Refusing to negotiate a contract is a right of enterprises; however, such refusal is not always legally implemented. The following article by NPLaw provides an in-depth analysis of when a refusal is lawful, when compensation liabilities may arise, and how to mitigate potential legal risks.
Refusing to negotiate a contract is a right of enterprises; however, such refusal is not always legally implemented. The following article by NPLaw provides an in-depth analysis of when a refusal is lawful, when compensation liabilities may arise, and how to mitigate potential legal risks.
I. Current situation of refusal to negotiate contracts
In the context of an increasingly competitive and volatile business environment, refusals to negotiate contracts have become more common. Many enterprises proactively withdraw from negotiations upon identifying risks or changing their business strategies. Nevertheless, in numerous cases, such refusals are made abruptly and in bad faith, thereby leading to complicated legal disputes.
Practical consulting experience indicates that most disputes do not arise from executed contracts but rather from the pre-contractual stage - an area already governed by Vietnamese law, although many enterprises still fail to properly understand and adequately apply the relevant legal provisions. Therefore, understanding the legal nature of refusal to negotiate is a prerequisite for minimizing legal risks.
II. Understanding refusal to negotiate a contract
1. What constitutes refusal to negotiate a contract during the pre-contractual stage?
Refusal to negotiate a contract refers to a situation where a contractor/investor fails to participate, does not conduct negotiations in accordance with the prescribed principles, or participates in negotiations but refuses to sign the negotiation minutes for the purpose of withdrawing from the bidding process despite having been invited to conduct negotiations. Accordingly, refusal to negotiate a contract means that one party ceases to participate in or terminates the negotiation process before the contract is formally executed.
2. Is refusal to negotiate a contract considered a manifestation of freedom of business?
If no contract or binding agreement requiring a party to continue negotiations exists, then suspending or refusing negotiations is the right to conduct free agreement and business. However, refusal to negotiate a contract shall not be regarded lawfully if such conduct violates bidding principles or commitments made in the bid dossier. The right to freedom of business must be exercised within the limits prescribed by law and in compliance with specialized legal regulations.
In the sectors of bidding and investment projects, once a bid dossier has been submitted, the parties are responsible for their proposals. Pursuant to Clause 6 Article 45 of Decree No. 214/2025/NĐ-CP, contractors are not permitted to refuse to implement the fundamental contents previously proposed. Refusal to negotiate in violation of negotiation principles or refusal to sign the negotiation minutes for the purpose of withdrawing from the bid award process shall be deemed a violation.
3. At what stage is an enterprise officially deemed to have refused to negotiate a contract rather than merely considering the proposal?
An enterprise shall officially be deemed to have refused to negotiate a contract when it fails to conduct negotiations within the prescribed time from the date of receipt of the invitation notice, appears at the negotiation session but refuses to sign the negotiation minutes, or fails to confirm acceptance on the National E-Bidding System. The relevant timelines are as follows:
- Domestic bidding: More than 05 working days from the date of receipt of the invitation to negotiate without conducting negotiations (under Clause 9, Article 14 of the Law on Bidding 2023).
- International bidding: More than 10 days from the date of receipt of the invitation to negotiate without conducting negotiations (under Clause 9, Article 14 of the Law on Bidding 2023).
- Online quotation procedures: More than 03 working days without the contractor confirming acceptance of the contract award on the National E-Bidding System pursuant to Clause 5 Article 102 of Decree No. 214/2025/NĐ-CP.
Additionally, an enterprise shall be deemed to have immediately refused negotiations if, during the negotiation process, it commits any of the following acts: Refusing to sign the negotiation minutes, violating negotiation principles, or failing to extend the validity period.
4. What is the difference between refusal to enter into a contract and refusal to negotiate a contract?
The following table sets out the differences between refusal to enter into a contract and refusal to negotiate a contract:
- Refusal to enter into a contract: It occurs at the final stage, after a specific offer to enter into a contract has been made and the essential terms have been agreed upon. It relates to the offer and acceptance mechanism in contract formation; where a party has already accepted the offer but subsequently refuses to execute the contract, such conduct may constitute a breach of civil obligations or a violation of sector-specific regulations. In addition, such refusal may be regarded as a breach of obligations and may trigger legal sanctions under Article 4 and Article 74 of the 2023 Law on Bidding.
- Refusal to negotiate a contract: It occurs during the pre-contractual stage, where the parties are still negotiating, exchanging views, and revising contractual terms. It reflects the principles of freedom, provided that the parties continue to comply with the requirements of good faith and honesty. Liability only arises where negotiations are conducted in bad faith or cause damage to the other party in violation of the principles of good faith and honesty under Article 3 of the 2015 Civil Code.
III. Legal provisions relating to refusal to negotiate a contract
1. What legal conditions allow a party to refuse contract negotiations without compensation liability?
A party may refuse to negotiate a contract without incurring compensation liability if the following legal conditions are satisfied:
- A party may freely terminate negotiations where no binding agreement exists (such as an exclusivity agreement or memorandum of understanding) and where no specialized law imposes an obligation to continue negotiations (such as obligations applicable to a successful bidder), thereby ensuring the rights to freedom of business and freedom of will under Article 3 of the Civil Code 2015.
