In this article, NPLAW provides an analysis of the current situation in which suppliers fail to submit reports to enterprises, introduces the relevant legal provisions under current laws, and addresses common questions together with preventive solutions.
In this article, NPLAW provides an analysis of the current situation in which suppliers fail to submit reports to enterprises, introduces the relevant legal provisions under current laws, and addresses common questions together with preventive solutions.
I. Current situation regarding supplier’s failure to submit reports to enterprises
In the context of digitalized economies and increasingly deep international integration, supply contracts for goods and services between enterprises and suppliers play a pivotal role in the supply chain. However, a common and persistent issue faced by many Vietnamese enterprises is that suppliers do not submit periodic reports on contract execution, leading to difficulties in risk management, quality control, and assessment of partnership effectiveness.
The primary causes arise from limited resources of small suppliers, unclear contract provisions, and the lack of reports on origin of goods or delivery progress from the suppliers, causing the enterprises unable to lose control over quality when purchasing goods. The consequences can be severe: operational disruption, increased legal costs, loss of reputation, and risks of losing international contracts due to quality management failures.
II. Understanding of supplier’s failure to submit reports to enterprises
A clear understanding of the legal framework helps enterprises accurately identify violations, apply timely remedies, and fully safeguard their legitimate rights.
1. In what cases is a supplier’s failure to submit reports deemed a contractual breach?
Pursuant to Clause 12 Article 3 of the Law on Commerce 2005, a contractual breach means a party fails to perform, or inadequately or improperly performs its obligations as agreed by the parties. A supplier’s failure to submit reports periodically constitutes a contractual breach when:
- The contract clearly stipulates reporting obligations (content, timeline, form), and the supplier’s failure to perform, inadequately perform, or perform late;
- The contract falls under a specialized legal sector where reporting is mandatory, meaning failure to report constitutes a violation even if it is not stated in the contract;
- A repeated violation or one causing significant consequences (affecting the purpose of the contract) may be considered a fundamental breach, entitling the buyer to unilaterally terminate the contract under Article 428 of the Civil Code 2015.
2. Can a supplier’s failure to submit reports be considered a breach of fundamental obligations?
A fundamental breach in commercial relationships is understood as a contractual breach by one party causing damage to the extent that the other party cannot attain the purpose of the contract (Clause 13 Article 3 of the Law on Commerce 2005). The supplier is deemed to have breached a fundamental obligation if the failure to submit reports causes damage and directly affects the contractual purpose.
III. Relevant legal regulations concerning supplier’s failure to submit reports to enterprises
Understanding the applicable law helps enterprises identify the appropriate rights and apply suitable remedies to protect their lawful interests.
1. Is the supplier’s failure to submit reports the only grounds for the enterprise to unilaterally terminate the contract?
A supplier’s failure to submit reports is not the sole legal basis for unilateral termination. Under Article 428 of the Civil Code 2015, an enterprise may unilaterally terminate the contract if the other party seriously breaches its obligations, which includes reporting obligations because such obligations are fundamental under the contract or required by law.
2. Can a supplier be exempt from liability if a force majeure affects its ability to submit reports?
A supplier is exempt from liability if a force majeure directly affects its ability to submit reports. Under Clause 2 Article 351 of the Civil Code 2015, the obligor is not liable if failure to perform results from force majeure, unless agreed otherwise or otherwise provided by law.
3. What contractual sanctions may apply to suppliers failing to submit reports?
A supplier may be subject to contractual sanctions according to Article 300 of the Law on Commerce 2005. The fine amount is as agreed by the parties but must not exceed 8% of the value of the violated portion of the contractual obligation (unless sector-specific legislation provides otherwise).
Under Article 301 of the same Law, penalties and compensation for damages may be applied concurrently if the contract so provides. Even without a sanction clause, the enterprise may still claim actual damages (lost profits, substitute inspection costs, etc.) under Article 360 of the Civil Code 2015.
IV. Questions regarding supplier’s failure to submit reports to enterprises
With numerous practical issues raised by enterprises, the following section provides detailed explanations and recommended solutions.
1. What steps should be taken to clarify the matter when a supplier fails to submit reports?
To address a supplier’s failure to submit reports, enterprises should:
- Step 1: Written notice of breach: The enterprise sends an email or official letter requesting the supplier to rectify within a specific duration, stating the breached contractual clause and legal consequences (Article 295 of the Law on Commerce 2005).
- Step 2: Collecting and retaining evidence: The enterprise retains all emails, meeting minutes, prior notices, substitute inspection invoices, or documents demonstrating damages arising from the missing reports (e.g., extra audit costs, production delays).
- Step 3: Conducting negotiation or mediation: The enterprise invites the supplier for discussion and proposal of remedies (extension, supplemental reports, compensation), and then sets up a minutes signed by both parties as legal evidence.
- Step 4: Applying sanctions or initiating legal proceedings: If no remedy is reached, the enterprise can send notice of sanctions, compensation, or file a lawsuit before a court or arbitral tribunal.
2. In what cases may a supplier refuse to submit reports?
A supplier may refuse in the following cases:
- Force majeure: The obligor is not liable if non-performance is due to force majeure (Clause 2 Article 351 Civil Code 2015).
- Trade secrets: If reports contain sensitive information, the supplier may refuse to provide such a part but must supply an alternative one (Clause 23 Article 4 Intellectual Property Law 2005 as amended 2022).
- No contractual provision: If there is no reporting clause, the supplier is not obligated, but the enterprise may request an amendment.
Thus, enterprises should include detailed reporting clauses to eliminate legitimate grounds for refusal.
3. How are disputes resolved when arising from a supplier’s failure to submit reports?
If disputes arise, enterprises may first negotiate or mediate. If unsuccessful, the matter may be brought before a court or commercial arbitration (Article 317 of the Law on Commerce 2005).
The resolution process includes evidence collection, filing a statement of claim, paying fees, and participating in ensuing judicial or arbitral procedures.
4. Is it necessary to include contractual clauses to prevent suppliers from failing to submit reports?
Including such clauses is essential, enabling enterprises to manage contracts, reconcile accounts, and protect their rights. The clause should specify report type, frequency, method of submission, and sanctions for breach.
5. Which authorities may intervene if a supplier’s failure to submit reports causes damage to the enterprise?
Article 8 of the Law on Commerce 2005 identifies government bodies overseeing commercial activities:
- The Government exercises unified state management over commercial activities;
- The Ministry of Industry and Trade is responsible for state management of goods trading and commercial activities;
- Ministries and ministerial-level bodies manage commercial activities within their sectors;
- People’s Committees at all levels manage commercial activities within their localities.
Selecting the appropriate authority helps enterprises save time, reduce costs, and secure optimal protection.
V. Seeking a reputable law firm for issues related to supplier’s failure to submit reports?
Legal advisory services concerning supplier non-reporting support clients with:
- Advice on current reporting obligations under applicable law;
- Review and assessment of supplier contracts to determine legal responsibilities regarding report content, deadlines, and format;
- Support in handling violations, including sanctions and compensation, when suppliers fail to report timely or adequately;
- Advice and drafting of breach notices, minutes of meetings, and litigation dossiers to ensure proper procedural compliance and protect lawful rights.
For inquiries or legal assistance concerning supplier’s failure to submit reports, please contact NPLAW for direct and comprehensive support from our legal team.
