A breach of investment commitments under a business cooperation contract is a common issue in business cooperation arrangements, potentially causing financial losses and reputational harm to the parties. Such breaches may arise from failure to perform as agreed, delays in performance, or misinterpretation of contractual terms. A clear understanding of applicable legal regulations and dispute resolution mechanisms helps the parties safeguard their rights and interests, mitigate risks, and maintain a sustainable cooperative relationship.

I. Introduction to issues related to breach of investment commitments under business cooperation contracts

In business cooperation contracts, investment commitments constitute a core element that defines each party’s obligations to contribute capital, assets, or resources. In practice, failure to properly perform investment commitments may lead to various legal and economic issues, adversely affecting project progress, profits, and the reputation of the parties.

Such breaches commonly include delayed capital contribution, performance for improper purposes, or misuse of resources contrary to the agreement. Understanding the causes of breaches, as well as the rights and obligations of the parties, is necessary to minimize risks, protect lawful interests, and maintain a long-term cooperative relationship.

II. Understanding breaches of investment commitments under business cooperation contracts

To manage risks and protect contractual rights in business cooperation contracts, the parties should clearly understand what constitutes a breach of investment commitments, the causes thereof, relevant factors, and the competent authorities for determining a breach.

1. How can a breach of investment commitments under a business cooperation contract be understood?

A breach of investment commitments under a business cooperation contract refers to an act by a party to a business cooperation contract whereby such party fails to perform, fully perform, or timely perform the investment obligations and commitments agreed in the contract.

Pursuant to Clause 14 Article 3 of the Law on Investment 2025 (effective from 01 March 2026), a business cooperation contract is a contract entered into between investors for the purpose of business cooperation and profit/product sharing in accordance with law, without establishing an economic organization.

Accordingly, commitments regarding capital, assets, timelines, and the rights and obligations of the parties constitute the core of a business cooperation contract, and failure to perform such commitments constitutes a contractual breach.

2. What factors may lead to breaches of investment commitments under business cooperation contracts?

Breaches of investment commitments under business cooperation contracts may arise from multiple factors, both objective and subjective, directly affecting the performance of obligations by the parties:

  • Objective causes: Changes in economic conditions, policies, laws, or market circumstances may render a party unable to perform its investment commitments as initially anticipated.
  • Subjective causes: Including delays in capital contribution, improper use of invested resources, use of resources contrary to the agreed purposes, or misinterpretation of contractual terms.
  • Lack of control and supervision mechanisms: Failure to establish mechanisms for monitoring investment progress, verifying resources, and conducting periodic reporting may also lead to breaches.
  • Internal disputes or conflicts of interest: Disagreements among cooperating parties regarding benefits, profit distribution, or the use of common assets may lead to breaches of investment commitments.

Thus, breaches may stem from objective circumstances, subjective conduct, inadequate supervision, or conflicts of interest. The parties should proactively manage and supervise the investment process to minimize risks.

3. May investment commitments under a business cooperation contract be modified during performance?

During the performance of a business cooperation contract, the need to adjust investment commitments may arise due to changes in actual conditions, project objectives, or the capacity of the parties.

Pursuant to Article 421 of the Civil Law 2015, the parties may agree to amend the contract, including investment commitments, provided that such amendments do not contravene the law or the original agreement. Amendments may be made by way of a contract addendum or an amending agreement, duly executed by the parties.

In business cooperation contracts, Articles 510 and 511 of the Civil Law 2015 provide that a member may withdraw from or join the contract with the consent of the majority of members, and the corresponding investment commitments may be adjusted accordingly. Any change must be duly notified, mutually agreed upon, and properly recorded to avoid subsequent disputes or misunderstandings.

Accordingly, investment commitments may be modified during the performance of the contract, provided that such modifications comply with the law, the parties’ agreement, and are clearly documented to safeguard rights and mitigate dispute risks.

4. Who has the authority to determine breaches of investment commitments under a business cooperation relationship?

Where there is suspicion that a party has failed to perform investment commitments under a business cooperation contract, identifying the competent body to review and determine the breach is essential to protect rights and ensure transparent dispute resolution.

