Assignment of benefits under a business cooperation contract

In the course of business cooperation, it is not uncommon for a party, due to strategic, financial, or operational restructuring reasons, to seek assignment of the benefits arising from a business cooperation contract to a third party. The following article by NPLaw aims to clarify the legal nature, conditions, and consequences of such assignment in order to help the parties mitigate potential dispute risks.

I. Impact of the assignment of benefits under a business cooperation contract

The assignment of benefits under a business cooperation contract is not merely a simple civil arrangement; it may directly affect the rights, obligations, and legitimate interests of multiple related parties. In practice, if such assignment is implemented in contravention of applicable law or inconsistent with the terms of the executed contract, it may result in invalidity of the transaction, liability for damages, or prolonged disputes.

Thus, the assignment of contractual benefits must be carefully examined from both legal and practical perspectives. It is particularly significant in investment cooperation agreements, profit-sharing arrangements, or business cooperation contracts entered into without the establishment of a separate legal entity.

In summary, the assignment of benefits under a business cooperation contract has far-reaching implications for the validity and stability of the cooperative relationship, requiring comprehensive evaluation by the parties prior to implementation.

II. Legal understanding of the assignment of benefits under a business cooperation contract

To minimize risks, a clear understanding of the legal nature of such assignment is indispensable.

1. What is the assignment of benefits under a business cooperation contract?

“Benefits” refer to lawful interests recognized and protected by law, a charter, or an agreement, enabling an individual or organization to enjoy, claim, or exercise such interests within a specific social, economic, or legal relationship. Pursuant to Clause 14 Article 3 of the Law on Investment 2020, a business cooperation contract is established for the purpose of profit-sharing or product-sharing, indicating that such economic benefits constitute the core object pursued by the parties throughout their cooperation.

In addition, under Article 115 of the Civil Code 2015, benefits arising from a contract constitute property rights, falling within the category of other property rights that are capable of monetary valuation and transferable. Accordingly, benefits under a business cooperation contract are understood as the right to enjoy economic gains arising from such contracts. Furthermore, Article 415 of the Civil Code 2015 recognizes contracts for the benefit of a third party, thereby affirming that economic benefits derived from a contract may exist independently of the party performing obligations and may be assigned to a third party on the basis of a lawful agreement.

Thus, the assignment of benefits under a business cooperation contract refers to the act whereby a contracting party transfers to a third party the economic benefits arising from the contract. Such benefits may include the right to receive profits, exploit a project, share products, or other legally established financial entitlements, without transferring the status of a contracting party and without altering the obligations already undertaken toward the remaining parties.

2. When should the parties consider assigning benefits under a business cooperation contract?

The parties should consider assigning contractual benefits when a party no longer has the need or capacity to continue enjoying the economic returns from the cooperation, yet does not wish (or is unable) to terminate or assign the entire contract.

Specifically, assignment of benefits may be appropriate where: a participating party intends to recover capital, restructure investments, or adjust its business strategy; a third party emerges with the capacity and willingness to acquire the right to receive profits or products under suitable economic conditions; or business risks and internal conflicts increase, prompting a party to preserve its anticipated economic interests.

Accordingly, when the parties seek to flexibly adjust the allocation of economic benefits while maintaining the original contractual structure and core obligations, assignment of benefits under the business cooperation contract should be considered.

3. Which clauses require special attention when assigning benefits?

When implementing the assignment of benefits under a business cooperation contract, the parties must pay particular attention to the following clauses to ensure that the transaction reflects its proper legal nature and remains legally enforceable.

