Representations and Warranties in SPAs Under Vietnamese Law: the issue
In a Vietnamese share purchase agreement, representations and warranties are where the transaction’s real risk is allocated — yet they are also the clause most often copied wholesale from international templates, even though Vietnamese law has no dedicated statutory chapter governing them. This article sets out what the clause contains in Vietnamese practice, what a buyer actually recovers when a warranty proves false, and how the claims window should be drafted so the clause works on paper and in a dispute alike.
The core legal basis
A Vietnamese SPA stands on three legs at once: the Civil Code 91/2015/QH13 on transaction validity and damages, the Enterprise Law 59/2020/QH14 — whose Article 127 confirms free transferability of shares, subject to the founding-shareholder limits in Clause 3, Article 120 and to charter restrictions — and the parties’ own bargain. Because there is no separate statutory chapter on SPA warranties, the clause’s legal weight lies entirely in the drafting: the warranted subject matter must be clear, the loss-quantification mechanism must be clear, and the claims window must be clear; miss one of the three and the clause is close to unenforceable when a dispute arrives.
Analysis, question by question from the client’s brief
A complete warranty set falls into two tiers. Fundamental warranties cover the seller’s legal capacity and authority to sign, valid title to the shares or capital being sold, fully paid charter capital, and non-conflict with the target’s charter and existing commitments. Business warranties cover the rest of the enterprise: financial and tax position, material contracts, land and assets, labour and social insurance, licenses, pending disputes and legal compliance. Each warranty should be pinned to a reference moment — signing, closing, or both — because the same statement can be true at signing and false at closing.
A false warranty does not generate a fixed statutory recovery in Vietnam; the consequence is built from the contract and the Civil Code: the buyer must prove the warranty was untrue when given, that actual loss flowed from the untruth, and the causal link between them. The recovery machinery must therefore be written into the SPA in advance: notice of claim within the survival period, a direct indemnity for identified known risks, and a funded source such as a price retention or bank guarantee. A bare sentence that ‘the seller shall compensate in accordance with law’ leaves the buyer to litigate a full damages case to get its money back.
The survival period is a matter of bargain, since no statute fixes it for SPAs. Vietnamese deal practice commonly sets 12 to 24 months for ordinary business warranties, longer for tax warranties, and longest — sometimes unlimited — for fundamental title warranties, occasionally tied to the expiry of tax audit exposure. The technical point most often missed is the line between the warranty’s survival and statutory limitation periods: the contract should state that a claim notified in time survives until resolved, to prevent an argument that the right lapsed mid-dispute.
Vietnam has no codified SPA warranty regime, but the clause is fully recognised through the Civil Code’s freedom-of-contract principle provided its content breaches no prohibition and no social-ethics rule. The difference from Anglo-American practice lies in enforcement, not validity: Vietnamese courts and tribunals demand tighter proof of loss and are less receptive to foreign-style liquidated quantification formulas. A ‘standard international’ warranty set copied verbatim therefore gives false comfort; the version that works is the one localised in its proof-of-loss mechanics, timelines and funded security.
Recommended sequence of actions
When drafting or reviewing the warranty clause: first, split fundamental from business warranties and pin a reference moment to each; second, write the claims machinery in advance — notice, tiered survival periods, and the effect of a timely notice; third, attach a concrete funded source (price retention, guarantee, escrow) to the large risks; fourth, reconcile every warranty against diligence findings so nothing is duplicated and no identified risk group is left unwarranted.
This article is pending review by the QA Council.
Frequently Asked Questions
What is the first point to verify on representations and warranties in spas under vietnamese law?
A two-tier set: fundamental warranties on the seller’s capacity, title to the capital sold, paid-up capital and authority to sign; and business warranties on finance, tax, material contracts, land, labour, licenses, disputes and compliance. Each warranty needs a reference moment — signing, closing or both.
Which documents and filings decide the outcome on representations and warranties in spas under vietnamese law?
The buyer must prove the warranty was untrue when given, the actual loss, and causation, under the damages framework of the Civil Code 91/2015/QH13. To avoid a full lawsuit, the SPA should pre-write the indemnity route, the claim notice period, and a funded source such as a retention from the purchase price.
What goes wrong most often on representations and warranties in spas under vietnamese law, and what does it cost?
It is set by agreement — Vietnamese law fixes no period for SPAs. Practice runs 12–24 months for business warranties, longer for tax, and longest or unlimited for fundamental title warranties. The contract should also state that a claim notified within the period survives until it is resolved.
How should the parties allocate the risks of representations and warranties in spas under vietnamese law in the deal documents?
Yes, through freedom of contract under the Civil Code: there is no separate SPA warranty chapter, but nothing prohibits the clause. The gap versus international practice is enforcement — proof of loss must be tighter and the quantification mechanism spelled out, so a copied foreign template usually underperforms.
This article has been quality-reviewed by the FLAW AI Legal Council