EPC and industrial construction contracts in Vietnam: a legal handbook — the new framework from 01/07/2026

EPC and industrial construction contracts in Vietnam: a legal handbook

The EPC (Engineering – Procurement – Construction) contract is the backbone of industrial construction: factories, logistics warehouses, data centres, energy facilities. Unlike ordinary construction contracts, EPC concentrates full responsibility — design, equipment procurement, execution, commissioning and handover — in a single contractor, usually at a lump-sum price. From 01/07/2026, the legal framework for construction contracts in Vietnam has fundamentally changed, with a new Construction Law and a new decree on construction contracts. This handbook covers what project owners and EPC contractors must know.

Contents

• 1. Overview: EPC in the Vietnamese legal context
• 2. The new legal framework from 01/07/2026
• 3. EPC contract structure
• 4. Contract price and payment
• 5. Guarantees in EPC contracts
• 6. Risk allocation — the soul of EPC
• 7. Contract variations
• 8. Acceptance, handover, warranty and maintenance
• 9. Penalties and damages
• 10. EPC dispute resolution
• 11. Common risks and prevention
• 12. Insurance, force majeure and project documentation
• 13. Performance security beyond bank guarantees
• 14. FAQs
• Related articles in this industry handbook
• Need in-depth EPC advice?
• Language versions
• References

1. Overview: EPC in the Vietnamese legal context

What is EPC? EPC (Engineering – Procurement – Construction) is a turnkey contracting form in which the contractor is responsible for everything: design, materials and equipment supply, construction, testing, commissioning and handover of a completed, ready-to-operate facility ("turnkey").

Why is EPC prevalent in industrial construction? For factories, energy facilities or data centres — where design, process equipment and execution are tightly linked — owners want a single point of responsibility instead of coordinating multiple separate contractors. The lump-sum price helps owners control total investment.

Legal status in Vietnam: an EPC contract is a form of construction contract, governed by construction legislation (the Construction Law, the decree on construction contracts) and the Civil Code on contracts generally. International forms such as FIDIC (notably the Silver Book for EPC/Turnkey) are widely used in projects with foreign elements — but remember: FIDIC is a standard contract form, not Vietnamese law. Parties may agree to apply or reference FIDIC, but agreed content must not contradict mandatory Vietnamese construction-contract law.

2. The new legal framework from 01/07/2026

From 01/07/2026, three new instruments take effect together, replacing the entire old framework:

• The Construction Law 2025 (No. 135/2025/QH15, adopted 10/12/2025): replaces the 2014 Construction Law (No. 50/2014/QH13), effective principally from 01/07/2026 (Clauses 2–3 of Article 43, Article 71 and Clauses 3–5 of Article 95 took effect early on 01/01/2026). The Law restructures project classification by investment form, project management, construction permits, acceptance, warranty and maintenance; transitional provisions are in Article 95.
• Decree 210/2026/ND-CP (issued 15/06/2026, effective 01/07/2026): details and guides implementation of Articles 82, 83(4), 84(4), 85 and 87 of the Construction Law on construction contracts (classification, contents, contract dossiers; performance security — public-investment and PPP projects; contract variations; suspension and termination; payment, settlement and liquidation) — the most direct instrument for EPC contracts. It replaces Decrees 37/2015/ND-CP and 50/2021/ND-CP.
• Decree 207/2026/ND-CP (issued 15/06/2026): on construction quality management, execution and maintenance — replacing Decree 06/2021/ND-CP. Directly relevant to the EPC contractor's acceptance, warranty and maintenance duties.

Practical meaning: every EPC contract negotiated and signed from 01/07/2026 must comply with the new framework. Contracts signed earlier need their transitional provisions checked to determine the applicable instrument for unperformed works — counsel should verify the details directly.

3. EPC contract structure

A complete EPC contract typically contains these blocks — use them as a negotiation checklist:

1. Scope of work: the responsibility boundary between owner and EPC contractor. Describe precisely: design stages, equipment supply (lists, technical standards), construction items, testing and handover levels. Vague scope causes most EPC disputes ("is this within the lump sum?").
2. Design dossier and technical requirements: the employer's requirements, applicable standards, mandatory Vietnamese construction regulations.
3. Schedule: commencement date, milestones, completion date; extension mechanisms for excusable events.
4. Price and payment (see section 4).
5. Guarantees (see section 5).
6. Owner's obligations: timely site handover, information, design approvals, timely payment, procedural support (permits, utility connections).
7. Quality management, acceptance, handover (see section 8).
8. Warranty and maintenance (see section 8).
9. Contract variations (see section 7).
10. Penalties and damages (see section 9).
11. Force majeure, suspension, termination.
12. Dispute resolution (see section 10).

