In practice, claims for damages under a business cooperation contract commonly arise when one party breaches its committed obligations, thereby directly affecting the lawful rights and interests of the other party.

I. Common mistakes in claims for damages under business cooperation contracts

During resolving disputes arising from business cooperation contracts, claims for damages are frequently raised by the parties. However, in practice, many such claims are not accepted by the Court or Arbitration due to common misunderstanding and improper application of the law.

1. Confusing contractual breaches with actual damages

A common misunderstanding is the assumption that the existence of a contractual breach automatically leads to the right to claim damages. In reality, under the general principles of civil and commercial law, a breach of contract is merely a necessary condition, while the occurrence of actual damage constitutes the sufficient condition for establishing liability for damages.

In many business cooperation disputes, the non-breaching party fails to prove specific losses (such as lost profits, additional expenses, or property damage), resulting in the rejection of the damages claim even though the breach did in fact occur. It demonstrates that identifying and quantifying the damage plays a decisive role in determining whether a claim for damages will be accepted.

2. Failure to prove the causal relationship between the breach and the damage

Another common mistake is the failure to establish a direct causal relationship between the contractual breach and the actual damage incurred. In business cooperation contracts, investment activities, exploitation of resources, and profit-sharing arrangements are often influenced by various objective factors, such as market fluctuations, changes in legal policies, or the management capacity of the parties.

If it cannot be demonstrated that the damage resulted directly from the breach of contract rather than from other objective factors, the claim for damages will be difficult to be accepted. It is a common reason why many damages claims are considered lacking both legal and factual grounds.

3. Incorrect determination or excessive claims beyond the compensable scope of damage

When making a claim for damages under a business cooperation contract, some parties request compensation for losses that are unrealistic, unreasonable, or not yet incurred, such as expected future profits without reliable evidence. 

Under the principle governing claims for damages, only actual, direct, and quantifiable losses are eligible for compensation. Claims exceeding such a scope not only weaken the credibility of the request but may also make the dispute resolution authority consider the claimant as acting without good faith or abusing its rights.

4. Ignoring or failing to comply with compensation provisions stipulated in the contract

In many business cooperation contracts, the parties often agree in advance on specific provisions regarding damages, contractual sanctions, limitations of liability, or methods for determining losses. However, when disputes arise, it is not uncommon for the claiming party to rely solely on general statutory provisions while disregarding the contractual clauses previously agreed upon by the parties.

Failure to comply with the contractual agreement may result in a damages claim that does not reflect the parties’ original intentions, thereby reducing the likelihood that the claim will be accepted during dispute resolution.

5. Lack of evidence proving the damage and the burden of proof

Another serious mistake is the failure to adequately prepare evidence proving the losses, such as accounting records, invoices, contracts with third parties, financial statements, or documents demonstrating lost profits.

Under general legal principles, the party claiming damages takes the burden of proof. If such an obligation is not fulfilled, the damages claim will be difficult to accept in practice. 

Avoiding the above mistakes is a decisive factor in ensuring the effectiveness of a damages claim in a business cooperation contract.

II. Understanding claims for damages under business cooperation contracts

To safeguard lawful rights and interests when disputes arise, a proper understanding of the legal nature, conditions for liability, scope of compensable losses, and evidentiary requirements relating to claims for damages under business cooperation contracts is a main factor in ensuring effective dispute resolution. Accordingly, this section focuses on clarifying the core legal issues concerning damages claims in business cooperation contracts.

1. What is a claim for damages under a business cooperation contract?

Pursuant to Clause 14 Article 3 of the Law on Investment 2025, a business cooperation contract (BCC) is a contract concluded between investors for the purpose of business cooperation and sharing profits or products in accordance with the law without establishing an economic organization.

Meanwhile, pursuant to Clause 1 Article 302 of the Commercial Law 2005, claim for damages means the breaching party compensate for losses caused to the non-breaching party due to the breach of contract.

Accordingly, a claim for damages under a business cooperation contract may be understood as a request made by the non-breaching party requiring the breaching party to compensate for the actual losses incurred as a result of the breach during the performance of the business cooperation contract. Such claims may be pursued through negotiation, mediation, or by requesting resolution by a Court or Arbitration in accordance with the law.

In essence, it is a form of civil liability arising from breach of contract, aimed at restoring the material benefits that the non-breaching party would have obtained if the contract had been properly performed. Thus, compensation for damages is not punitive in nature but is intended to remedy the actual losses suffered by the non-breaching party.

2. When does the non-breaching party have the right to make a claim for damages under a business cooperation contract?

A business cooperation contract is essentially a contract within the commercial sector and is thus governed by the Commercial Law 2005. Pursuant to Article 303 of the Commercial Law 2005, the non-breaching party has the right to claim damages under a business cooperation contract when the following conditions are satisfied:

  • There is a breach of contract;
  • Actual damage has occurred;
  • The breach of contract is the direct cause of the damage.

