Legal Risks in Commercial Contracts | FLAT LAW FIRM

Reading contracts through a risk lens: a map, not a list

Instead of reading a contract cover to cover and fixing things that “look problematic”, the lawyer’s approach is to build the risk map first: list what could go wrong at each stage — from the parties’ standing, the document’s form, each clause group, to the mechanism for handling incidents — then check the contract against that map. The benefit is not missing “invisible” risks: a clause absent from the contract is sometimes more dangerous than one poorly written.

A risk map for a commercial contract in Vietnam typically covers six groups: (1) party and signing-authority risks; (2) contract form risks; (3) risks from ambiguous price, payment, and acceptance clauses; (4) risks from penalty and damages mechanisms; (5) risks from force majeure and exemption clauses; (6) risks from dispute-resolution clauses. Each group below analyses recognition signs, legal bases, and handling.

Party and signing-authority risks

This is the “root” risk group: if the signatory lacks authority, the entire contract may not bind the company — every clause, however carefully drafted, becomes meaningless.

• Legal standing of the contracting party: does the counterparty still legally exist, is its enterprise registration certificate still valid, is the signatory the legal representative at the time of signing.
• Authority of the signatory: the legal representative (Articles 12–13 of the 2020 Enterprise Law) signs within their inherent powers; anyone else may sign only with a written authorisation (Articles 135, 138 of the 2015 Civil Code) stating scope and term. A commonly missed point: authorisation to “sign contracts” does not automatically include signing addenda, liquidation minutes, or later amendment agreements.
• Consequences of signing beyond authority: under Article 143 of the 2015 Civil Code, transactions beyond the authorised scope do not create the company’s rights and obligations for the excess portion — unless the company agrees, knew without objecting within a reasonable time, or was at fault causing the other party not to know. Many businesses “remedy” with a resolution ratifying the transaction after signing, but this is a stopgap.

Prevention: before signing, ask the counterparty for its enterprise registration certificate, charter, and authorisation document (if the signatory is not the legal representative). Details at Contract signing authority in companies.

Form risks: when a contract “exists but does not”

Vietnamese law generally respects freedom of form — but there are cases where form is a validity condition, and violating form renders the contract void:

• Contracts requiring notarisation or certification: e.g. house sale/donation contracts, land-use-right transfers. If these are only hand-signed between the parties, the contract risks being declared void.
• Form of amendments: under Article 421(3) of the 2015 Civil Code, an amending contract must follow the form of the original. A notarised original means the amending addendum must also be notarised (Article 53 of the 2024 Notarisation Law (Law No. 46/2024/QH15, effective 01/7/2025, replacing the 2014 Notarisation Law)). Many disputes arise from “handwritten” addenda attached to notarised contracts.
• Signatures and seals: from 01/01/2021, the 2020 Enterprise Law (Article 43) abolished the seal-specimen notification procedure — companies decide on seals themselves, and digital signatures carry the same value as seals. However, if the contract provides “effective when signed and sealed”, a missing seal may still cause disputes. The safe approach is to state clearly: effectiveness runs from signing by the authorised person, regardless of sealing.

Risks from ambiguous clauses: price, payment, acceptance

This group does not void contracts, but is the largest practical “minefield” — because each party understands differently and each believes they are right:

• Price: “lump-sum price” without a listed work scope; price adjusted by “market price” without defining how it is determined; unclear whether the price includes VAT, freight, or insurance.
• Payment: from when is the term counted (invoice date, acceptance date, goods-receipt date)? What documents ground payment? Are deductions or set-offs allowed? “Flexibility” allowing a few weeks’ delay, if not recorded in writing, becomes grounds for the breaching party to claim the other agreed to change the deadline.
• Acceptance: what are the criteria, who accepts, how long, and what happens if one party does not cooperate.

Handling principle: every measurable element (quantity, quality, time, standards) must be defined in the contract or technical addendum. Any clause that cannot be written in detail must point to a later determination mechanism.

