Mid-stream EPC termination is a project’s most dangerous moment: works half-built, materials in transit, long-lead equipment on order. Both sides’ money is decided in the few weeks around the termination date — by the joint condition survey and by how the contract classifies the reason for termination.
Legal basis
- Law on Construction 50/2014/QH13 (amended by Law 62/2020/QH14)
- Decree 37/2015/ND-CP on construction contracts (amended by Decree 50/2021/ND-CP)
- Civil Code 91/2015/QH13
The termination reason decides each side’s purse
EPC contracts usually carry three termination families: contractor default (serious delay, abandonment, incapacity) — the employer may terminate, complete with others, and charge the contractor the cost difference; employer default (prolonged late payment, no site handover) — the contractor may terminate and claim payment plus damages; and termination for convenience (if agreed) — payment per the contract formula for work done and unavoidable commitments. Every post-termination dispute starts with this classification question, plus whether the terminating side honoured the warning and cure procedure.
Paying for work in progress: measure on site, fix it in minutes
Payment principle: the contractor is paid for work executed to quality and accepted up to termination, materials delivered to site within the contract scope, and — depending on the termination reason — demobilisation costs and non-cancellable equipment commitments. In the first days after the termination notice: run a joint site inventory and measurement (with the supervisor), photo/film the entire status, and minute the handover of the site, materials, design documents and technical files. Without a joint status record, each side will hold a different quantity figure and the lawsuit gains years.
Handover and the post-termination phase
Handover covers: the site and unfinished works; all design documents produced (including the licence to use the design to complete this project as the contract agrees); materials and equipment bought for the project; and access to relevant subcontracts where the main contract allows assignment. The employer should simultaneously call the performance security within its validity if termination is for contractor default, and fix protective measures for the unfinished works (covering, materials storage) so transition-period damage is not laid at its door.
Related reading on flaw.vn: article EXP-1789 covers the general framework of this topic — this article deals only with the specific angle in its title.
Frequently asked questions
When can an EPC contract be terminated midway?
In principle: the value of work executed to quality and accepted up to termination, plus materials delivered within the contract; then additions/deductions per the termination reason (completion-cost differences if contractor default; damages and commitment-cancellation costs if employer default or convenience). The figure can only be fixed after a joint site inventory, measurement and a status minute signed by both sides.
How is unfinished work volume paid?
Immediately on receiving the notice: demand a joint site inventory and measurement with the supervisor present, a status and handover minute with photos/video, sealing and preservation of project materials and files, and a written reservation of all payment and damages rights. Do not remove equipment from site before the minute exists — that act is routinely used against the contractor.
Hand over dossiers and site to the new contractor?
As the EPC contract agrees: typically the employer may use design documents it has paid for to complete this very project, while intellectual property and use on other projects remain with the designer/contractor absent a broader assignment. Check the design-documents clause and pay for design work performed within the termination account.
Compensation upon termination?
If the contract has a performance security and the termination falls in a callable case (contractor default, after warning and expiry of the contract cure period), the employer may call the issuing organisation within the security’s validity and strictly per its conditions. A call on wrong conditions or after expiry is the most common reason banks refuse.
This article has been quality-reviewed by the FLAW AI Legal Council