First, the parties may conduct a self-assessment based on the contract and factual evidence to determine whether a breach has occurred. If the matter cannot be resolved, the dispute may be referred to commercial arbitration where the contract contains an arbitration clause, pursuant to Clause 1 Article 5 of the Law on Commercial Arbitration 2010. The Arbitral Tribunal will determine the breach based on the case file, evidence, and applicable law.

In the absence of an arbitration agreement, the parties may initiate proceedings before a competent People’s Court. The court will examine the contract, evidence, and relevant legal provisions to render a determination. Commercial and business disputes fall within the jurisdiction of the court as prescribed in Article 30 of the Civil Procedure Code 2015.

This process ensures that the determination of breaches is conducted transparently, lawfully, and in protection of the lawful rights and interests of the parties.

III. Relevant legal provisions governing breaches of investment commitments under business cooperation contracts

To address and prevent breaches of investment commitments under business cooperation contracts, the parties must be familiar with the applicable legal framework, including civil law, commercial law, investment law, and other specialized regulations. This section analyzes the general legal basis, liability for damages, and common violations related to investment commitments.

1. Which legal provisions govern breaches of investment commitments under business cooperation contracts in Vietnam?

The determination of breaches of investment commitments under business cooperation contracts must be based on a clear legal framework to safeguard the rights and obligations of the parties, including:

Pursuant to Article 22 of the Law on Investment 2025 (effective from 01 March 2026), business cooperation contracts entered into between domestic investors are governed by civil law and relevant laws. Where a business cooperation contract involves foreign investors, the execution of the contract must comply with procedures for issuance of the Investment Registration Certificate under Article 26 of the Law on Investment. The parties to a business cooperation contract shall establish a coordination board to implement the contract.

The functions, duties, and powers of the coordination board are agreed upon by the parties in the contract. During implementation, the parties may agree to use assets formed from business cooperation to establish an enterprise in accordance with the law on enterprises. The contents of business cooperation contracts are stipulated by the Government, ensuring that contractual terms do not contravene the law and are consistent with investment cooperation objectives.

In addition, the Civil Code 2015 (Articles 423 and 428) provides for legal consequences of contractual breaches, including the right to rescind the contract or unilaterally terminate performance where the other party commits a serious breach. The breaching party is liable for damages under Article 360 where losses are caused to the non-breaching party.

Accordingly, the determination and handling of breaches of investment commitments are based on the combined application of the Law on Investment 2025, the Civil Code 2015, and other relevant regulations.

2. Are there provisions on damages for breaches of investment commitments under business cooperation contracts?

The Civil Code 2015 constitutes the primary legal basis governing damages in civil contracts, including business cooperation contracts. Under Article 360, the breaching party must compensate for actual losses arising from the failure to properly perform contractual commitments. Such losses include both direct losses and provable lost benefits.

In addition, Article 584 sets out the general principles of compensation in civil liability, emphasizing that compensation must be proportionate to actual losses and the degree of breach, unless otherwise agreed by the parties in a manner not contrary to law.

Furthermore, Articles 423 and 428 of the Civil Code provide that where a serious breach of contractual obligations occurs, the aggrieved party has the right to rescind the contract or unilaterally terminate performance without compensation, while still retaining the right to claim damages in accordance with law.

3. What are common breaches related to investment commitments under business cooperation contracts?

In the course of performing business cooperation contracts, understanding common breaches enables the parties to proactively prevent risks and safeguard lawful interests. Common breaches include:

  • Failure to contribute sufficient capital or failure to contribute on time: A frequent breach where a party does not contribute the agreed amount of capital or assets or fails to meet the agreed schedule.
  • Misuse of capital or assets for improper purposes: Investment capital or assets formed from cooperation are used for purposes outside the agreed scope of business activities.
  • Failure to perform other contractual rights and obligations: Including failure to participate in the coordination board, lack of transparency in information disclosure, failure to provide progress reports, or non-compliance with agreed rights and obligations.
  • Delays in project implementation: Failure to complete tasks, business objectives, or project phases within the agreed timeline.
  • Non-compliance with agreements on amendment, transfer, or termination of the contract: Violations relating to withdrawal from the contract, admission of new members, or transfer of contributed capital without the consent of the remaining parties.