Penalties and damages: understand correctly to keep your rights

This is the clause group deciding how much a business “can claim” when the counterparty breaches:

• Penalties apply only if agreed. Under Article 418 of the 2015 Civil Code and Article 300 of the 2005 Commercial Law, a penalty is an agreement between the parties — no agreement means no right to penalise, however clear the breach.
• The 8% cap in commercial contracts. Article 301 of the 2005 Commercial Law limits penalties to 8% of the value of the breached contractual obligation (except Article 266 cases). Penalty agreements above the cap risk being reduced in dispute resolution.
• Do penalty and damages go together? — distinguish contract types. For purely civil contracts, under Article 418(3) of the 2015 Civil Code, to claim both penalty and damages the parties must agree clearly: if the contract agrees only on penalty and stays silent on damages, the breaching party bears only the penalty. Conversely, for commercial contracts, under Article 307 of the 2005 Commercial Law, the aggrieved party may apply both remedies — penalty and damages — simultaneously, unless the parties agree otherwise or the law provides otherwise. Meaning in commercial contracts, even with only a penalty agreed and silence on damages, the breaching party may still have to both pay the penalty and compensate damages.
• Damages require proof. Under Article 419 of the 2015 Civil Code and Articles 302–304 of the 2005 Commercial Law, the claimant must prove actual damage, its extent, and causation. The contract should pre-set a damages calculation method to reduce the later proof burden.

Force majeure and exemptions: do not let the clause “die”

Force majeure clauses are often copied from templates, listed generically, then forgotten — until an incident occurs and each party interprets differently. Under Article 156(1) of the 2015 Civil Code, a force majeure event must simultaneously satisfy three elements: objective, unforeseeable, and insurmountable despite all necessary measures. Missing one, it is not force majeure.

Points to clarify in the contract:

• Specific listing: beyond typical events (natural disasters, war, epidemics), provide for industry-specific events (e.g. export bans, supply-chain disruptions caused by policy).
• Notice and mitigation duties: within how long the affected party must notify, in what form, and what mitigation measures it must take.
• Consequences: suspension, deadline extension, or contract termination — and in which cases termination is allowed. Under Article 351(2) of the 2015 Civil Code, a party unable to perform due to force majeure bears no civil liability (unless otherwise agreed) — but “no liability” does not mean the contract automatically terminates.

Businesses should cross-check this clause against Article 294 of the 2005 Commercial Law on commercial exemptions to avoid contradictions.

Dispute-resolution clauses: choosing wrong costs more time

Many contracts spend dozens of pages on rights and obligations, then end with “all disputes shall be resolved at the competent court” — a real risk, because when disputes arise the first question is “where and under what procedure”:

• Tiered roadmap: negotiation, mediation (if suitable), then arbitration or court — with clear deadlines for each step so one party cannot drag on indefinitely.
• Arbitration or court: an arbitration agreement must designate a specific centre (e.g. VIAC), the number of arbitrators, language, venue, and applicable law. Vague agreements (“disputes shall be resolved by arbitration”) risk being deemed unable to identify the arbitration institution. Note: Law No. 81/2025/QH15 is the Law amending and supplementing certain articles of the Law on the Organisation of People’s Courts (effective 01/7/2025) — not an arbitration instrument.
• Do not confuse with Resolution 81/2025/UBTVQH15: this is an entirely different instrument — a Resolution of the National Assembly Standing Committee on establishing provincial-level and regional People’s Courts and territorial jurisdiction (also effective 01/7/2025). The identical “81/2025” number easily confuses research, but the issuing body and content differ.
• Limitation periods: commercial disputes have a 02-year limitation (Article 319 of the 2005 Commercial Law), and 02 years under arbitral procedure (Article 33 of the 2010 Commercial Arbitration Law).

Pre-signing risk review process: a practical checklist

A lean process, immediately applicable to each commercial contract before submission for signing. Resource-allocation principle: not every risk deserves negotiation to the end — after review, rank each risk by probability and impact (financial, operational, reputational) into three levels: high (handle before signing), medium (negotiate if room), low (accept and record in writing).

• Step 1 — Check the parties: enterprise registration certificate, legal representative, authorisation documents, charter provisions on authority.
• Step 2 — Check the form: whether notarisation is mandatory; signatures, seals, number of copies.
• Step 3 — Read clauses by risk group: contract subject; price and price-adjustment mechanisms; payment; acceptance/handover; penalties (agreed or not, above the 8% cap or not); whether penalty and damages go together; force majeure; contract termination; dispute resolution.
• Step 4 — Cross-check: whether clauses contradict each other; whether addenda and attached technical documents are complete and consistent.
• Step 5 — Score and decide: rank risks on the priority matrix, renegotiate high-level points, record accepted-risk points in writing.

For high-value or complex contracts, steps 3 and 4 should involve a lawyer — these are the two steps demanding experience in spotting “invisible” risks.

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