The Civil Code and commercial contract practice 2026: what to update
The Civil Code 2015 is the "root law" of every contract in Vietnam — from goods sales and logistics services to M&A. In 2026, as many sectoral laws are amended, businesses need a firm grip on the Civil Code points that remain foundational in commercial contract practice, and the points requiring a check against sectoral law.
This law-update article on Vietnam Civil Code commercial contracts 2026 systematizes the 13 most practical groups of issues.
1. Contract formation: form and timing
The Civil Code 2015 recognizes contracts concluded orally, in writing, or by specific conduct. For high-value commercial contracts, written form is the standard — not only because the law requires it in some cases, but because it is the only reliable evidence in disputes.
Three 2026 practice trends:
- Electronic formation: contracts signed via email, e-signing platforms, even Zalo/WeChat — potentially valid if will-expression and signature requirements are met. Businesses should state clearly in template contracts which electronic methods are accepted;
- Framework contract + orders/appendices: the common commercial model — the framework sets principles, each order is a specific contract. State clearly the priority order when an order conflicts with the framework;
- General terms: the party drafting standard terms must ensure the other side had the chance to read and understand — terms disadvantageous to the weaker party risk review in disputes.
2. Contract validity: 4 conditions that never age
A contract is valid when: the subjects have appropriate civil legal capacity; the parties are fully voluntary; the purpose and content don't breach legal prohibitions or social ethics; plus other statutory conditions.
In commercial practice, the two most-tripped conditions:
- Signing authority: is the signatory the legal representative, or validly authorized? A hundred-billion-dong contract signed by a department head "beyond authorization" is a classic dispute;
- Legal prohibitions: contracts whose object or purpose breaches prohibitions (e.g. transferring an ineligible project, trading in banned sectors) may be declared wholly void.
3. Void contracts: when and with what consequences
The Civil Code distinguishes voidness for breach of prohibitions/social ethics, sham transactions, mistake/fraud/threat/coercion, and partial voidness. Legal consequence of a void contract: the parties restore the original state, returning what each received; the at-fault party compensates resulting damage.
Key practical point: partial voidness — when one clause is void (e.g. an above-cap penalty), the rest survives if unaffected. Penalty clauses should therefore be drafted "severable," with a severability provision.
4. Performance: principles and security measures
Perform correctly, fully, honestly, in good faith. Security measures under the Civil Code: pledge, mortgage, deposit, earnest money, escrow, retention of title, guarantee, credit guarantee, lien.
In 2026 commerce, the three most-used:
- Deposit: both security and a "measure" of good faith — the breaching party forfeits it or returns double as provided. Distinguish deposits from advance payments;
- Bank guarantees: the standard in construction and high-value equipment sale contracts;
- Penalties + damages: see section 5.
5. Penalties and damages
The most-debated "couple":
- Penalties: agreed by the parties but not exceeding statutory caps for each contract type. For commercial contracts the Commercial Law sets the cap — above-cap agreements risk the excess being declared void;
- Damages: the breaching party compensates actual damage, including property loss and lost income, if the aggrieved party proves it;
- Combination: the law permits claiming both penalties and damages within statutory limits for commercial contracts — regulate the combination mechanism in the contract rather than debating it after the dispute arises.
Note: specific caps and combination conditions must be checked against the Commercial Law and current guidance — an uncertain point of this article. When drafting penalty clauses, also state the calculation basis (percentage of the breached obligation's value or of the whole contract), when the penalty right accrues, and a mitigation mechanism where the breacher proves actual damage is far lower — these details decide whether the clause "survives" a dispute.
6. Termination, cancellation, unilateral termination
The Civil Code distinguishes: termination by agreement; termination on completion; unilateral termination (a right under the agreement or statute on the other's material breach); cancellation (for material breach, returning what was received).
Practice notes:
- Unilateral termination rights must be clearly regulated in the contract (trigger conditions, notice procedure) — if the contract is silent, unilateral termination is allowed only in statutory cases;
- Notice: send in the proper form to the right address, keep proof of sending/receipt — "was notice given?" disputes are very common;
- Consequences: termination doesn't extinguish the right to claim already-accrued damages.
