Fundamental vs Non-Fundamental Breach of Contract in Vietnam

Important correction up front: Vietnamese law does not use the term “fundamental breach”. The Civil Code uses “serious breach” (vi phạm nghiêm trọng, Articles 423 and 428). “Fundamental breach” is a concept from Article 25 of the CISG (UN Convention on Contracts for the International Sale of Goods). Confusing the two is a common error in online articles — and can lead businesses to invoke the wrong basis for terminating a contract.

This article compares the two frameworks side by side, distinguishes avoidance from unilateral termination, and recommends pre-defining breach thresholds in contracts — current as of October 2026.

1. The Vietnamese framework: “serious breach” under the Civil Code

The Civil Code 91/2015/QH13 (effective 1 January 2017) is the foundation:

Article 423 — Avoidance of contract: a party may avoid the contract when the other party commits a serious breach. Avoidance is retroactive: the contract is treated as never concluded, and parties must return what they received.
Article 428 — Unilateral termination: a party may unilaterally terminate upon the other’s serious breach, but effects apply only prospectively (no retroactivity), and the terminating party must notify immediately.
Articles 418–422: for non-serious breaches, the aggrieved party is only entitled to demand continued performance, breach penalties, and damages — no right to avoid or unilaterally terminate.

The key point: only a serious breach unlocks avoidance/unilateral termination. Minor breaches (a few days’ delivery delay with no material loss, typos in documents, etc.) do not.

2. The international framework: “fundamental breach” under the CISG

Vietnam has been a CISG member since 1 January 2017. For international sales of goods within CISG scope:

CISG Article 25 defines fundamental breach: a breach that substantially deprives the aggrieved party of what it was entitled to expect under the contract, unless the breaching party did not foresee (and a reasonable person would not have foreseen) that result. Two elements: degree of deprivation + foreseeability.
CISG Articles 49 / 64: only a fundamental breach entitles the buyer/seller to declare the contract avoided.
CISG Articles 47 / 63: for non-fundamental breaches, the aggrieved party may fix an additional period for performance (Nachfrist) — avoidance only if performance still fails after expiry.

Academic references taking the same approach: PICC Article 7.3.1 (UNIDROIT Principles) and PECL Article 8:103.

3. Warning: do not mechanically equate the two concepts

Criterion	“Serious breach” (Civil Code)	“Fundamental breach” (CISG Art. 25)
Scope	All civil contracts in Vietnam	International sale of goods only
Proof standard	Degree of seriousness (assessed case by case by courts)	Substantial deprivation of expectation + foreseeability
Consequences	Avoidance (Art. 423) / unilateral termination (Art. 428)	Declaration of avoidance (Arts. 49/64); Nachfrist (Arts. 47/63)
Effect of avoidance	Avoidance: retroactive; termination: prospective	Avoidance: releases parties prospectively

Do not mechanically equate CISG “fundamental breach” with Civil Code “serious breach”: different proof standards, different scope. Whether CISG or the Civil Code applies depends on the nature of the contract and the parties’ choice-of-law clause.

4. Distinguishing avoidance from unilateral termination (Civil Code)

Two institutions often confused:

Avoidance (Article 423): retroactive — the contract is deemed never concluded; parties return what they received; the aggrieved party may still claim damages.
Unilateral termination (Article 428): effective from the moment of notice (prospective only); performed parts remain valid; the terminating party must notify immediately.

Choosing the wrong institution can forfeit restitution rights or render the termination notice defective as to timing.

5. Drafting recommendation: pre-define breach thresholds

To avoid disputes over “what counts as serious/fundamental” when conflict erupts, contracts should include:

A list of deemed-serious breaches: e.g., delivery delayed beyond 30 days, goods unfit for their basic purpose, non-payment after two written reminders.
A cure procedure for non-serious breaches: notice — cure period (Nachfrist-like) — penalty — damages.
A clear choice-of-law clause: international contracts should state whether CISG or a national law applies, avoiding parallel-framework disputes.
Sample clause: “Any breach listed in Annex X is agreed by the parties to constitute a serious breach, entitling the aggrieved party to avoid or unilaterally terminate the contract under Articles 423/428 of the 2015 Civil Code (or to declare avoidance under CISG Articles 49/64 where the CISG applies).”

6. Frequently asked questions

Is a 5-day delivery delay a serious breach?

Usually not — unless the contract makes timing essential (e.g., seasonal goods, or an express “time is of the essence” clause). Non-serious breaches only entitle the aggrieved party to continued performance, penalties, and damages.

Does the CISG apply to domestic contracts?

No. The CISG covers only international sales of goods (parties in different member states). Purely domestic contracts are governed by the 2015 Civil Code.

Does unilateral termination require advance notice?

Under Civil Code Article 428, the terminating party must notify immediately; contracts should specify the form and timing of notice to avoid disputes.

7. Legal bases (as of 14 October 2026)

Civil Code 91/2015/QH13 — Articles 418–423, Article 428.
CISG (Vietnam a member since 1 January 2017) — Articles 25, 47, 49, 63, 64.
References: PICC Article 7.3.1; PECL Article 8:103.

This article is general academic-legal analysis; whether CISG or the Civil Code applies depends on the contract’s nature and choice-of-law clause.

Contact us

FLAT Law Firm advises on drafting and reviewing domestic and international contracts, building breach/termination clauses, and representing clients in contract disputes. Reach us via our contact page.

Transparency note — FLAW AI Legal Council: This article was prepared by the FLAW AI Legal Council and has not been reviewed by a human lawyer. It is general information and does not replace legal advice for specific cases.

This article is awaiting review by the QA Council.