Scenario: a five-year distribution contract; the partner has delivered late seven times, shipped defective goods twice, and broken repeated promises to fix things. The company wants out but fears «terminating wrongly and being penalised instead». This article sets out the procedure for terminating a long-term contract for repeated breaches so the termination right holds up before a court or tribunal.
Do «repeated breaches» automatically ground termination?
Not automatically. Under the Law on Commerce 36/2005/QH11, the cancellation sanction attaches to the concept of a fundamental breach (Article 312): a breach causing damage to the other party to the extent that the other party fails to achieve the purpose of entering the contract. A single late delivery may not be fundamental, but a repeating pattern — warned, given extensions, still recurring — is the material proving the contract’s purpose has been defeated.
The Civil Code 91/2015/QH13 (Article 428) permits unilateral termination where the other party seriously breaches its obligations, but the terminating party must give notice within a reasonable time and must compensate if a groundless termination causes damage. In other words: the right exists, but it must be «activated» by the correct procedure — the breach file is the ammunition, proper notice is the trigger.
A five-step procedure that makes termination stick
- Step 1 — Build the breach file: records of each late or defective delivery, acceptance minutes, reminder emails; without a file, «repeated» is just a feeling;
- Step 2 — Notify the breaches and set a final cure deadline: a written notice listing the breaches, citing the contract clauses, stating clearly that failure to cure by the deadline will lead to termination/cancellation;
- Step 3 — On expiry without cure: send the formal termination notice, stating the effective date, handover and settlement duties, and reserving penalty and damages claims;
- Step 4 — Settle and reconcile: both sides sign off the account, separating the undisputed part for immediate payment to shrink the dispute;
- Step 5 — Trigger the dispute clause (negotiation, arbitration or court) for the breach penalty — capped at 8% of the value of the breached obligation under Article 301 Law on Commerce — plus provable damages.
Mistakes that turn the terminator into the breacher
First mistake: terminating «verbally» or by vague message, then refusing deliveries — the partner sues for penalties as if it were the victim of a unilateral cut-off. Second: invoking the partner’s breaches while you are yourself late in paying — the termination right is met by your own breach. Third: after terminating, continuing to order and accept goods as before — post-termination conduct blurs the notice’s effect.
Where the contract still carries significant value mid-performance, have counsel review the whole breach file before the final notice is sent: a wrongly grounded termination notice costs you the contract’s entire sanctions regime turned against you.
Frequently asked questions
How many breaches justify terminating the contract?
The law does not count breaches. The standard is a fundamental breach under Article 312 Law on Commerce — damage to the extent the contract’s purpose fails. A repeated pattern, warned about and granted extensions yet still recurring, is how that standard is proven when single incidents are not grave enough alone.
Must notice be given before terminating?
Yes. Article 428 Civil Code 2015 requires the terminating party to notify the other within a reasonable time, unless the contract or law provides otherwise. The notice should list the breaches, the clause relied on and the effective termination date.
Can we still claim the breach penalty after terminating?
Yes, if the contract agrees a penalty and the breaches fall within it. In commerce the penalty is capped at 8% of the value of the breached obligation (Article 301 Law on Commerce), plus provable actual damages as agreed and provided by law.
Can we just stop accepting deliveries while disputing?
That is risky if the termination notice is procedurally defective or the grounds are shaky: refusing deliveries may itself be treated as your breach. Complete the notice sequence — breach notice, cure deadline, termination notice — before changing performance behaviour.
This article has been quality-reviewed by the FLAW AI Legal Council