4. Contract price and payment

The lump sum is EPC's signature pricing: the contractor quotes one fixed price for the entire scope. It lets owners control total investment; the contractor bears cost fluctuations within the committed scope (except contractually adjustable cases).

Points to lock down:

• Advance payment: amount, conditions (usually tied to an advance payment guarantee), recovery through progress payments.
• Milestone payments vs. measured progress: milestones are more common in EPC; each milestone needs a clear acceptance condition for payment.
• Retention: a percentage held from each payment until the warranty period ends — securing the contractor's warranty duties.
• Payment currency and exchange-rate adjustment: essential in projects with foreign elements.
• Payment dossiers: the document list per instalment (acceptance minutes, invoices, quality records…) — one missing document can legitimately delay payment.

5. Guarantees in EPC contracts

The guarantee system is the EPC contract's financial safety net, typically comprising:

• Bid bond (tender stage): securing that the bidder will not withdraw or refuse to sign if awarded.
• Performance bond: usually 5–10% of contract value, securing performance; the owner may call the bank on contractor default.
• Advance payment guarantee: matching the advance, reducing as the advance is recovered.
• Warranty bond: securing post-handover warranty duties.

Negotiation note: "unconditional, irrevocable, on-demand" wording gives the owner enormous power — contractors should carefully delimit call conditions to prevent abuse.

6. Risk allocation — the soul of EPC

EPC's golden rule: risk goes to the party best able to control and manage it. In standard EPC, the contractor bears most risks: design, material/equipment prices, execution, delays. The owner retains risks the contractor cannot control: site, government approvals, legal changes, force majeure.

Risks to delineate clearly:

• Geotechnical / site conditions: who bears it when actual surveys differ from owner-furnished data?
• Legal and tax policy changes: especially sensitive as the construction framework itself just changed (2026).
• Material price and exchange-rate movements: is the lump sum adjustable, and by what formula?
• Owner-caused delays (late site handover, late design approvals): contractor's extension and cost compensation.
• Force majeure: definition, notification procedure, consequences (extension, suspension, termination).

A common mistake: owners pushing all risks onto the EPC contractor (including site and legal risks) for a "worry-free" lump sum — resulting in either very high risk pricing or, worse, a weak contractor collapsing mid-project.

7. Contract variations

EPC contracts are not frozen at signing. Construction-contract law and practice allow adjustments where:

• Scope changes at the owner's request (variation orders): require a written change-order procedure, valuation of additional works and corresponding schedule adjustments. Extra work without a written order is the leading cause of contractors losing claims for additional payment.
• Force majeure: objective events unforeseeable and unremediable despite all necessary measures.
• Legal changes affecting performance cost or schedule.
• Owner breaches (late site handover, late payment, late approvals): the contractor gets time extensions and compensation for reasonable additional costs.

Procedural principle: all adjustments in writing (contract appendices, minutes, change orders); timely notices within contractual deadlines — late notice can forfeit variation rights.

8. Acceptance, handover, warranty and maintenance

• Acceptance: industrial works must be accepted under quality-management law (now Decree 207/2026/ND-CP) and the contract: work acceptance, section/completion acceptance, trial runs (no-load and loaded), handover-for-use acceptance. Each step needs acceptance minutes — payment documents and the basis for risk transfer.
• Handover: with as-built dossiers, operation and maintenance manuals, equipment lists and spare parts.
• Warranty: the EPC contractor warrants the works after handover; the period is agreed but not below statutory minimums by work type and grade. During warranty, the contractor remedies defects attributable to it.
• Maintenance: after warranty expiry, works must be maintained per maintenance procedures — the owner's/user's responsibility.

9. Penalties and damages

• Penalties: parties may agree penalty levels for breach (delays, late payment, quality failures…). Agreed levels must consider applicable statutory limits — applying the Commercial Law 2005 penalty framework to construction contracts needs case-by-case assessment (seek counsel).
• Damages: the breaching party compensates actual, direct loss caused by the breach — including the owner's lost business opportunity from delays (if proven).
• Limitation of liability: international EPC practice commonly caps contractor liability (e.g. 100% of contract value, with carve-outs). This heavily negotiated clause is sometimes missing from domestic forms.

10. EPC dispute resolution

EPC disputes are typically high-value, technically complex and often cross-border. Options:

• Negotiation, mediation: always the first step; many FIDIC-based contracts require a Dispute Board before arbitration.
• Commercial arbitration: the preferred route for EPC — especially with foreign elements (VIAC or international institutions such as SIAC, ICC). Arbitral awards are final.
• Courts: where the parties have not agreed on arbitration.

