A buyer closed a VND 200 billion deal. Three months post-closing, a court notice arrives: the target is defendant in a VND 50 billion damages suit — filed before diligence, but never appearing in the data room. The seller says “forgot”; the buyer says “deliberate concealment”. How to claim? Analysis.
Legal basis
- Civil Code 2015, Articles 385, 401, 418–419: SPA R&W — “no undisclosed disputes” warranties breached by concealed ongoing litigation.
- Commercial Law 36/2005/QH11: good-faith information duties in negotiation and contracting.
- Civil Procedure Code 2015: court-accepted cases are objective legal events with court records — they can’t “not exist”.
“Forgot” vs “deliberate” — why the distinction matters
If merely “forgotten” (inadvertent): still breaches the “no undisclosed disputes” R&W — buyers claim under SPA R&W mechanics (within caps, de minimis…). The main path.
If “deliberately concealed” (fraud): far graver — most SPAs make fraud an exception to all limits (no caps, de minimis, or survival periods). Buyers may also sue independently for fraud (deception in contracting — Article 127, Civil Code 2015: deceived contracts may be voided).
Hence buyers always want to prove “deliberate”; sellers always claim “forgot”. The evidence battle decides compensation levels.
Proving deliberate concealment — 5 evidence types
1. Court records: case-acceptance decisions dated before data-room opening — proving the suit existed during diligence.
2. Data-room logs: access-log extracts — suit documents never uploaded, or uploaded then removed. Many data-room platforms keep full histories.
3. Seller internal emails: target management’s suit discussions during diligence — proving sellers knew when opening the data room.
4. Disclosure schedules: cross-check against warranties — the suit appears in no disclosure while smaller matters are listed (proving “selection” not “forgetting”).
5. Witness testimony: target personnel, seller’s counsel aware of the suit…
Claiming damages — 4 steps
1. Assess losses: suit value (VND 50 billion) × loss probability (per litigators’ assessment) + legal costs + business impact. A VND 50 billion suit isn’t automatically VND 50 billion in losses — assess defeat likelihood.
2. Send claim notice per SPA R&W procedures (see EXP-6211) — within 15–30 days of discovery.
3. Negotiate: present concealment evidence for leverage — sellers facing fraud signs usually settle.
4. Arbitrate/litigate: claim under R&W; proven fraud escapes caps and survival limits.
Suit arising post-closing?
R&W typically warrants only signing/closing-date status — post-closing suits (from post-closing events) don’t breach. But if suit causes predate closing (pre-signed contracts, pre-occurring acts), warranties still cover — distinguish “filing time” from “cause-arising time”.
Seller blames “buyer’s lawyers’ poor diligence”?
Victim-blaming doesn’t excuse seller disclosure duties. Unless SPAs have pro-sandbagging clauses (forfeiting known/undiscoverable claims) and sellers prove actual buyer knowledge — very hard. Buyer diligence duties don’t replace seller disclosure duties.
Independent court checks during diligence?
Yes — this topic’s key lesson. In due diligence, buyers should: search court records at all levels (headquarters, branch locations), check judgment enforcement, and demand counsel confirmations on dispute status. Independent-check costs are far below concealed VND 50 billion suits.
Do generic disclosures exempt?
No — as analyzed in EXP-6211, disclosures must be specific enough for risk assessment. Stating “the company may have ordinary-course disputes” without the specific VND 50 billion suit doesn’t exempt that suit.
Fraud claim limitations?
Fraud is typically a SPA survival-period exception — but still subject to statutory limitations (usually 3 years from learning of infringed rights). Act immediately on fraud discovery; don’t rely on “survival exceptions” to delay.
Contact FLAT Law Firm
FLAT Law Firm advises buyers: independent dispute-status diligence, tight R&W drafting, and handling post-closing concealment discoveries. Contact us upon discovering concealed suits — concealment evidence “cools” fast over time.
This article has been quality-reviewed by the FLAW AI Legal Council