These common breaches typically relate to capital contribution, use of assets, performance of obligations, project timelines, and compliance with contractual arrangements, requiring close supervision and effective risk management mechanisms by the parties.

IV. Questions regarding breaches of investment commitments under business cooperation contracts

In the course of performing business cooperation contracts, the parties often have concerns regarding legal liability, rights and interests, sanctions, and risk prevention in relation to investment commitments. This section addresses common questions to help the parties better understand their rights and obligations, thereby ensuring lawful performance and minimizing disputes.

1. What legal liabilities may arise from breaches of investment commitments under business cooperation contracts?

Breaches of investment commitments under business cooperation contracts may lead to civil, administrative, and, in serious cases, criminal liability.

  • Administrative liability: Pursuant to Article 15 of Decree 122/2021/NĐ-CP on administrative sanctions in the field of investment and business activities in Vietnam:
    + Violations of reporting on investment supervision and evaluation: Under Points a and b Clause 1 Article 15, late submission, incomplete reports, or failure to submit periodic supervision and evaluation reports are subject to fines ranging from 20,000,000 VND to 30,000,000 VND, together with remedial measures requiring supplementation of missing contents and compliance with reporting obligations.
    +     Violations of enhanced investment activity reporting obligations: Under Points a, b, c, d, dd Clause 2 Article 15, failure to submit investment activity reports, late submission, false or inaccurate reporting, or failure to timely notify or issue decisions on project termination may result in fines ranging from 30,000,000 VND to 50,000,000 VND, together with remedial measures requiring compliance with reporting and notification obligations.

Where the acts specified in Clauses 1 and 2 Article 15 cause serious consequences, the violator may also be required to compensate for damages arising from violations of reporting obligations, and the competent authority may impose additional remedial measures to ensure transparency and compliance with investment law.

  • Criminal liability: If a breach of investment commitments is accompanied by fraudulent intent to appropriate property or other prohibited acts under the Penal Code 2015, the offender may be subject to criminal prosecution. In particular, under Article 174 (Fraudulent Appropriation of Property), the use of deceitful means to appropriate property of partners or related parties may result in fines or imprisonment depending on the extent of damage and the nature of the conduct, together with additional penalties such as prohibition from holding positions, practicing certain professions, or confiscation of property.
  • Civil liability: Under Article 360 of the Civil Code 2015, the breaching party must compensate for actual losses arising from the breach, including property losses and direct material benefits that the aggrieved party failed to obtain. Under Article 584, compensation also covers reasonable expenses incurred by the non-breaching party to perform the contract or prevent losses. Where the contract provides for sanctions for breach, Article 418 of the Civil Code requires the breaching party to pay penalties as agreed, and such sanctions do not replace the obligation to compensate for losses where actual losses exceed the agreed penalty.

Depending on the nature and severity of the breach, the non-performing party may take civil, administrative, and, in serious cases, criminal liability in accordance with law.

2. What remedies may the non-breaching party seek when the other party breaches investment commitments?

Where one party breaches investment commitments under a business cooperation contract, the other party is entitled to seek remedies in accordance with law and the contract:

  • Specific performance: The aggrieved party may require the breaching party to fully perform the agreed obligations, as a fundamental contractual right under Point d Clause 1 Article 398 of the Civil Code 2015.
  • Damages: Under Articles 360 and 584 of the Civil Code, the aggrieved party may claim compensation for actual losses and reasonable expenses incurred to perform the contract or prevent losses. Where the contract provides for sanctions for breach, sanctions may also be claimed under Article 418.
  • Unilateral termination or rescission in serious cases: Under Articles 423 and 428 of the Civil Code, where a serious breach prevents the attainment of the contractual purpose or remediation cannot be agreed, the aggrieved party may unilaterally terminate performance or rescind the contract without liability for compensation, subject to timely notice to the breaching party.
  • Dispute resolution: The aggrieved party may request negotiation, mediation, arbitration, or court proceedings to resolve the dispute in accordance with Article 317 of the Law on Commerce 2005.

