Short answer: A company sued in arbitration over a 2-month late delivery caused by flooding must prove four elements to be exempted: the event occurred objectively; it was unforeseeable at contract signing; all necessary and possible measures were taken but could not overcome it; and a direct causal link to the late delivery. The force-majeure definition comes from Article 156 of the Civil Code 2015 — note the Commercial Law 2005 does not define force majeure; it only sets out exemption cases (Article 294) and the notice duty (Article 295). The most common reason companies lose despite a genuine force-majeure event: failing to notify the buyer immediately in writing.
1. How is force majeure defined?
Article 156.1 of the Civil Code 2015: “A force majeure event is an event occurring objectively, unforeseeably and irremediably despite the application of all necessary measures and available capabilities.”
Article 351.2 of the Civil Code 2015: a party failing to perform correctly due to force majeure bears no civil liability, unless otherwise agreed or otherwise provided by law.
Article 294 of the Commercial Law 2005 lists four exemption cases: (a) as agreed by the parties; (b) force majeure events; (c) breach entirely caused by the other party fault; (d) breach from implementing a competent state authority decision unknowable at signing. Article 294.2: the breaching party bears the burden of proving the exemption cases.
Warning: the law has no closed list of events “automatically constituting force majeure” — this article does not assert that pandemics, bans, etc. always qualify; the arbitral tribunal/court assesses each case. In particular, economic hardship and market price fluctuations are normally not force majeure under doctrine and case practice (still foreseeable and manageable in business) — no false hope.
2. The five-group evidence dossier
The invoking party must prove four elements: (1) objectivity; (2) unforeseeability at signing; (3) all necessary measures taken but ineffective; (4) direct causation with the late delivery — plus proof of written notice. In practice, five evidence groups:
- Official disaster/event announcements by competent state authorities (emergency declarations, disaster warnings…).
- Proof of blocked/paralyzed routes, ports, warehouses (port authority notices, carrier notices, photos, site minutes).
- Proof of mitigation efforts: alternative transport quotations, emails with backup suppliers, partial-delivery proposals — proving “all necessary measures and available capabilities” were applied. This group is decisive because the “all measures” standard is open-ended; the tribunal will ask: was a substitute supplier available, was another transport mode possible?
- The immediate written notice to the buyer on the exemption case and possible consequences + partial-delivery/mitigation proposals (Article 295).
- An event log: a detailed timeline from occurrence to cessation, with the cessation notice (Article 295.2).
3. The Article 295 notice duty — a subtlety often misunderstood
Article 295 of the Commercial Law 2005:
- Clause 1: the breaching party must immediately notify the other party in writing of the exemption case and possible consequences.
- Clause 2: when the exemption case ceases, immediate notice is required.
- Clause 3: the breaching party must prove the exemption case to the aggrieved party.
The precise subtlety: failure to notify or late notice does not forfeit the exemption right for the breach — but creates liability to compensate damage caused by the failure to notify. This article does not state “no notice = no exemption” (wrong). In practice, many companies lose not because the event was not force majeure, but because they lack the immediate written notice — losing evidence and owing extra damages the buyer could not mitigate.
4. In arbitration: evidence, assessment and the 8% penalty
Commercial Arbitration Law 2010 (No. 54/2010/QH12):
- Article 46: parties have the right and duty to provide evidence to the arbitral tribunal; the tribunal may summon witnesses, order expertise/asset valuation, consult specialists; where evidence cannot be self-collected, it may request court assistance — the Chief Judge assigns a Judge within 7 working days.
- Article 45: the tribunal may verify facts: meeting the parties, consulting third parties.
Violation penalties: under Articles 300–301 of the Commercial Law 2005, penalties apply only if agreed; capped at 8% of the breached contract-obligation value (except Article 266). This article does not apply 8% where the contract has no penalty clause. The 8% figure frames settlement risk: successful force-majeure proof exempts both penalties and damages (Articles 294, 351.2 Civil Code); failure exposes the company to up to 8% penalty + damages (Articles 302–303) + late-payment interest (Article 306).
FAQs
Where is force majeure defined?
Civil Code 2015, Article 156.1. The Commercial Law 2005 does not define it — it only provides exemption cases (Article 294) and the notice duty (Article 295).
Does failing to notify the buyer immediately forfeit the exemption?
No, but it creates liability to compensate damage caused by the failure to notify (Article 295, Commercial Law 2005).
Are economic hardship or raw-material price spikes force majeure?
Normally not. Doctrine and case practice treat them as foreseeable and manageable in business.
What is the maximum penalty for late delivery?
8% of the breached contract-obligation value — only if the contract includes a penalty clause (Articles 300–301, Commercial Law 2005).
How does the tribunal collect evidence the company cannot?
The tribunal requests court assistance; the Chief Judge assigns a Judge within 7 working days (Article 46, Commercial Arbitration Law 2010).
Legal references
- Civil Code 2015: Articles 156.1, 351.2.
- Commercial Law 2005: Articles 294, 295, 300–301, 302–303, 306.
- Commercial Arbitration Law 2010 (54/2010/QH12): Articles 45, 46.
Companies facing arbitration claims over late delivery should build their force-majeure evidence dossier as early as possible. Reach us via the Contact page of FLAT Law Firm for support.
The legal content of this article is reviewed by FLAT’s AI Legal Council and submitted to the owner for approval; it is not an opinion of a licensed lawyer and does not replace legal advice for specific cases.
For reference only, not legal advice.