• First, the subject matter and scope of the assigned benefits must be clearly defined. Pursuant to Clause 14 Article 3 of the Law on Investment 2020, benefits under a business cooperation contract include profits, products, or other economic gains arising from the contract. Therefore, the assignment agreement must specifically identify the type of benefit, the percentage or ratio, duration, and scope of entitlement.
• Second, the conditions and form of assignment must be observed. The assignment transaction must be made in writing in accordance with Article 119 of the Civil Code 2015, and must comply with any contractual conditions requiring consent of the remaining parties.
• Third, it must be clarified that assignment of benefits does not equate to transfer of obligations. The transfer of claims under Article 365 of the Civil Code 2015 and the transfer of obligations under Article 370 of the Civil Code 2015 are only valid when statutory conditions are satisfied. Accordingly, the agreement must specify that the assigning party remains responsible for performing contractual obligations under the business cooperation contract, while the assignee is entitled solely to the economic benefits, unless otherwise lawfully agreed.
• Fourth, the effective date and the commencement of benefit entitlement must be clearly stipulated. Under Article 401 of the Civil Code 2015, determination of the effective time of assignment forms the basis for distinguishing benefits arising before and after the assignment, thereby preventing disputes during performance.
• Finally, the parties must address financial obligations and dispute resolution. Tax liabilities arising from the assignment of property rights must be agreed upon in compliance with the Law on Tax Administration 2019, and dispute resolution mechanisms must be determined in accordance with the Civil Procedure Code 2015 (as amended in 2025) or the Law on Commercial Arbitration 2010.

In essence, prior to entering into an assignment transaction, the parties should thoroughly examine the specific conditions applicable to each case to ensure compliance with law and legal validity.

4. Is a written form required for the assignment of benefits?

Pursuant to Clause 1 Article 119 of the Civil Code 2015, civil transactions may be expressed verbally, in writing, or by specific acts, unless otherwise prescribed by law. However, in order to minimize legal risks and better protect the interests of the parties in the cases of disputes, the assignment of benefits under a business cooperation contract should be documented in writing.

III. Relevant legal provisions governing the assignment of benefits under a business cooperation contract

To ensure legal compliance, the parties must understand the applicable regulatory framework.

1. Which laws govern the assignment of benefits under a business cooperation contract in Vietnam?

The assignment of benefits under a business cooperation contract is governed by the following legal provisions:

Article 115 of the Civil Code 2015 provides that property rights are rights that can be valued in monetary terms, including other property rights such as rights to receive profits and products arising from contracts. This provision establishes the legal basis for recognizing contractual benefits as transferable assets.

In addition, provisions on the form of civil transactions (Article 119), the effective time of contracts (Article 401), and the definition of a business cooperation contract under Clause 14 Article 3 of the Law on Investment 2020 clarify that the scope of assignment is limited to benefits and does not automatically include contractual obligations.

Notably, Article 415 of the Civil Code 2015 (contracts for the benefit of a third party) serves as a critical legal basis recognizing that a third party may enjoy benefits arising from a contract even if not a direct signatory.

In the cases of disputes, the Civil Procedure Code 2015 or the Law on Commercial Arbitration 2010 shall govern jurisdiction and dispute resolution mechanisms, depending on the parties’ agreement. Accurate identification of the legal grounds enables the parties to properly assess the legality of the assignment and avoid future legal risks.

2. What is the procedure for assigning benefits under a business cooperation contract?

The procedure is implemented in accordance with civil law and relevant specialized legislation.

• Firstly, Point e Clause 1 Article 28 of the Law on Investment 2020 requires that a business cooperation contract contain provisions on amendment, assignment, and termination. Accordingly, the parties must determine whether assignment is permitted under the executed contract. Assignment is valid only if not prohibited by law and not contrary to the contractual agreement.
• Secondly, the assignment agreement must be made in writing according to Article 119 of the Civil Code 2015.

After execution, the assignment must be notified to the obligor and related parties. Under Clause 2 Article 365 of the Civil Code 2015, the transfer of a claim becomes effective against the obligor from the time the obligor is notified.

If the business cooperation contract is subject to registration or amendment under specialized legislation, the parties must implement the required registration or notification procedures with the competent state authority in accordance with Article 28 of the Law on Investment 2020 or other relevant regulations.

• Finally, the parties must fulfill all financial obligations arising from the assignment in accordance with applicable law.

Accordingly, the assignment process must be conducted in a structured and legally compliant manner to ensure enforceability.