In short, the non-breaching party may seek specific performance, damages, contractual penalties, termination or rescission, and dispute resolution depending on the severity of the breach and the contractual arrangements.

3. What forms of sanctions may be applied to address breaches of investment commitments under business cooperation contracts?

Measures to address breaches of investment commitments under business cooperation contracts may include administrative, civil, and criminal sanctions, as well as contractual remedial measures.

With respect to administrative sanctions, Clause 1 Article 21 of the Law on Handling of Administrative Violations 2012 provides principal forms of sanctions, including warnings; fines; deprivation of licenses or professional practice certificates or suspension of operations for a definite term; confiscation of instrumentalities used for violations; and expulsion. These measures are applied depending on the nature and severity of the violation to ensure deterrence and compliance.

In addition, civil and criminal measures as discussed in Section IV.1 above may be applied where relevant.

4. What grounds may be considered legitimate where a party fails to perform investment commitments under a business cooperation contract?

The law and contractual practice recognize certain legitimate grounds that may justify non-performance or adjustment of commitments:

  • Objective circumstances beyond control: Including natural disasters, epidemics, economic fluctuations, or changes in policies or laws that render performance impracticable.
  • Contractual agreements or conditions: Where the contract provides for adjustment of commitments in special circumstances, non-performance or adjustment in accordance therewith may be deemed legitimate.
  • Mutual consent of the parties: Where there is written agreement or an addendum agreed by the parties.
  • Temporary difficulties with remedial measures in progress: Where the breaching party is actively performing obligations but encounters temporary obstacles and has a concrete remedial plan, such grounds may be considered legitimate.

These legitimate grounds typically involve objective factors, contractual arrangements, mutual consent, or bona fide remedial efforts, providing a legal basis for the breaching party to protect its interests and avoid unnecessary disputes.

5. How can the parties prevent breaches of investment commitments under business cooperation contracts?

Preventing breaches of investment commitments is main to maintaining a sustainable cooperative relationship, minimizing legal risks, and protecting common interests:

  • Clearly defining rights and obligations: Investment commitments should be detailed in the contract, including capital amounts, timelines, purposes of use, and related entitlements.
  • Establishing supervision and reporting mechanisms: Periodic monitoring of investment progress, proper use of resources, and transparent reporting help detect issues early.
  • Providing for sanctions and remedies: The contract should clearly stipulate consequences for non-performance, including penalties, damages, and rights of unilateral termination.
  • Agreeing on mechanisms for adjustment: Allow adjustments to commitments in response to changed circumstances through addenda or amending agreements by mutual consent.
  • Seeking professional legal advice: The parties should consult experienced lawyers or reputable law firms to review contracts, ensure protective clauses, and ensure compliance with law.

In essence, effective prevention requires detailed contractual arrangements, ongoing supervision, clear remedial provisions, flexible adjustment mechanisms, and professional legal advice to mitigate risks and preserve cooperative relationships.

V. Are you looking for a reputable law firm to support issues related to breaches of investment commitments under business cooperation contracts?

Where breaches of investment commitments arise under business cooperation contracts, engaging a reputable law firm is essential to safeguard rights and ensure lawful dispute resolution. NPLaw, with its team of experienced lawyers, provides in-depth advice on the rights and obligations of the parties, drafts and reviews contracts, and advises on dispute resolution strategies through negotiation, mediation, arbitration, or court proceedings. NPLaw’s support enables the parties to implement investment commitments safely and effectively, minimize legal risks, and maintain sustainable cooperative relationships.

The above information is for reference purposes only. For case-specific advice, please contact NPLaw for prompt consultation.