Commercial remedies under the Law on Commerce 2005, the 8% cap on the penalty for breach, interest on late payment, force majeure and fundamental change of circumstances, gathering evidence, and the 2 year statute of limitations for commercial disputes.
About this article
The limitation period for commercial disputes is only 2 years. Under the Law on Commerce 2005, the limitation period for suing in a commercial dispute is 2 years, not the 3 years of the Civil Code's general rule. Enterprises used to 3 years often notice the difference only when it is too late.
Information updated to September 2026. This article provides general information and does not replace legal advice for a specific case. The appropriate course of action depends on the specific content of the contract and on how the relationship between the parties has developed in practice.
1. The steps before suing shape the outcome of the dispute
What happens between discovering a breach and filing a claim largely decides the outcome. In this period, the injured party can strengthen its position by gathering evidence and preparing documents properly, or weaken it with steps that seem reasonable but breach legal duties, such as stopping performance without notice.
2. The nature of the breach determines the available remedies
A breach is a fundamental breach when it causes the other party such damage that it cannot achieve the purpose of the contract.
This is a precondition for the three strongest remedies. Unless the parties agree otherwise, suspension, termination and cancellation of the contract are available only for a fundamental breach. If the injured party uses them for a lesser breach, it may itself become the party in breach.
3. The injured party may use seven types of remedy
The injured party may use seven commercial remedies: specific performance; a contractual penalty; damages; suspension of performance; termination of performance; cancellation; and other measures agreed by the parties.
3.1. A penalty requires agreement and is capped
| Type of contract | Maximum level | Legal basis |
|---|---|---|
| Commercial contracts generally | 8% of the value of the breached part of the obligation | Law on Commerce 2005 |
| Construction contracts funded by public investment or other state capital | 12% of the value of the breached part of the contract | Law on Construction 2014 |
| Purely civil contracts | No cap; as agreed | Civil Code 2015 |
Two technical points are often missed. First, the 8% cap applies to the value of the breached part of the obligation, not the whole contract value. Second, under Article 300, a penalty can be claimed only if the contract provides for one. Without a penalty clause, the injured party cannot claim a penalty, however clear the breach.
3.2. Damages need no prior agreement
Damages cover the injured party's actual, direct loss and the direct profit it would have earned but for the breach. Unlike a penalty, damages can be claimed without any prior agreement.
3.3. A penalty and damages may be claimed together
The injured party may claim both a penalty and damages if the contract provides for a penalty. If it does not, the injured party can claim damages only.
This differs from the Civil Code, under which claiming both depends on the parties' agreement. For commercial contracts, the Law on Commerce applies as the special law.
3.4. The injured party must mitigate its loss
A party claiming damages must take reasonable steps to limit its loss, including lost direct profit. If it does not, the breaching party may ask for the damages to be reduced accordingly.
This is one of the most common reasons damages claims are cut. If a seller fails to deliver, the buyer should find an alternative supply and keep evidence of what it did, rather than wait and then claim the full cost of a production stoppage.
3.5. Suspension, termination or cancellation must be notified immediately
A party that suspends, terminates or cancels the contract must notify the other party immediately. If it does not and this causes damage, it must pay compensation.
Stopping performance in practice without written notice is a common mistake, and it can reverse the parties' positions before a court or arbitral tribunal.
4. Late payment interest is best agreed specifically in the contract
A party paid late may claim interest on the overdue amount at the average market rate for overdue debt at the time of payment, unless otherwise agreed or provided by law.
If the parties have not agreed a rate, under Resolution No. 01/2019/NQ-HDTP the court sets it from the average overdue debt rate of at least three commercial banks in the locality of the case. This takes time and invites argument.
If the parties agree a rate, it may not exceed 20% a year under the Civil Code 2015; anything above that has no effect. Stating a specific rate of up to 20% a year in the contract is therefore simpler and more effective than a general cross-reference.
5. Force majeure and fundamental change of circumstances are narrowly applied
| Force majeure | Fundamental change of circumstances | |
|---|---|---|
| Legal basis | Civil Code 2015; Law on Commerce 2005 | Civil Code 2015 |
| Nature | Performance is impossible | Performance is still possible, but the balance of interests is seriously upset |
| Consequence | Exemption from liability | The obligation remains; a right to request renegotiation arises |
| Role of the court | Confirms the exemption | May amend or terminate the contract |
A fundamental change of circumstances is recognised only if five conditions are met: the change has an objective cause and occurs after the contract is signed; the parties could not foresee it when signing; the change is so great that, had they known, they would not have signed or would have signed on different terms; continuing to perform would seriously harm one party; and the affected party has taken every necessary step within its power but could not prevent or reduce the impact.
