Changes in the performance period of a BOO contract frequently arise during project implementation due to delays in site clearance, cost fluctuations, policy changes, or force majeure. However, not every schedule extension or adjustment will be approved unless it complies with the procedures and legal conditions prescribed by law. Any adjustment to the implementation period may also affect the total investment capital, the project's financial plan, and the investor's capital recovery period. If such changes are not mutually agreed upon and properly documented, they may lead to disputes and financial losses for the contracting parties.

I. Overview of issues relating to changes in the performance period of BOO contracts

Changes to the performance period of a BOO contract are common issues arising during the implementation of public-private partnership (PPP) investment projects. Given the nature of the Build–Own–Operate (BOO) model, under which the investor constructs, owns, and operates the infrastructure facility over an extended period, the project implementation schedule directly affects the project's financial model, capital recovery period, and anticipated investment returns.

In practice, adjustments to the implementation schedule may result from various factors, including delays in land handover, planning revisions, fluctuations in construction material prices, financing difficulties, or force majeure. Nevertheless, such changes are not merely matters of contractual agreement between the parties; they must also comply with the legal framework governing investment, construction, and PPP project contracts. Failure to follow the prescribed procedures, approval authority, and legal requirements when changing the BOO contract performance period may lead to disputes, compensation liabilities, and significant legal risks for all parties involved.

II. Understanding changes in the performance period of BOO contracts 

1. What does changing the performance period of a BOO contract mean?

Pursuant to Article 401 of the Civil Code 2015, as guided by Article 22 of Decree No. 21/2021/ND-CP, the contract performance period, or the duration of a contract's validity, may be understood as the period commencing from the effective date of the contract until the date on which all contractual obligations have been fully performed by the parties. Furthermore, under Clause 16, Article 3 of the Law on Investment 2020 under the Public-Private Partnership, a BOO contract is classified as a PPP project contract.

Accordingly, changing the BOO contract performance period refers to the parties' agreement to adjust the contractual implementation previously established, including the construction period, completion date, operational commencement date, or project operation term. Such adjustments must comply with the legally prescribed procedures, authority, and formal requirements and may also entail corresponding amendments to the parties' obligations, project costs, and financial arrangements.

2. When is it necessary to change the BOO contract performance period?

Adjustments to the BOO contract performance period are generally required when the project can no longer proceed under the original implementation schedule or when maintaining the agreed timeframe would undermine the project's feasibility. In practice, it may occur due to delays in land handover, delays in licensing procedures, planning adjustments, or technical requirements imposed by competent state authorities.

Additionally, objective factors such as fluctuations in construction material prices, financing difficulties, supply chain disruptions, or force majeure (including natural disasters and pandemics) may also necessitate schedule adjustments. In certain cases, extending the implementation period is intended to rebalance the project's financial plan by prolonging the operational period, thereby offsetting additional costs incurred and preserving the investor's ability to recover its investment.

3. What factors may lead to changes in the performance period of a BOO contract ?

Adjustments to the BOO contract performance period may arise from both objective and subjective factors encountered during project implementation, including:

  • Delays in site clearance or land handover compared with the committed schedule.
  • Delays in obtaining permits, approvals, or planning adjustments from competent state authorities.
  • Changes to technical designs or construction standards required by regulatory authorities or arising from actual construction conditions.
  • Fluctuations in construction material prices, labor shortages, or supply chain disruptions that prolong the construction period.
  • Difficulties in securing financing, restructuring project financing, or changes in lending conditions.
  • Force majeure events such as natural disasters, pandemics, armed conflicts, or other emergency situations beyond the parties' reasonable control.

4. Can changes to the BOO contract performance period affect project costs?

Changes to the performance period of a  BOO contract may have a direct and substantial impact on project costs as the implementation timeline is closely linked to the project's financial model and overall investment efficiency. Specifically, such adjustments may result in:

  • Additional construction costs due to extended construction periods, including labor, equipment, and site management expenses.
  • Increased interest expenses and financing costs arising from delayed capital recovery.
  • Escalation of construction material prices during the extension period, thereby increasing the total investment capital.
  • Additional expenses for project management, trial operations, or early maintenance resulting from schedule adjustments.
  • Changes to project cash flow and the capital recovery period, potentially requiring revisions to service pricing mechanisms or risk-sharing arrangements.