In practice, the right to claim damages is only effectively protected when the non-breaching party is able to prove all of the above elements, thereby avoiding situations where claims are based merely on assumptions or damages that have not yet arisen. Therefore, determining the appropriate time and legal grounds for making a claim is crucial to the likelihood of its acceptance.

3. What types of damages may be compensated in a claim for damages under a business cooperation contract?

Pursuant to Clause 2 Article 302 of the Commercial Law 2005, the value of compensation includes the actual and direct losses incurred by the non-breaching party as a result of the breach, as well as the direct benefits that the non-breaching party would have obtained if the breach had not occurred.

In claims for damages under business cooperation contracts, compensable losses commonly include property damage, reasonable expenses incurred to remedy the consequences of the breach, and actual profits lost or reduced that the non-breaching party would otherwise have received in the absence of the breach.

However, not all losses are compensable. Only losses that are actual, direct, and capable of being determined and proven will be accepted. Hypothetical, expected, or unsubstantiated losses are generally not recognized by dispute resolution authorities. Therefore, accurately determining the scope of compensable losses is a crucial factor in ensuring the legality and feasibility of the damages claim.

4. What documents should be prepared to support a claim for damages under a business cooperation contract?

To establish a well-founded claim for damages under a business cooperation contract, the claimant must prepare adequate documents and evidence supporting the claim. Such documents typically include:

  • The business cooperation contract and its appendices;
  • Documents proving the breach of contract;
  • Accounting records, invoices, and financial statements demonstrating the actual damage;
  • Documents establishing the causal relationship between the breach and the damage.

Preparing comprehensive and well-organized evidence not only clarifies the substance of the damages claim but also fulfills the claimant’s burden of proof under the law. It is a decisive factor in determining whether the claim for damages will be accepted during dispute resolution.

III. Legal provisions relevant to claims for damages under business cooperation contracts

The resolution of claims for damages under business cooperation contracts must not only rely on the contractual agreements between the parties but must also be conducted within the framework of applicable legal regulations.

1. Which laws govern claims for damages under business cooperation contracts in Vietnam?

In Vietnam, claims for damages under business cooperation contracts are primarily governed by the Civil Code 2015 and the Commercial Law 2005.

The Civil Code 2015, as the general law, provides for damages arising from breach of contractual obligations as follows:

  • Article 360 on liability for damages due to breach of obligations provides that where damage arises from a breach of obligations, the obligor must compensate for the entire damage unless otherwise agreed or otherwise provided by law.
  • Article 419 stipulates that damages arising from breach of contract shall be determined in accordance with Clause 2 of this Article, Article 13, and Article 360 of the Civil Code. The obligee may claim damages for the benefits that it would have obtained from the contract. The obligee may also request the obligor to reimburse expenses incurred due to the failure to perform contractual obligations, provided that such reimbursement does not overlap with compensation for lost contractual benefits.

In addition, the Commercial Law 2005 applies where the business cooperation contract is established between entities engaged in commercial activities and for profit-making purposes. Specifically:

  • Article 302 provides for damages, defining them as the compensation paid by the breaching party for losses caused by the breach. The value of damages includes the actual and direct losses suffered by the non-breaching party and the direct benefits that the non-breaching party would have received if the breach had not occurred.
  • Article 303 provides the grounds for liability for damages, including the following elements: The existence of a contractual breach; actual damage; and a direct causal relationship between the breach and the damage.
  • Article 304 stipulates the obligation to prove the loss, whereby the party claiming damages must prove the loss, the extent of the loss caused by the breach, and the direct benefit that the non-breaching party would have received in the absence of the breach.

In addition to the two fundamental statutes above, depending on the specific sector of cooperation, damages claims may also be governed by the Law on Investment 2025 (Article 22) as well as relevant implementing decrees and circulars.

2. What is the procedure for making a claim for damages under a business cooperation contract?

The process of making a claim for damages under a business cooperation contract generally begins with the non-breaching party identifying the breach and the actual losses incurred, while simultaneously collecting documents and evidence supporting its claim. According to Article 304 of the Commercial Law 2005, the claimant must prove the losses, the extent of the losses caused by the breach, and the direct benefits that the non-breaching party would have obtained if the breach had not occurred.

If no agreement can be reached, the non-breaching party has the right to initiate legal proceedings before the Court or submit the dispute to commercial arbitration, depending on the dispute resolution clause of the contract pursuant to Article 317 of the Commercial Law 2005.

During this process, strict compliance with procedural rules and the burden of proof plays a decisive role in determining the effectiveness of the damages claim.