Drafting tip: state the mechanism clearly (arbitration or courts — no ambiguity), the institution, tribunal size, language, governing law and seat. A vague dispute clause can cost years just to establish jurisdiction.

11. Common risks and prevention

12. Insurance, force majeure and project documentation

Insurance. EPC contracts should allocate insurance duties explicitly rather than assuming "the contractor handles it":

• Contractor's all-risks (CAR) insurance: covering physical damage to the works during construction — typically the contractor's duty, with the owner named as co-insured.
• Third-party liability: for damage to surrounding property and injuries to third parties.
• Professional indemnity: where the contractor bears design responsibility, covering design errors and omissions.
• Equipment and cargo insurance: for imported machinery during transport and storage before installation.

The contract should state minimum coverage amounts, the insurer approval standard and the duty to provide policies and premium receipts. Uninsured gaps surface only after a loss — when it is too late.

Force majeure. Vietnamese law recognises force majeure as an exemption from liability, but contracts should define it operationally: which events qualify (natural disasters, epidemics, wars, qualifying state acts), the notification procedure and deadline (commonly within days of occurrence), the duty to mitigate, and the consequences — time extension, cost sharing and, for prolonged events, termination rights. Typhoons and flooding are recurring realities on Vietnamese industrial projects; treating them as "unforeseeable" without a contractual mechanism is poor planning.

Project documentation discipline. EPC disputes are won or lost on documents. From day one, the contractor should maintain: daily site diaries, design submission and approval logs, variation-order registers, minutes of all coordination meetings, correspondence files and photographic progress records. Owners should keep approval records and payment files with equal discipline. When a dispute reaches arbitration years later, the party with complete contemporaneous records holds a decisive advantage — memories fade, but signed minutes do not.

13. Performance security beyond bank guarantees

EPC projects need layered security on both sides — bank guarantees are only one instrument:

• Parent company guarantees: where the contractor is a local subsidiary, owners routinely require the foreign parent's guarantee of performance. Review the guarantee's scope (whole obligations vs capped amount), its expiry and the law governing it — a guarantee governed by a foreign law may be hard to enforce locally.
• Retention money mechanics: beyond the headline percentage, agree the release triggers (provisional vs final acceptance), whether retention can be replaced by a retention bond, and interest on delayed release.
• Escrow and project accounts: for large industrial projects, routing contract payments through a supervised project account protects both sides — the owner sees funds applied to the works, the contractor sees payment capacity.
• Owner's payment security: contractors should not overlook the mirror image — advance-payment guarantees protect the owner, but the contractor's protection against owner insolvency mid-project deserves equal drafting attention (suspension rights, termination for prolonged non-payment, title to unfixed materials).

Drafting pitfalls recur: guarantees expiring on a fixed calendar date instead of on the acceptance certificate (leaving a gap if the project is late); claim mechanics requiring documents the beneficiary cannot produce; and on-demand guarantees whose independence from the underlying contract surprises owners when a call is made during a bona fide dispute. Each instrument should be reviewed as a standalone document, not as a contract appendix nobody reads.

14. FAQs

What is an EPC contract? EPC (Engineering – Procurement – Construction) is a turnkey contract in which the contractor handles everything from design and equipment procurement to construction, commissioning and handover of a completed facility, usually at a lump-sum price.

What is the new legal framework for construction contracts from 01/07/2026? The Construction Law 135/2025/QH15 (effective 01/07/2026, replacing the 2014 Construction Law) and Decree 210/2026/ND-CP (effective 01/07/2026, replacing Decrees 37/2015 and 50/2021) govern construction contracts.

Do FIDIC-based EPC contracts apply directly in Vietnam? FIDIC is an international standard form of contract, not Vietnamese law. Parties may agree to apply it, but its content must not contradict mandatory Vietnamese law on construction contracts.

What is the minimum warranty period for industrial construction works? The warranty period is agreed in the contract but may not be shorter than the statutory minimum for each type and grade of work — check the instrument in force when drafting.

Related articles in this industry handbook

• Labour law handbook for logistics companies
• 2026 update: default interest in commercial contracts

Need in-depth EPC advice?

From drafting and negotiating EPC contracts to handling variations, adjustments and construction disputes, FLAT Law Firm supports owners and contractors in industrial projects. Call our hotline 0988424851.

Language versions

References

• Construction Law 2025 (No. 135/2025/QH15).
• Decree 210/2026/ND-CP detailing construction contracts.
• Decree 207/2026/ND-CP on construction quality management, execution and maintenance.
• Civil Code 2015 (No. 91/2015/QH13).