3-Year Limitation for Contract Disputes

Scenario: a contract debt is nearly three years overdue; the accounting team says «relax, the contract limitation is three years». That statement is half right — and the wrong half can kill the entire claim: commercial disputes between traders carry a two-year limitation under the Law on Commerce, not three. This article clarifies the dual regime and how the start point is computed.

Two different numbers: 3 years civil, 2 years commercial

Article 429 of the Civil Code 91/2015/QH13 (Civil Code 2015) sets the limitation for civil contract disputes at three years, from the date the entitled person knows or should know their lawful rights and interests were infringed. This is the «three years» in this article’s title and on most businesses’ lips.

But Article 319 of the Law on Commerce 36/2005/QH11 sets the limitation for commercial disputes at two years from the date lawful rights and interests were infringed. Sale-of-goods and service contracts between traders for business purposes fall in principle into the commercial group — two years. A company applying the three-year mark to a commercial dispute discovers the mistake on the very day the court applies the limitation defence. The first task on receiving an old debt is to classify which regime governs it.

The start point: «knows or should know» of the infringement

Limitation does not run from signing; it runs from when the right was infringed and the entitled person knew or should have known. For trade debts, the conventional start is the payment due date on which the debtor failed to pay — not the delivery date, and not the date the creditor «ran out of patience». For hidden breaches (defective goods discovered late, quality failures surfacing only in use), the start can move back to when the damage was — or should have been — discovered with ordinary care.

Restart events under Article 153 Civil Code 2015: limitation restarts when the obligor acknowledges part or all of the obligation, has performed part of it, or the parties have successfully reconciled. An email saying «we confirm we owe X, please extend to next month», or a small «pay-down» instalment, can restart the clock — which is why demand letters and periodic signed reconciliations have legal value far beyond accounting.

Expired limitation: is everything lost?

Not automatically. Procedural law provides that the court applies limitation only upon a party’s request made before the first-instance court issues its judgment or decision. If the debtor does not invoke limitation, the court does not apply it for them. And an obligation whose suit limitation has expired still exists civilly: if the debtor pays voluntarily, it cannot reclaim the payment on the ground that «limitation had expired».

Practical strategy for a creditor with a debt near the deadline: first create a restart event (a signed reconciliation, an agreement to pay part), and when the clock is down to months, file the claim immediately to «freeze» the position — do not let a good debt die on an admin team’s reminder calendar.

Frequently asked questions

When does the 3-year limitation for contract disputes start?

Under Article 429 Civil Code 2015, three years from the date the entitled person knows or should know their lawful rights and interests were infringed — for trade debts, conventionally the due date the debtor failed to pay. Commercial disputes between traders, however, carry a two-year limitation under Article 319 Law on Commerce.

Is a sale contract between two companies under the 2-year or 3-year regime?

In principle two years under the Law on Commerce, as a commercial dispute arising from sale of goods or services for profit purposes. The Civil Code’s three years applies to civil contract disputes outside the Commerce Law’s specific scope.

If the debtor pays part, does limitation restart?

Yes. Under Article 153 Civil Code 2015, limitation restarts when the obligor performs part of the obligation, acknowledges it, or the parties reconcile. A signed debt reconciliation is therefore a highly effective limitation-protection tool.

Can we still sue after limitation has expired?

The court still accepts the case; limitation is applied only if a party requests it before the first-instance judgment. If the debtor does not invoke it, the case is heard normally. Even so, never bet on the opponent’s forgetfulness — sue in time.

Reviewed by the Legal Practice Group – FLAT LAW FIRM

This legal analysis has been verified against current Vietnamese regulations and cross-border FDI transaction practices by the attorneys at FLAT LAW FIRM.

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