3. What types of breaches commonly lead to claims for damages under business cooperation contracts?

In practice, claims for damages under business cooperation contracts typically arise from breaches of fundamental contractual obligations, such as failure to contribute capital or assets as committed, late capital contribution, failure to perform or improper performance of the agreed cooperation activities, violations of sharing obligations for profits or risks, or unilateral modification of the business plan causing losses to the other party.

Additionally, breaches relating to information disclosure obligations, the duty of good faith, and confidentiality obligations during the course of business cooperation are also common causes of disputes and damages claims. Identifying these common breaches enables the parties to proactively manage risks and protect their interests from the stage of contract negotiation and performance.

IV. Questions regarding claims for damages under business cooperation contracts

During the application of legal regulations to protect their lawful rights and interests, parties to a business cooperation contract often encounter various issues relating to the conditions, scope, and procedures for making claims for damages. Below are several common questions that frequently arise in dispute resolution practice.

1. What are the consequences of failing to make a claim for damages under a business cooperation contract?

Failure to pursue or timely pursue a claim for damages under a business cooperation contract may result in several adverse legal consequences for the non-breaching party. First, such a party risks not receiving compensation for actual losses, which directly affects its lawful rights and interests in business operations.

Moreover, if the statute of limitations for initiating a lawsuit under Article 319 of the Commercial Law 2005 expires, the non-breaching party may lose the right to request the Court or Arbitration to resolve the dispute.

2. What is the legal process for resolving a claim for damages under a business cooperation contract?

The process for resolving a claim for damages under a business cooperation contract generally includes the following basic steps:

  • Identifying the breach and the actual losses incurred;
  • Collecting and preparing documents and evidence;
  • Conducting negotiations or mediation in accordance with the contractual agreement;
  • Filing a lawsuit before the Court or requesting resolution by commercial arbitration if no agreement is reached.

Compliance with the proper procedures and fulfillment of the burden of proof are main factors determining the success of the damages claim.

3. What factors may reduce the amount of compensation in a claim for damages under a business cooperation contract?

Pursuant to Article 294 of the Commercial Law 2005, a breaching party may be exempted from liability in the following circumstances:

  • Where an exemption from liability has been agreed upon by the parties;
  • Where a force majeure occurs;
  • Where the breach is entirely attributable to the fault of the other party;
  • Where the breach results from compliance with a decision of a competent state authority that the parties could not have known at the time of contract formation.

In addition, pursuant to Article 305 of the Commercial Law 2005, the party claiming damages must take reasonable measures to mitigate losses, including losses relating to the direct benefits that would have been obtained. If the claimant fails to take such measures, the breaching party has the right to request a reduction in the amount of compensation corresponding to the losses that could reasonably have been mitigated.

Accordingly, the amount of compensation in a claim for damages under a business cooperation contract may be reduced in certain circumstances, such as when the non-breaching party is partly at fault in causing or increasing the damage, when the non-breaching party fails to take reasonable measures to mitigate the loss, or when the parties have agreed on a limitation of liability in the contract.

4. How does the failure to promptly notify the breach and damage affect a claim for damages under a business cooperation contract?

Failure to promptly notify the breaching party of the damage may negatively affect a claim for damages under a business cooperation contract, particularly where such delay results in increased losses or prevents the breaching party from taking remedial measures.

In dispute resolution practice, Courts and Arbitration tribunals often consider the timing of notification as a factor in assessing the good faith and the duty to mitigate losses of the claimant. Delayed notification may be regarded as contributory fault on the part of the non-breaching party, which may lead to a reduction in the compensation amount or the rejection of part of the damages claim.

5. What consequences may arise from incorrectly determining the level of damage in a claim for damages under a business cooperation contract?

Errors in determining the amount of damage, such as claiming compensation exceeding the actual losses or lacking supporting evidence, may result in the claim being partially rejected or dismissed entirely. Furthermore, such errors may undermine the credibility of the claim and prolong the dispute resolution process.

In adjudication practice, Courts and Arbitration tribunals generally accept only losses that are actual, direct, and supported by clear evidence in accordance with the Civil Code 2015 and the Commercial Law 2005. Therefore, accurately determining the amount of damage is a decisive factor in the outcome of a damages claim.

V. Are you looking for a reputable law firm to assist with issues related to claims for damages under business cooperation contracts?

Disputes arising from claims for damages under business cooperation contracts are often complex and require in-depth knowledge of contract law, commercial law, and practical experience in dispute resolution before Courts and Arbitration tribunals. The involvement of a professional legal advisory firm can help enterprises and individuals properly assess risks, develop appropriate dispute resolution strategies, and maximize the protection of their lawful rights and interests.

If you require legal advice, assistance in preparing legal dossiers, or representation in disputes relating to damages claims under business cooperation contracts, selecting a reputable and experienced law firm is an essential step to ensure long-term legal safety and effectiveness.

The above information is provided for reference purposes only. Should you require detailed advice regarding your specific case, please contact NPLAW Law Firm for prompt legal assistance.