You are an FDI enterprise currently facing contract disputes but feel confused by differences between local laws and those of your parent company. Get clarity with KMC here.
If you are currently involved in a contract dispute and need immediate assistance, please contact our experts familiar with legal frameworks and international practices at hotline +84814894789 or +84919889331 (Ho Chi Minh City); +84814894789 (Hanoi).
However, if your issue is not urgent, let’s explore the topic in depth. Contract disputes typically arise from misunderstandings, breaches, or differing interpretations of contractual terms. This is especially common for FDI enterprises due to the disparities between the legal systems of the parent country and Vietnam. Don’t worry! This article will introduce effective methods for resolving contract disputes that ensure fairness for both parties.
What Is a Contract Dispute?
A contract dispute occurs when contracting parties—such as an FDI enterprise and its partner—have disagreements or conflicts regarding the execution, interpretation, or compliance with agreed terms. Simply put, this is when parties are not “on the same page” concerning their rights and obligations under the contract, leading to conflict.
According to the 2025 Civil Code of Vietnam, the statute of limitations to initiate a civil contract dispute claim is 3 years from the time you become aware of your infringed rights. Therefore, timely action is critical.
To resolve disputes, parties may negotiate, mediate, or resort to arbitration or litigation. The goal is to find a fair solution that restores cooperation or reasonably terminates the disagreement while protecting the interests of both sides.
Common Causes of Contract Disputes for FDI Enterprises
Failure to Fully Perform Contractual Commitments
This refers to one party not fully complying with the agreed terms. Typical examples include delayed delivery, substandard product quality, or late payments. Such breaches usually cause direct damages and lead to conflicts.
Misunderstandings or Differences in Contract Content
FDI enterprises often encounter this due to language barriers, differences in business culture, or divergent legal interpretations, resulting in varied understandings of certain contractual clauses.
Disputes over Contract Termination
Such disputes arise when one party wants to terminate the contract prematurely, but the other party disagrees or objects to the termination conditions. For example, an enterprise may seek to terminate because the partner fails to meet requirements, while the partner deems this unfair, leading to conflicts over rights and obligations.
Disagreements on Compensation for Damages
When one party causes damage—such as delivering defective goods or failing to perform services—the parties often cannot agree on the extent of damages or compensation method. For instance, one party demands high compensation while the other considers the damage minimal, resulting in prolonged disputes.
Unilateral Contract Modifications Without Consent
During contract execution, one party may propose changes to contract value, completion deadlines, or scope of work. Without consent from the other party, these changes can trigger disputes. For example, an FDI company may request price adjustments due to increased costs, but the partner refuses, causing disagreement.
Differences in Legal Frameworks and Transaction Scope
For FDI enterprises, cross-border contracts are more complex as they involve multiple jurisdictions. Disputes can arise from disagreements over applicable laws or interpretation of legal provisions.
Contract Dispute Resolution Methods
Negotiation – The Friendly and Cost-effective First Step
Negotiation involves parties sitting together to resolve disagreements without third-party involvement. It is typically the initial choice due to its simplicity, cost-efficiency, and flexibility. Parties avoid complicated legal procedures while maintaining business relationships—crucial for FDI companies seeking long-term credibility and cooperation.
However, successful negotiation requires goodwill from both parties. If one side is unwilling, this method may be ineffective.
Mediation – Assistance from a Neutral Third Party
Mediation follows unsuccessful negotiation. Parties involve a neutral third party (mediator or mediation organization) to help reach a mutually agreeable solution. Compared to courts or arbitration, mediation is faster and less costly. To be effective, it requires open dialogue, tension reduction, and confidentiality.
However, mediation outcomes are non-binding. If a party does not comply, other methods may be necessary.
Commercial Arbitration – The Ideal Choice for International Disputes
- FDI enterprises often prefer commercial arbitration, especially when contracts involve foreign elements. Parties agree to submit disputes to an arbitration center, where arbitrators issue final and binding decisions.
Advantages include:- Parties select arbitrators, procedures, and applicable law.
- High confidentiality protects sensitive business information.
- Arbitration awards are binding and internationally enforceable under the New York Convention.
This method is ideal for enterprises seeking quick, professional dispute resolution without public court processes.
Litigation – The Last Resort
- If other methods fail, parties may bring disputes before Vietnamese courts for adjudication under Vietnamese law with binding judgments.
Litigation suits complex disputes or uncooperative parties but often entails lengthy procedures, high litigation costs (including court fees and attorney fees), and potential reputational risks due to public proceedings.
Effective contract dispute resolution is essential to protect your company’s interests without alienating partners. That is why you should seek advice from experts like KMC. Our team not only understands the law but also skillfully manages disputes to maintain your business relationships.
Note: The information above is for reference only. Please consult the latest legal regulations on contracts at the Vietnamese Government Legal Portal for the most accurate guidance.