7. Dispute resolution: choosing the mechanism
Parties may agree on: negotiation, mediation, commercial arbitration, or court. The dispute-resolution clause is a "surviving" clause — it still applies even if the main contract is declared void (the separability principle).
Drafting recommendations:
- a multi-tier clause: negotiation → mediation → arbitration/court, with time limits per tier;
- for cross-border deals (especially Vietnam–China): consider international arbitration, governing law and language of proceedings from the negotiation stage;
- force majeure clauses should list specifically and regulate notice procedures and the extent of exemption.
8. Sham contracts and intra-group transactions
A common voidness pattern in FDI practice is the sham contract: parties paper a contract to mask a different transaction (e.g. a low-price sale contract to cut tax while the real price is higher; a "shell" service contract for a loan).
Treatment principle: in disputes, the adjudicator identifies the actual transaction performed, unconstrained by the sham contract's label or form. The sham contract is declared void; the real transaction (if lawful) stands.
Accompanying risks go beyond civil liability: sham contracts aimed at tax evasion or transfer pricing can trigger administrative, even criminal, tax liability. FDI businesses need special care with intra-group (intercompany) agreements priced off-market — also a focal point in transfer-pricing inspections.
9. Limitation periods for contract disputes
The right to sue doesn't last forever. The Civil Code 2015 sets the limitation for contract claims at 03 years from when the claimant knew or should have known their lawful rights were infringed, unless otherwise provided.
Practice notes:
- limitation is not automatic — courts apply it only when a party invokes it. A defendant who "forgets" to plead limitation loses this shield;
- parties may not freely shorten or extend limitation periods against the rules;
- limitation can be interrupted (the breacher acknowledges the obligation, parties negotiate…) — each interruption restarts the clock;
- in foreign-related disputes, limitation also depends on the chosen governing law — don't assume Vietnamese limitation applies.
Advice: the moment a breach is detected, send a written demand — it pressures and interrupts limitation in your favor.
10. 2026 commercial contract review checklist
- Signatories: legal standing, authority, authorization;
- Contract object: any prohibited/restricted scope;
- Form: written, valid e-signing, complete signatures, seals (if needed);
- Price, payment method and terms;
- Duration, performance milestones, acceptance conditions;
- Deposit/guarantee/performance security;
- Penalties: within statutory caps;
- Damages: proof mechanism, limits;
- Unilateral termination: conditions, notice procedure;
- Force majeure: definition, procedure, consequences;
- Dispute resolution: mechanism, tiers, governing law;
- Boilerplate: governing law, effectiveness, amendments, assignment.
11. Penalties, damages and late-payment interest: combining three tools
Three remedies often confused — distinguish them clearly when drafting:
Contractual penalty: a sum the breaching party pays per the contract's agreement, on breach. Features: applies only if the contract agrees a penalty; the rate is agreed but capped by statute (for commercial contracts under the Commercial Law). No need to prove actual loss;
Damages: compensation for actual losses suffered — direct losses plus profits that would have been earned absent breach. Features: must prove actual loss and causation; available even without a contractual damages clause (under the law);
Late-payment interest: for delayed monetary payment. Rate as agreed or per statutory default.
Practical combination: a good contract has all three — penalties to deter and apply easily (no proof of loss needed), damages to fully cover real losses, interest for payment obligations. Note: don't stack remedies unreasonably — courts/tribunals may adjust excessive totals, and counterparties will hesitate to sign draconian terms.
One often-missed point — interest on awarded damages: when the breaching party delays paying adjudicated compensation (judgment, arbitral award), the aggrieved party may claim late-payment interest on that sum for the delay period. So stalling payment after losing only inflates the total — early compliance is usually the economical choice. In enforcement negotiations, the winning party can use accruing delay interest as leverage for early payment — rather than rigidly insisting on every last cent while collecting nothing for months. At the same time, distinguish clearly in enforcement records: which amounts are principal under the award, and which are accruing delay interest — this transparency prevents disputes over remaining balances when the debtor pays in installments. Finally, don't forget the tax angle of any compensation received: depending on the nature of the payment (damages, contractual penalty, delay interest), the tax treatment may differ — consult a tax advisor before closing the books on a dispute, so there are no surprises at year-end tax finalization and the real value of the compensation is preserved.