III. Legal provisions governing changes in the performance period of BOO contracts

1. Can changes to the BOO contract performance period result in legal penalties?

Under Articles 385 and 398 of the Civil Code 2015, a contract is formed based on the parties' mutual agreement, and the parties are free to agree upon its contents, including amendments and supplements. Furthermore, Article 420 of the Civil Code 2015 permits the parties to renegotiate contractual terms if there has been a fundamental change in circumstances. For infrastructure projects implemented under the PPP model, adjustments to the project schedule must also comply with the Law on Investment 2020 under the Public-Private Partnership concerning the conditions and competent authority for amending PPP project contracts. Thus, if the adjustment is made in accordance with the prescribed legal procedures, with the mutual consent of the parties, and in compliance with applicable law, it will not be regarded as a contractual breach.

Conversely, if one party unilaterally extends the implementation period without a lawful basis or without obtaining the consent of the other party, civil liability may arise. According to Article 418 of the Civil Code 2015, contractual sanctions may only be imposed where expressly agreed by the parties. In addition, under Article 360 of the Civil Code 2015, a party that breaches its contractual obligations must compensate the other party for damages resulting from non-performance or improper performance of those obligations. However, if project delays result from force majeure as defined under Article 156 of the Civil Code 2015, the breaching party may be exempt from liability provided that all statutory conditions for exemption are satisfied.

2. Which authority has jurisdiction to resolve disputes concerning changes to the BOO contract performance period?

Pursuant to Article 317 of the Commercial Law 2005, commercial disputes may be resolved through negotiation, mediation, arbitration, or court proceedings. If the contract contains a valid arbitration clause, the dispute shall be resolved by an arbitral institution in accordance with the Law on Commercial Arbitration 2010.

If the parties have not agreed to arbitration, or if the arbitration agreement is invalid, jurisdiction shall belong to the competent People's Court in accordance with the Civil Procedure Code 2015. For PPP projects, dispute resolution may also be governed by the Law on Investment 2020 under the Public-Private Partnership, which permits the parties to agree upon arbitration or court proceedings, including, in certain circumstances, foreign arbitration.

3. Can a party claim compensation if changes to the BOO contract performance period cause losses?

If changes to the BOO contract performance period result from one party's breach of contractual obligations and cause actual losses to the other party, the injured party is entitled to claim compensation in accordance with applicable law.

Under Article 360 of the Civil Code 2015, a party that breaches its contractual obligations must take civil liability for any resulting damages. Furthermore, Article 419 of the Civil Code 2015 provides that recoverable damages include actual and direct losses, as well as any benefits that the injured party would otherwise have been entitled to receive.

In addition, if the contract contains a fine clause, Article 418 of the Civil Code 2015 allows the breaching party to be subject to contractual fines in addition to liability for damages, if so agreed by the parties or prescribed by law. However, if the adjustment to the implementation period results from force majeure under Article 156 of the Civil Code 2015 and the statutory conditions for exemption from liability are fully satisfied, the affected party may be exempt from its obligation to compensate for damages.

IV. Questions regarding changes in the performance period of BOO contracts

1. What procedures must be followed when amending the implementation period of a BOO contract?

When amending the implementation period of a BOO contract, the parties should comply with a strict procedure to ensure legal validity and minimize legal risks, including:

  • Reviewing the contractual provisions governing schedule adjustments, extension conditions, and amendment mechanisms.
  • Identifying the legal and factual grounds for the proposed amendment (e.g., delays in site handover, planning revisions, or force majeure).
  • Negotiating and reaching a written agreement, followed by the execution of a contract appendix or amendment in accordance with Article 398 of the 2015 Civil Code.
  • Complying with the requirements for amending project contracts (where the project involves a PPP arrangement) under the Law on Investment 2020 under the Public-Private Partnership, including obtaining approval from the competent state authority where required.
  • Fulfilling all notification and reporting obligations under the applicable laws and the project contract.

