Research Legal Advice

• Reputational damage may be claimed and recovered under Vietnamese law as a result of a breach of commercial contract • This is because Vietnamese law allows for the claiming of moral damages, including those caused by the infringement of reputation, as a result of a breach of contract • Reputational damage may be considered "actual and direct loss" under Vietnamese law if it is directly caused by the breaching party • While individuals may be able to claim for reputational damage, it is not clear if companies can do so as well • There is no specific guidance on how to assess reputational damage arising from a breach of contract in Vietnamese law, but the court may need to apply regulations on compensation for non-contractual damages by analogy.

• Vietnamese law does not have a clear concept of liquidated damages, but there are provisions that support their use and some international treaties that allow for them. • Parties to a contract can agree on the amount of damages for a breach of obligation under Article 360 of the Civil Code 2015. • The Commercial Law 2005 allows for parties to reach agreements that are not inconsistent with law and social ethics. • Agreements on damages reached during a conciliation meeting in civil disputes must be recognized by the court. • Some international treaties, including the United Nations Convention on Contracts for the International Sale of Goods, the Agreement on Trade-related Aspects of Intellectual Property Rights, and the Agreement between the United States and Vietnam on Trade Relations, include the concept of liquidated damages or allow for parties to agree on them. • Circular 14/2015 of the Ministry of Transport provides for "non-refundable fixed compensation" in the event of denied boarding, flight cancellations, or long delays, which can be considered a form of liquidated damages. • Decree 37/2015 encourages the use of FIDIC conditions of contracts for construction projects using state capital, which may include agreements on liquidated damages under the delay damage clause. • The Commercial Law 2005 allows for the enforcement of an agreement on liquidated damages if it meets certain conditions, including being in writing, reasonable, and not violating any provisions of law or social ethics. • In practice, some courts in Vietnam have not recognized and enforced agreements on liquidated damages due to the lack of clear legal grounds for them. It is advisable for parties to carefully consider the enforceability of such agreements in Vietnam.

• By default, the governing law for contracts between a foreign-owned company and other companies in Vietnam is Vietnamese law. • The 2020 Investment Law allows for the parties to choose foreign governing law for contracts relating to "business investment activities" if it is not inconsistent with Vietnamese law. • The 2015 Civil Code and 2005 Commercial Law allow for the parties to choose foreign governing law for contracts with a "foreign element," which includes: • At least one party being a foreign individual or legal entity • The establishment, modification, implementation, or termination of the contract occurring in a foreign country • The subject matter of the contract being located in a foreign country • To introduce a foreign element into a contract, a foreign-owned company could add a foreign investor as a sponsor/guarantor for their obligations.