12. Contracts with Chinese counterparties: clauses needing special care
Vietnam–China deals need certain clauses "locked down":
- Contract language: bilingual VI–ZH contracts need a prevailing-language clause for conflicts — otherwise each side cites its favorable version. Invest in professional legal translation, not a "for-show" version;
- Governing law: agree clearly on Vietnamese, Chinese or third-country law — it directly affects limitation, remedies and interpretation;
- Dispute resolution: arbitration (VIAC, CIETAC, SIAC, HKIAC…) is usually preferred over courts in cross-border deals for New York Convention enforceability. Specify the institution, number of arbitrators, language and seat;
- Payment terms: fix the payment currency, who bears international transfer fees, and when payment counts as made (funds credited vs. transfer order sent);
- Counterparty checks: verify the Chinese company's legal standing (business license, representative) — engage Chinese counsel for lookups if needed.
13. When the dispute erupts: the first 72 hours
Handling in the first days often decides the dispute:
- Preserve evidence now: save all emails, Zalo/WeChat messages, meeting minutes, delivery records — stop anyone "cleaning up." Screenshots weigh less than extractable original data;
- Send formal notice: notify breach in writing (email + hard copy), specifying the breached obligation and a cure deadline — pressure, limitation interruption, and evidence in one;
- Quick assessment: is the breach curable, estimated damages, is the counterparty still in good faith — to choose: negotiate, mediate, or prepare litigation/arbitration;
- No extreme "self-help": holding goods hostage, freezing accounts, smearing the counterparty online — these can turn the right party into the wrong one, owing counter-damages;
- Consult counsel early: initial advice costs far less than fixing strategic mistakes later.
FAQ
Q: Which instruments govern commercial contracts in 2026?
A: The general framework is the Civil Code 2015 on contracts; the Commercial Law 2005 and sectoral laws apply depending on the field (investment, land, construction…). Check the instruments in force at conclusion and performance.
Q: Are contracts signed via email or Zalo valid?
A: They can be, if formation and signature requirements are met. Businesses should state clearly in contracts which electronic formation methods are accepted.
Q: What is the maximum contractual penalty?
A: Penalties are agreed by the parties but must not exceed statutory caps for each contract type (e.g. commercial contracts have a cap under the Commercial Law). Above-cap agreements risk partial invalidity.
Q: How is interest on late payment calculated?
A: Late-payment interest follows the parties' agreement; absent agreement, the statutory rate applies. State the rate, accrual start and calculation method in the payment clause.
Q: Can penalty and damages be claimed together?
A: Depending on contract type and agreement. For commercial contracts the law permits combining penalties and damages within statutory limits; regulate the combination mechanism clearly in the contract.
Q: No penalty rate in the contract — can I still penalize?
A: No. Penalties apply only as agreed in the contract. Without a penalty clause, the aggrieved party may still claim damages (proving actual loss) and late-payment interest (for delayed payment). So when drafting, don't forget the penalty clause — the cheapest deterrent.
Q: Minor breach, counterparty cured immediately — let it slide?
A: Record the breach and cure in writing even if you waive compensation. The written record: (1) evidences "history" if breach recurs; (2) interrupts limitation. A verbal waiver surrenders your future rights.
Q: Bilingual VI–ZH contract, versions conflict — which prevails?
A: Per the contract's prevailing-language clause (if any). Without one, interpretation gets messy — the court/tribunal must reconstruct common intent from negotiations, drafts and other evidence. Lesson: always include a prevailing-language clause and invest in quality legal translation upfront.
When to work with a lawyer
When drafting or reviewing high-value commercial contracts; when negotiating penalty, damages and force majeure clauses; or when a dispute has arisen. FLAT Law Firm drafts and reviews commercial and cross-border contracts — hotline 0988424851.
References
- Civil Code 2015 (No. 91/2015/QH13), effective 01/1/2017.
- Commercial Law 2005 (No. 36/2005/QH11), effective 01/1/2006.
- Cross-checked at the time of writing (28/9/2026).
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