was the buyer's fault, and damages are reduced where the buyer failed to take necessary mitigation measures. This is why liability-cap clauses commonly appear in high-value equipment sales — but what cap level is reasonable and acceptable under the law in each context needs counsel's careful review, not copying templates from the internet.
6. Costs, timelines and key milestones
On costs: the law sets no fee for concluding a sales contract; costs arise mainly from drafting, notarization (if the parties voluntarily notarize), and compliance costs such as VAT and import tax for cross-border goods. Contracts should clearly allocate taxes and fees to avoid disputes when tax authorities assess obligations.
On timelines, the statutory milestones to remember:
- The limitation period for contract disputes is 3 years, from the date the claimant knew or should have known their lawful rights and interests were infringed (Article 429, Civil Code 2015). After expiry, courts still accept the case but the other side may invoke limitation to defeat the claim — so do not delay when receivables are overdue.
- Maximum penalty of 8% of the value of the breached contractual obligation (Article 301, Commercial Law 2005). Agreed penalties above this will be reduced by courts in disputes.
- Penalty and damages may apply simultaneously where the contract agrees a penalty (Article 307); without a penalty agreement, only damages may be claimed. Damages require three elements: a breach, actual loss, and direct causation (Article 303); the claimant must prove losses and mitigate reasonably (Articles 304, 305).
On legal fees for drafting and reviewing contracts: FLAT quotes per matter, depending on complexity and transaction value. Contact hotline 0988424851 for advice and a quote.
7. Common risks and mistakes
Mistake 1: Signing a skeletal framework contract, "finalizing" terms in appendices. Many companies sign a few-page master agreement, leaving "details to each order". When the order is just an email confirming quantity, all payment, delivery and warranty terms fall into a void. Prevention: the framework contract must contain complete general terms applying to every order; orders only add quantity, type and specific delivery time.
Mistake 2: No late-payment interest clause, negotiating the rate only when collecting debt. Without an agreed rate, the seller still has the Article 306 right but must prove the average market overdue rate at payment time — costly and disputable. Write the rate and calculation method into the contract upfront.
Mistake 3: Signing the handover record "to get it done" without inspecting. As analyzed under Article 44 of the Commercial Law 2005, signing without noting defects forfeits the right to complain about discoverable defects. Internal procedures should require warehouse staff to check before signing, noting every irregularity in the record.
Mistake 4: Forgetting the retention-of-title clause in installment sales. Without an agreed retention, when the buyer becomes insolvent, the seller is merely an unsecured creditor, queuing behind secured creditors in bankruptcy. One clause under Article 453 of the Civil Code 2015 can make a decisive difference in asset recovery.
Mistake 5: Agreeing penalties above the 8% cap and resting easy. Courts will cut the excess under Article 301 of the Commercial Law 2005. Instead of a "scary" penalty, combine a within-cap penalty with a mechanism for proven actual damages.
Mistake 6: No dispute-resolution clause, or a vague "negotiation" clause. When negotiation fails and the contract names no competent court or arbitral institution, the parties lose months just determining the forum. State clearly: negotiation within X days, then the specific arbitral center or competent People's Court, plus governing law.
8. Quick checklist
- [ ] Goods described distinctly enough: name, type, specifications, quality standards, origin
- [ ] Price, currency, taxes/fees, transport-insurance costs clearly allocated
- [ ] Payment schedule tied to objective milestones (handover record signing, invoicing), with late-payment interest rate
- [ ] Specific delivery place, time and method; obligation to hand over accompanying documents
- [ ] Goods inspection procedure, handover record, complaint deadlines on quantity/quality
- [ ] Quantity tolerance, excess/short delivery and non-conformity mechanisms
- [ ] Risk and ownership transfer timing; retention-of-title clause for installment sales
- [ ] Warranty scope, duration, form; warranty complaint procedure and liability cap
- [ ] Penalty (within 8% cap), damages, suspension/termination, dispute-resolution mechanism
9. Frequently asked questions
Must a sales contract in Vietnam be in writing?
Not mandatory in every case — an oral agreement can be valid if it meets the statutory conditions on parties, content and form. However, for commercial transactions of value, a written contract is the only evidence protecting your rights in a dispute. Case practice shows oral contracts can almost never prove the agreed payment and delivery terms. For installment sales specifically, Article 453 of the Civil Code 2015 requires the contract to be in writing.
When may the buyer suspend payment?
Under Article 51 of the Commercial Law 2005, unless agreed otherwise, the buyer may suspend payment upon evidence that: the seller committed fraud; the goods are subject to dispute; or the delivered goods do not conform to the contract. Suspension lasts only until the dispute is resolved or the non-conformity remedied. Important: if the evidence proves unfounded and causes damage to the seller, the buyer must compensate and bear other sanctions.
What is the maximum contractual penalty for breach of a sales contract?
Under Article 301 of the Commercial Law 2005, the penalty is agreed by the parties but may not exceed 8% of the value of the breached contractual obligation. Beyond the penalty, where the contract agrees a penalty, the aggrieved party may simultaneously claim damages (Article 307) and late-payment interest (Article 306). Without a penalty agreement, only damages may be claimed.
When does the goods warranty period start running?
Under Article 446 of the Civil Code 2015, the warranty period runs from the time the buyer is obliged to take the goods. The warranty content and duration are agreed by the parties (Article 49, Commercial Law 2005). During the warranty period, the seller must repair within the shortest time practically possible and bear warranty costs, unless agreed otherwise. For equipment and machinery, tie the warranty start to successful acceptance and trial operation rather than the delivery date.
How are late delivery or short delivery handled?
First apply whatever the contract agreed on late-delivery penalties and cancellation of the late portion. On statutory defaults: the buyer may refuse or accept excess goods (Article 43); for non-conforming delivery, the buyer may suspend payment until the seller remedies (Article 51); and may claim penalties and damages under the agreement and the Commercial Law. If lateness defeats the buyer's contracting purpose, that may constitute fundamental breach — grounds for suspension or termination.
10. When to work with a lawyer
Businesses should engage a commercial-contract lawyer when: (i) the contract value is large or it is a first transaction with a new, unproven partner; (ii) payment mechanics are complex — multi-installment deferred payment, retention of title, foreign-currency payment or L/C; (iii) the goods are machinery, equipment or technology lines needing special warranty, acceptance and liability-cap terms; (iv) the counterparty shows signs of delay, non-conforming delivery or prolonged overdue receivables; (v) the contract has foreign elements requiring choice of governing law and an appropriate dispute-resolution mechanism.
FLAT Law Firm advises on drafting, reviewing and negotiating sales contracts for domestic and FDI businesses, and represents clients in resulting disputes. Contact hotline 0988424851 for advice.
References
- Civil Code 2015 (No. 91/2015/QH13), effective 01/01/2017, in force — checked against thuvienphapluat.vn
- Commercial Law 2005 (No. 36/2005/QH11), effective 01/01/2006, in force — checked against thuvienphapluat.vn