2. If one party does not agree to amend the implementation period of the BOO contract, how may the dispute be resolved?

If one party refuses to agree to the proposed amendment, the parties should first negotiate in good faith with a view to reaching a mutually acceptable solution and balancing their respective interests. If no agreement can be reached, the dispute may be resolved through the dispute resolution mechanism stipulated in the contract, under Article 317 of the Commercial Law 2005.

In case the contract contains a valid arbitration clause, the dispute shall be resolved in accordance with the Law on Commercial Arbitration 2010. In the absence of a valid arbitration agreement, the dispute shall fall within the jurisdiction of the competent People's Court under the Civil Procedure Code 2015. Furthermore, if there has been a fundamental change of circumstances, either party may petition the court to amend the contract under Article 420 of the Civil Code 2015.

3. How may the parties amend the implementation period of a BOO contract in the event of force majeure?

If force majeure occurs, the parties may consider adjusting the implementation period of the BOO contract in accordance with the applicable laws and the terms of the executed contract. According to Article 156 of the Civil Code 2015, force majeure is an objective event that is unforeseeable and cannot be remedied despite the application of all necessary measures within the affected party's capability. If these statutory conditions are satisfied, the affected party may be exempt from liability for delayed performance under Article 351 of the Civil Code 2015.

4. What legal requirements apply to notifying the other party of amendments to the implementation period of a BOO contract?

When notifying the other party of an amendment to the implementation period of a BOO contract, the parties must comply with the notification provisions stipulated in the contract, including the notice period, method of notification (such as written notice, official correspondence, or email), the authorized signatory, and the designated address for service of notices.

The notice should be delivered promptly upon the occurrence of any circumstance likely to delay project implementation or otherwise affect project performance. It should also be accompanied by supporting documents and evidence substantiating the grounds for the proposed adjustment, particularly where the amendment is based on force majeure under Article 156 of the Civil Code 2015.

In addition, any amendment to the implementation period must be made in writing by way of a contract appendix or written amendment in accordance with the principle of contractual freedom under Article 398 of the Civil Code 2015. For PPP projects, any adjustment to the project schedule must also obtain approval from the competent state authority in accordance with the Law on Investment 2020 under the Public-Private Partnership. Failure to comply with the prescribed notification and amendment procedures may result in the requested extension being rejected, and the breaching party may incur the corresponding legal liabilities.

5. What losses may arise if the implementation period of a BOO contract is not amended properly?

If the implementation period of a BOO contract is not amended in accordance with the prescribed procedures and competent authority requirements, the parties may take various legal and financial consequences, including:

  • Contractual sanctions for unilaterally extending the project schedule without valid approval.
  • Liability to compensate for damages under Article 360 of the Civil Code 2015 where actual losses are caused to the other party.
  • Increased financing and project management costs, adversely affecting the project's capital recovery plan.
  • Exposure to administrative sanctions or even termination of the project contract in cases of serious breaches of project schedule obligations.
  • Disputes that may damage the parties' reputation and long-term business relationship.

V. Why should you seek legal advice from NPLaw regarding amendments to the implementation period of a BOO contract?

Where issues arise concerning amendments to the implementation period of a BOO contract, consulting lawyers with in-depth expertise in investment law, project contracts, and PPP regulations is essential to help investors and other stakeholders manage risks and safeguard their legitimate rights and interests. NPLaw's experienced legal team can provide assistance in:

  • Reviewing BOO contracts and assessing provisions relating to project schedules, extensions, contractual sanctions, and damages.
  • Advising on the legal grounds for adjusting the project implementation period, including circumstances involving force majeure or a fundamental change of circumstances.
  • Assisting in the preparation and drafting of contract appendices and ensuring compliance with the statutory procedures for notification and obtaining approval for project schedule adjustments.
  • Representing or assisting clients in dealing with competent state authorities throughout the project schedule amendment process.
  • Advising and protecting clients' interests in arbitration or court proceedings arising from project delays or contract extension disputes.

The above information is provided for general reference only. If your enterprise or investment project encounters difficulties or requires comprehensive legal advice regarding amendments to the implementation period of a BOO contract, please contact NPLaw for timely and professional legal assistance from our experienced lawyers.