3. Common violations related to assignment of benefits

In practice, the following legal violations frequently occur:

• First, assignment without obtaining the consent of the remaining parties where the business cooperation contract restricts or conditions assignment upon approval. It violates the principle of respect for contractual agreement under Articles 3 and 385 of the Civil Code 2015 and fails to satisfy the conditions set out in Article 365.
• Second, failure to notify the obligor of the assignment. Under Clause 2 Article 365 of the Civil Code 2015, the transfer of a claim is only effective against the obligor upon notification; absent such notice, the assignment does not produce legal effect toward that obligor.
• Third, failure to execute the assignment agreement in writing, in violation of Article 119 of the Civil Code 2015.
• Fourth, failure to perform financial and tax obligations arising from the assignment, contrary to Article 274 of the Civil Code 2015 and relevant tax laws.
• Fifth, assignment to an ineligible transferee under law or contract, particularly in conditional investment or business sectors, in violation of Article 365 of the Civil Code 2015 and relevant provisions of the Law on Investment 2020.

Strict compliance with legal requirements is therefore essential to minimize disputes.

IV. Questions the assignment of benefits under a business cooperation contract

1. Can benefits under a business cooperation contract be freely assigned?

 Assignment must comply with both contractual terms and legal regulations. Under Point e Article 28 of the Law on Investment 2020, a business cooperation contract must contain provisions on amendment, assignment, and termination. The parties may agree on whether assignment is permitted and under what conditions. If the contract imposes restrictions or requires approval from other parties, assignment is lawful only upon satisfying those conditions. Hence, freedom of assignment is always subject to specific legal requirements.

2. How can the parties protect their interests when assigning benefits?

To safeguard their interests, the parties must execute a written assignment agreement clearly specifying the scope of benefits assigned, the assignment value, and the responsibilities of each party.

They must comply with Article 119 of the Civil Code 2015 regarding form and notify relevant parties. Financial and tax obligations must be fully discharged.

Retention of all relevant documents, such as the assignment agreement, payment records, notifications, and supporting materials, is essential as evidence of rights and obligations in accordance with Articles 14 and 15 of the Civil Code 2015 on protection of civil rights. Thorough preparation is decisive in protecting legitimate interests.

3. What is the dispute resolution process?

Pursuant to Article 317 of the Commercial Law 2005, disputes may be resolved through:

• Negotiation between the parties;
• Mediation conducted by a mutually agreed organization or individual;
• Resolution by arbitration or court in accordance with procedural laws governing arbitration or judicial proceedings.

It underscores the necessity of clearly stipulating dispute resolution mechanisms within the contract.

4. What are the consequences of non-compliance?

Failure to comply with legal requirements may render the assignment invalid under Article 117 of the Civil Code 2015.

If declared invalid, legal consequences are handled pursuant to Article 131 of the Civil Code 2015, whereby the parties must restore to each other what has been received, and the party at fault must compensate for damages.

If the assignment constitutes a breach of contractual obligations, the breaching party may incur civil liability under Article 360 of the Civil Code 2015.

Where violations also infringe specialized laws on investment, taxation, or regulated business sectors, administrative penalties may additionally be imposed.

Accordingly, non-compliance may not only invalidate the transaction but also expose the parties to substantial civil and administrative liabilities.

5. What happens if the other party is not notified?

If the obligor is not notified of the assignment, the assignment may not be enforceable against that party. Consequently, the obligor is not required to recognize or distribute benefits to the assignee, and all benefits arising may continue to be deemed attributable to the assigning party under the original business cooperation contract.

V. Are you seeking a reputable law firm to assist with the assignment of benefits under a business cooperation contract?

Given the complexity and associated legal risks, professional legal support is essential. NPLaw, with its experienced team of lawyers, is ready to assist in contract review, advisory on procedures, and representation in matters relating to the assignment of benefits under a business cooperation contract.

The above information is provided for reference purposes only. For detailed advice tailored to your specific case, please contact NPLaw for prompt consultation.