A contract is a fundamental legal basis that records the agreement between parties in civil and commercial relations. However, in practice, during contract execution, disputes and difficulties may arise due to various reasons: changes in actual circumstances, one party’s breach of obligations, or ambiguities in the contract terms. If such issues are not resolved promptly and in compliance with the law, they can seriously affect the rights, reputation, and cooperative relationship of the parties.
The following article by NPLAW analyzes common issues, the relevant legal framework, and provides some advisory solutions aimed at best protecting the lawful rights and interests of the parties in resolving issues arising during contract execution.
I. Current situation of resolving issues arising during contract execution
In practice, during the execution of a contract, the following problems are frequently encountered: breach of schedule, delivery of goods not in conformity with quality requirements, late payment, unlawful unilateral termination, or disputes over the interpretation of contractual clauses.
Some notable realities include:
- Loosely drafted contracts lacking risk anticipation: Main provisions such as sanctions for breach, payment conditions, and dispute resolution mechanisms are often superficial or contradictory, making enforcement difficult.
- Lack of initial legal consultation: Businesses and individuals often fail to consult lawyers when drafting and executing contracts, resulting in confusion when disputes arise.
- Dispute resolution is time-consuming and costly: Litigation or arbitration often requires significant time and expenses, negatively affecting business operations.
- Low compliance awareness: Many parties fail to perform their obligations seriously after signing, especially in construction, commerce, and investment cooperation.
- Negotiation mechanisms are underutilized: Due to lack of skills or goodwill, negotiation often fails, forcing parties to resort to legal proceedings.
II. Legal provisions relating to the resolution of issues arising during contract execution
1. Causes of issues arising during contract execution
Common causes include:
- Unclear and incomplete drafting: Contracts use ambiguous language or lack essential provisions (penalties, payment terms, remedies), leading to different interpretations.
- Lack of legal knowledge: Parties are unaware of their statutory rights and obligations, resulting in breaches or unreasonable demands.
- Objective factors during performance: Market price fluctuations, epidemics, natural disasters, or new legal policies may prevent full performance.
- Lack of goodwill and compliance: Some parties intentionally default (delayed payment, unlawful unilateral termination) or show no cooperation in handling issues.
- No clear dispute resolution mechanism: Contracts miss or wrongly stipulate dispute resolution methods, causing deadlock when disputes arise.
- Absence of professional legal advice: Without legal consultation, parties may encounter unforeseen legal risks.
2. Common issues arising during contract execution
- Breach of payment obligations: Delayed or incomplete payments.
- Non-conforming delivery: Wrong quantity, quality, or late delivery (common in sales contracts).
- Delay in performance: Particularly in construction and service contracts.
- Unlawful unilateral termination: Damage to the other party.
- Disputes over interpretation or application of clauses: Due to ambiguous drafting.
- Failure to fulfill warranty or maintenance obligations: Especially for high-value assets.
- Additional costs outside the contract: Unclear agreements.
3. Methods of resolving issues arising during contract execution
- Negotiation: It is flexible, cost-effective, and preserves business relationships, though dependent on goodwill.
- Mediation: It includes a neutral third party (mediator) assisting in finding solutions. A successful mediation agreement may be recognized by Court if legal conditions are met.
- Commercial arbitration: It is confidential and chosen by the parties, suitable for commercial and investment disputes.
- Court litigation: It is widely used and legally enforceable, but often lengthy and public.
III. Questions on the resolution of issues arising during contract execution
1. Can a contract be terminated when disputes arise during contract execution?
If disputes lead to a serious breach of contractual obligations or fall under termination clauses, one party may terminate the contract according to agreement or law.
2. Is the time spent resolving disputes included in contract execution time?
Unless stipulated otherwise, dispute resolution time may not be counted towards contractual duration. Parties should amend the contract or prepare an addendum if an extension is needed.
3. What are the parties’ responsibilities when resolving issues during contract execution?
They must cooperate in good faith, provide relevant information, comply with agreed dispute resolution processes, and minimize damage while disputes remain unresolved.
4. What disputes are most common in this context?
Disputes over quality, progress, payment, scope of obligations, damages, and application of termination clauses.
5. Is it necessary to prepare an addendum when issues arise?
Preparing an addendum or adjustment minutes is essential to serve as a legal basis for modifying obligations, timelines, costs, or performance methods.
6. What is the general process of resolving issues during contract execution?
- Notification and written record of the issue;
- Negotiation between parties;
- If unsuccessful, mediation or referral to arbitration or court as agreed upon;
- Enforcement of the resolution (award, judgment, or recognized settlement).
IV. Legal advisory services on issues arising during contract execution
The above information is provided by NPLAW to assist clients in resolving issues arising during contract performance. If you have any further questions regarding the matters above or other legal concerns, please contact NPLAW for direct consultation and guidance from our professional team.
