After signing a letter of intent (LOI), one party walks away from the deal — can the other party sue? The short answer: it depends on the actual content of the LOI, not its title. Vietnamese law has no standalone rules on LOIs, and their legal effect is assessed under the general provisions of the Civil Code. This article answers the deal team question — does signing an LOI “lock you in”? — and sets out a safe LOI formula, under the framework in force as of 14 October 2026.
1. Vietnamese law has no standalone LOI rules
Vietnamese law does not separately define letters of intent (LOI), memoranda of understanding (MOU), or term sheets in M&A. The legal effect of an LOI is determined by its actual substance, not its name, under the general provisions of the Civil Code 2015 (91/2015/QH13) on civil transactions and contracts.
In a dispute, courts and arbitral tribunals do not rely on the label (“letter of intent”, “memorandum of understanding”) but assess the substance: the agreed content, the language used, the parties actual intent, and conduct before and after signing (email exchanges, meeting minutes, diligence work, deal announcements).
2. Two groups of provisions: non-binding and binding
Practice typically divides LOI provisions into two groups:
- Non-binding: the intention to transact, the indicative price, the preliminary deal structure, conditions precedent — these do not oblige the parties to close the deal;
- Binding: typically confidentiality (NDA), exclusivity/no-shop, cost allocation, break-up fees, governing law, and dispute resolution. These provisions bind when concluded with all elements of a civil transaction (Article 117 of the Civil Code: capable parties; voluntary; lawful purpose and content).
The golden rule: mark each provision expressly “binding” or “non-binding” — leave nothing ambiguous.
3. When is an LOI treated as a binding contract?
If an LOI satisfies Article 117 and shows agreement on core rights and obligations (transfer object, price or price-determination method, conditions precedent…), it may be treated as a valid contract under Article 385 (a contract is an agreement on the establishment, modification, or termination of civil rights and obligations) and Article 401 (a lawfully concluded contract takes effect from conclusion; parties must perform as committed) — the breaching party faces penalties for breach and damages.
The biggest trap: an LOI headed “non-binding” that still contains signed provisions on price, exclusivity, or confidentiality — those provisions still bind. Courts look at substance: an overly detailed LOI (complete object, price, core rights and obligations + signature of an authorized person) can well be deemed a contract.
Conversely, a fully “non-binding” LOI with a separately signed confidentiality clause still binds the confidentiality duty.
4. Confidentiality applies even without a separate NDA
Article 387 of the 2015 Civil Code (information in contract conclusion) provides that a party receiving confidential information during contract negotiation has a duty of confidentiality and may not use it for private or unlawful purposes; causing damage through breach triggers compensation (Clause 3).
This is the legal basis binding confidentiality duties during the LOI and due-diligence phase — even where the parties have not signed a separate non-disclosure agreement. Given the volume of sensitive information shared at this stage of an M&A deal, the confidentiality provision in the LOI (or a standalone NDA) should always be prioritized.
5. An LOI does not replace mandatory deal approvals
Signing an LOI does not trigger economic-concentration notification duties (2018 Law on Competition + Decree 35/2020/ND-CP) or sectoral approvals — e.g. Ministry of Finance approval for insurer share transfers (Article 74 of the 2022 Law on Insurance Business), or license conditions for intermediary payment service providers. These procedures attach to the definitive transfer agreement (investment forms under the 2025 Law on Investment).
However, parties should screen these approvals early, at the LOI stage, to include them as conditions precedent — avoiding the discovery, after signing, that the deal cannot close for lack of an approval.
6. A safe LOI formula
- Mark every provision binding or non-binding — avoid vague language like “the parties shall endeavor…”;
- Sign a standalone NDA first, before sharing data;
- Set a clear validity period, termination conditions, and dispute-resolution mechanism;
- The signatory must have representative authority — an LOI signed by an unauthorized person may face validity challenges;
- Do not commit firmly on price/enterprise value before diligence is complete — an easy dispute trigger;
- For M&A with a Chinese element: agree expressly on governing law and dispute resolution (Vietnamese courts / VIAC / international arbitration) within the binding provisions of the LOI.
Frequently asked questions
Does signing an LOI oblige closing the deal?
Usually not — the deal-intention part of an LOI is non-binding. But binding provisions (confidentiality, exclusivity, costs, break-up fees) do bind, and breach can lead to damages claims.
Is marking an LOI “non-binding” absolutely safe?
No. Courts and tribunals examine substance, not just the label or a disclaimer line. An overly detailed LOI with all contractual elements may still be deemed a valid contract.
Is information shared at the LOI stage protected without a separate NDA?
Yes — Article 387 of the 2015 Civil Code imposes confidentiality duties on information received during contract negotiation; breach causing damage triggers compensation. Signing a separate NDA remains best practice.
Does signing an LOI trigger economic-concentration notification?
No. The notification duty attaches to the definitive transfer agreement, but early screening at the LOI stage is advisable to set conditions precedent.
Sources
- Civil Code 2015 (91/2015/QH13): Article 117 (validity conditions of civil transactions); Article 385 (contracts); Article 386 (offer to conclude a contract); Article 387 (information in contract conclusion — confidentiality duty; compensation for damaging breach, Clause 3); Article 388 (effectiveness of a contract-conclusion offer); Article 401 (contract effectiveness).
- Law on Competition 2018 + Decree 35/2020/ND-CP — economic concentration (notification duty attaches to the definitive transfer agreement).
- Law on Investment 2025 (143/2025/QH15) — investment forms: capital contribution, share and capital-contribution purchase.
For reference only; not legal advice. This content was prepared by AI and will undergo quality review by the AI Legal Council of FLAT Law Firm before any publication consideration; it is not the legal opinion of a licensed human lawyer. Laws and regulations may change; verify the current legal texts before applying them.
Does your deal team need an LOI review before signing? Contact FLAT Law Firm for advice.