The Law on Commerce also exempts a party from liability where: the parties agreed the exemption; the breach is entirely the other party's fault; or the breach results from a decision of a competent state authority that the parties could not have known of when signing. The breaching party must prove the exemption.
The breaching party must give immediate notice of the exemption event. The breaching party must notify the other party immediately in writing of the exemption event and its likely consequences; if it does not, or notifies late, it must pay damages. In practice, many enterprises lose the right to rely on force majeure not because the event fails the test, but because they did not give notice properly and on time.
6. Evidence should be gathered and preserved early
6.1. Electronic evidence counts as writing if it meets the conditions
Under the Law on Electronic Transactions 2023, in force from 1 July 2024, a data message is not denied legal effect just because it is electronic. It is as valid as a written document if its information can be accessed and used for reference, and as valid as an original if its integrity has been assured since it was created and it can be accessed and used in full.
The reliability of a data message as evidence is assessed by how it was created, sent, received and stored, how its integrity was assured and maintained, and how the sender and other parties are identified.
In practice, emails and text messages are valid evidence, but their weight depends on whether their integrity and origin can be proved. An unauthenticated printed screenshot carries the least weight.
6.2. A bailiff's record of facts is evidence the court considers
A bailiff's record of facts (vi bang) is a source of evidence that the court considers in civil and administrative cases, and also a basis for transactions (Decree No. 08/2020/ND-CP). The bailiff must witness the event in person, and the bailiff's office must send the record to the provincial Department of Justice for registration.
A bailiff's record is especially useful to record the condition of goods or works at a given time, the content of a website or email account, the delivery of a document that the other party refuses to accept, and the course of a meeting.
6.3. A debt reconciliation can restart the limitation period
These are the most valuable tools before litigation, for a little-known reason: the limitation period starts again if the obligor acknowledges all or part of its obligation, or if the parties settle between themselves.
A debt reconciliation signed by the debtor therefore restarts the limitation period. With only 2 years for commercial disputes, regular written debt reconciliations have real legal value; they are not just an accounting formality.
7. The limitation period must be tracked from the date of breach
| Type of dispute | Limitation period | Legal basis |
|---|---|---|
| Commercial disputes | 2 years from when the lawful rights and interests were infringed | Law on Commerce 2005 |
| Contractual disputes under the general law | 3 years from when the claimant knew or should have known of the infringement | Civil Code 2015 |
Because the Law on Commerce is the special law, the 2-year period applies to commercial disputes. The starting point also differs: the Law on Commerce counts from the infringement, the Civil Code from when the claimant knew or should have known of it.
An important procedural point. A court applies the limitation period only if a party asks it to, and the request must be made before the first-instance judgment or decision. If the defendant does not raise limitation, the court decides the case on its merits even though the period has expired. This matters to both sides: a late claimant still has a chance, and a defendant must raise limitation itself rather than assume the court will apply it.
Time during which force majeure or an objective obstacle prevents the claimant from suing does not count towards the limitation period.
8. Suggested steps before suing
- Identify the contractual and legal basis. Match the conduct against the clause breached, decide whether the breach is fundamental, and check whether the contract has a penalty clause.
- Check the limitation period first. If it is about to expire, get a written acknowledgement of the obligation or file the claim first, and negotiate afterwards.
- Preserve evidence before giving notice. Have a bailiff record the current situation, collect and organise the correspondence, and keep delivery and payment records.
- Send written notice stating the breach, the clause breached, the remedy required and the deadline. Send it by the method and to the address in the contract, and keep proof of sending and receipt.
- Mitigate the loss and keep a record of the steps taken.
- Suspend, terminate or cancel only when the grounds are sufficient, and always give written notice at the same time.
- Negotiate and minute each meeting. Minutes that acknowledge the obligation open the way to settlement and restart the limitation period.
- Consider interim measures if the other party shows signs of dissipating assets, bearing in mind that security may have to be provided.
- File the claim with the correct body under the dispute resolution clause.
9. Preparing well before litigation protects the enterprise's position
The three most costly pre-litigation mistakes can all be avoided at no cost. The first is letting the 2-year limitation period expire by confusing it with 3 years. The second is stopping performance without written notice, which turns the injured party into the party in breach. The third is failing to mitigate loss, which cuts the damages claim precisely where the loss is largest.
Conversely, two simple but valuable steps are to have a bailiff record the situation as soon as a breach is found, and to keep written debt reconciliations signed by the debtor.