Scenario: a company wants out of a contract that no longer fits — the market moved, the partner weakened, or the contract simply carries an early-exit clause. The question is not «may we terminate» but «on what ground and by what procedure, so we are not penalised». This article systematises lawful unilateral termination under the Civil Code 2015.
The three sources of a unilateral termination right
Under Article 428 of the Civil Code 91/2015/QH13 (Civil Code 2015), a party may unilaterally terminate performance in three cases: (i) as agreed in the contract — many long-term contracts allow termination for convenience on 30, 60 or 90 days’ notice; (ii) as provided by law — specific contract types carry their own rules, such as loans, mandates and leases; (iii) the other party seriously breaches its obligations, or the contract’s subject matter is lost or irreparably damaged.
In commerce, distinguish «unilateral termination» from the cancellation sanction of the Law on Commerce 36/2005/QH11 (Article 312, tied to fundamental breach): cancellation in principle unwinds the parties to their pre-contract position with restitution, while Article 428 termination looks forward — performance already rendered keeps its value, with settlement and consequences under Article 427. Picking the wrong mechanism in the notice is a very common technical error.
The procedure that makes termination «lawful»
- Written notice stating the correct ground: cite the contract clause or the specific legal basis; a notice without grounds invites the counterparty to attack it as unlawful termination;
- Notice within the reasonable period required by Article 428 — or exactly the notice period agreed in the contract; arbitrary shortening is the first weakness attacked;
- Preserve the status quo during the notice period: keep performing obligations not yet at the termination point; do not hold the counterparty’s goods or money «hostage» outside the settlement mechanism;
- Settle and restore under Article 427: draw up a reconciliation record, return what was received for the unperformed part, and isolate any disputed part from the agreed part.
Terminating wrongly: the price
Article 428 is explicit: a party that terminates without grounds and thereby causes damage to the other party must compensate. In dispute practice, «wrongful termination» is also reframed by the counterparty as a contract breach — dragging in agreed penalties and full consequential damages such as replacement-contracting costs, price differences and lost profits.
Three classic mistakes turn an «apparently right» termination into a wrong one: mistaken grounds (invoking a for-convenience clause the contract does not contain), forgetting the notice duty, and terminating while yourself in breach of the reciprocal obligation (still owing the counterparty money). A three-point review before sending the notice is far cheaper than a lawsuit about the notice itself.
Frequently asked questions
Our contract has no early-termination clause — can we still terminate unilaterally?
Possibly, on a legal ground: the other party’s serious breach, or a sector law for that contract type permitting it. Without either an agreed or a legal ground, unilaterally stopping performance is itself a breach, with compensation under Article 428 Civil Code 2015.
How do unilateral termination and contract cancellation differ?
Article 428 termination looks forward: performance rendered stands, the parties settle and restore the unperformed part. Commercial cancellation (Article 312 Law on Commerce) is a sanction for fundamental breach aimed at restoring the original position. The two mechanisms produce different legal consequences — choose correctly in the notice.
How much notice must be given for unilateral termination?
The period agreed in the contract; failing agreement, a «reasonable time» under Article 428, judged by the contract’s nature and the time the other side needs to arrange replacement. The longer and more interdependent the contract, the longer the reasonable period.
Can a termination notice be withdrawn once sent?
Only with the other party’s consent. A valid notice takes effect at the time it states; unilaterally withdrawing after the counterparty has arranged itself around the notice (found a replacement, stopped production) creates a damages dispute. Be certain of the grounds before pressing send.
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This legal analysis has been verified against current Vietnamese regulations and cross-border FDI transaction practices by the attorneys at FLAT LAW FIRM.
