Vietnam has become a key player in global manufacturing, offering competitive labor costs and improving infrastructure. However, as foreign companies and domestic enterprises expand partnerships with Vietnamese manufacturers, the risk of contractual breaches has grown. Whether it’s late deliveries, substandard products, or non-fulfillment, a breach can severely impact business operations and reputations.

This guide outlines the legal remedies and practical steps you can take if a manufacturer fails to meet their contractual obligations in Vietnam.

Understanding a Breach of Contract Under Vietnamese Law

Under the Civil Code 2015 and Commercial Law 2005, a breach of contract occurs when one party fails to perform, improperly performs, or delays performance of its obligations.

Common breaches in manufacturing contracts include:

• Failure to deliver goods on time
• Delivery of defective or non-conforming products
• Violation of agreed specifications or quantities
• Refusal to fulfill orders without legal justification

Contracts in Vietnam should ideally be in writing and include detailed provisions on scope, quality standards, delivery schedules, penalties, and governing law. These elements form the foundation for determining whether a breach has occurred and what remedies are available.

Immediate Steps to Take When a Breach Occurs

If you suspect a breach, the first step is to review the contract carefully. Look for clauses that outline the rights and obligations of both parties, as well as the consequences of non-performance.

Next, gather and preserve all relevant documentation, including:

• Purchase orders, invoices, and shipping records
• Correspondence and meeting notes
• Photos or videos of non-conforming goods
• Internal reports on damages or delays

It is essential to formally notify the manufacturer in writing, specifying the nature of the breach and your expected remedy (e.g., replacement, compensation, cancellation). This notice can later serve as evidence in dispute resolution proceedings.

Negotiation and Commercial Resolution

Before pursuing formal legal action, it may be in your best interest to seek resolution through negotiation. Direct discussions or facilitated mediation can help:

• Adjust delivery deadlines or quantities
• Secure refunds or credit for defective goods
• Amend future obligations to mitigate losses

Negotiation often preserves business relationships, reduces legal costs, and leads to faster resolution. However, you should document all outcomes and consider involving legal counsel to ensure the agreement is enforceable.

What If the Manufacturer Is Uncooperative or Disappears?

If a manufacturer fails to cooperate or becomes unreachable, commonly referred to as “ghosting,” you still have legal options. Vietnamese law allows for unilateral contract termination and may enable you to initiate proceedings in absentia if you have sufficient evidence. In serious cases, local authorities or investigative agencies may assist in locating and serving the manufacturer through registered business information.

It’s important to act promptly by sending legal notices, documenting your losses, and consulting legal counsel to explore all available enforcement channels.

Can Foreign Companies Enforce Contracts in Vietnam?

Yes. Foreign companies are fully entitled to enforce contracts in Vietnam. The country’s legal framework supports foreign claimants through its commercial laws and treaty commitments, including the CPTPP and EVFTA.

As long as your contract is legally recognized and well-documented, Vietnamese courts and arbitration bodies can adjudicate and enforce judgments, even in disputes involving cross-border elements. Vietnam’s membership in the New York Convention also facilitates enforcement of international arbitral awards.

Legal Remedies Available in Vietnam

Vietnamese law provides several legal remedies if negotiations fail:

• Specific performance: You may request the court to compel the manufacturer to fulfill its contractual duties.
• Compensation for damages: If the breach causes financial loss, you can seek compensation equivalent to the actual damages.
• Penalty clause enforcement: If your contract includes a penalty clause for breach, you can enforce it without proving actual damages.
• Unilateral termination: For serious breaches, you may have the right to terminate the contract and claim losses.

These remedies are provided under the Civil Code (Articles 351—361) and the Commercial Law (Articles 292–308). The success of your claim depends heavily on evidence and whether contractual terms were clearly defined.

Can You Sue a Manufacturer in Vietnam for Breach of Contract?

Yes, manufacturers can be sued in Vietnamese courts if they breach contractual obligations. Foreign and domestic parties alike have standing to bring a claim, provided the contract is valid under Vietnamese law. A typical contract dispute begins with a written demand and proceeds to either court or arbitration depending on the dispute resolution clause. The statute of limitations for filing such claims is generally two years from the date of breach.

Dispute Resolution Mechanisms

Contracts often include provisions for how disputes will be resolved. In Vietnam, you generally have two main options:

• Litigation in Vietnamese courts: This follows the Civil Procedure Code and typically involves written submissions and court hearings. While cost-effective, it may take several months to over a year to resolve.
• Arbitration: If your contract includes an arbitration clause, you may refer the dispute to a tribunal such as the Vietnam International Arbitration Centre (VIAC). Arbitration is typically faster and more confidential, but costs can be higher.

Vietnam is also a party to the New York Convention, which means foreign arbitral awards can be enforced in Vietnam, and Vietnamese awards can be enforced internationally.

How to Prevent Breach Risks in Future Contracts

To minimize the risk of manufacturer non-performance, businesses should:

• Draft clear contracts with detailed specifications, delivery timelines, and penalty clauses.
• Include dispute resolution clauses specifying preferred jurisdiction or arbitration body.
• Vet suppliers thoroughly, including checking reputation, references, and litigation history.
• Require performance bonds or partial payments linked to milestones.
• Engage legal advisors to localize contracts in accordance with Vietnamese law.

These proactive steps not only reduce risk but also strengthen your legal position in the event of a dispute.

Conclusion

Manufacturer breaches are a common challenge in cross-border and domestic trade with Vietnam, but the legal system offers structured remedies to protect affected parties. Knowing your contractual rights and taking prompt, evidence-based action can improve your chances of a favorable outcome.

Le & Tran is a leading Vietnamese law firm with expertise in contract enforcement, international trade disputes, and litigation. We assist foreign and domestic clients in navigating complex supplier disputes and pursuing remedies through court or arbitration. Our team is recommended by AmCham Vietnam, the US Consulate, and is consistently ranked in Chambers, Legal500, and Benchmark Litigation for dispute resolution.

For legal support in enforcing manufacturing contracts in Vietnam, contact us at info@letranlaw.com.