- The refusal must be exercised in good faith and honestly (under Article 3 of the Civil Code 2015), and must not aim to deceive, improperly benefit, or intentionally create false expectations causing the other party to incur expenses or suffer damage.
- The refusal must not violate specific obligations arising during the pre-contractual stage or sanctions relating to breaches of civil obligations prescribed under Articles 351 and 360 of the Civil Code 2015.
2. Can provisions in a Memorandum of Understanding (MOU) prevent arbitrary refusal to negotiate a contract?
An MOU only has legal effect if it satisfies the conditions for a valid transaction or contract under the Civil Code 2015, including:
- A clear and voluntary agreement free from fraud or coercion, not violating prohibitory provisions of law or social ethics under Article 3 of the Civil Code 2015;
- Specific provisions imposing obligations, such as:
- Obligations to negotiate in good faith and actively;
- Obligations not to negotiate simultaneously with third parties (exclusive negotiation obligations);
- Obligations not to withdraw before a specified deadline, or only to withdraw under circumstances;
- Agreements on contractual sanctions or damages in the case of unilateral termination in breach of the MOU.
In such cases, the MOU becomes an independent contract, and any party refusing negotiations in violation of the MOU may be deemed to have breached contractual obligations.
IV. Questions relating to refusal to negotiate a contract
1. If a counterparty groundlessly refuses to negotiate a contract, which legal instruments should an enterprise rely on to initiate legal proceedings?
Legal action arising from a counterparty’s groundless refusal to negotiate a contract generally falls into the following two scenarios:
- Cases where the parties are only at the negotiation stage, without any MOU or binding agreement
- Pursuant to Article 3 of the Civil Code 2015: Arguing that the other party exercised its rights and obligations in bad faith and dishonestly during the negotiation stage, thereby causing damage to the enterprise.
- Pursuant to Article 351 of the Civil Code 2015: Where it can be proven that a specific obligation to negotiate in good faith already existed (arising from a letter of principle approval, meeting minutes, prior commitments, etc.) and the other party breached such obligation. The breaching party must take liability for violation of civil obligations, including obligations arising from unilateral legal acts, oral agreements, emails, and similar forms of commitment.
- Pursuant to Article 584 of the Civil Code 2015: If the conduct of inducing negotiations and then groundlessly refusing to proceed is considered an unlawful act causing damage and involving fault, the aggrieved party may claim non-contractual damages.
- Cases where there is an MOU/ agreement in principle/ exclusivity agreement
- Pursuant to Article 385 of the Civil Code 2015: Establishing that the MOU/agreement constitutes a valid contract leading to obligations to negotiate in good faith.
- Pursuant to Articles 351 and 360 of the Civil Code 2015: Arguing that the groundless refusal to negotiate constitutes a breach of obligations under the MOU and requesting compensation from the breaching party.
- Pursuant to Article 302 of the Commercial Law 2005: Claiming compensation for actual and direct damages, as well as direct profits that the aggrieved party would otherwise have obtained. If the MOU contains provisions on contractual penalties, Article 300 of the Commercial Law 2005 may also be invoked.
2. If the counterparty continuously changes personnel, causing delays in negotiations, does an enterprise have the right to refuse to continue negotiating the contract?
If the counterparty continuously changes personnel, thereby causing delays in negotiations, an enterprise has the right to refuse to continue negotiations based on the principles of freedom of contract and good faith.
Accordingly, an enterprise may terminate or refuse to continue negotiations if the counterparty’s repeated personnel changes cause the negotiation process to become prolonged and ineffective, provided that such refusal is conducted in good faith, honestly, and in compliance with any existing agreements between the parties.
3. If an enterprise has already spent 200 million VND on site surveys, but the counterparty unexpectedly refuses to negotiate the contract, from whom may such amount be claimed?
Pursuant to the provisions on non-contractual compensation for damages under Article 584 of the Civil Code 2015, compensation liability only arises when all four following elements are satisfied: Existence of unlawful conduct; actual damage; causal relationship between the conduct and the damage; and fault of the person causing the damage.
Accordingly, with respect to site survey expenses of 200 million VND, where one party independently decides to conduct the survey without any written agreement requiring the counterparty to reimburse such costs, the law generally regards such expenses as ordinary business costs and commercial risks. The counterparty shall only be liable for compensation if it committed unlawful conduct or breached obligations previously agreed upon, thereby causing damage.
A party may have grounds to claim compensation for the 200 million VND (or part thereof) if the counterparty unexpectedly and groundlessly refuses negotiations in breach of an agreement, or where there are MOUs, emails, meeting minutes, or similar documents evidencing that the site survey was conducted at the counterparty’s request and that the survey expenses would be reimbursed or incorporated into the future contract value.
4. Can silence or failure to respond to negotiation emails be considered an implied refusal to negotiate a contract?
Pursuant to Article 393 of the Civil Code 2015, silence is generally not automatically construed as acceptance or refusal unless the parties have agreed otherwise or established prior practices or transactional customs permitting such interpretation.
Therefore, silence or failure to respond to negotiation emails shall not automatically be deemed an implied refusal to negotiate. However, in practice, prolonged silence may be interpreted by the other party as unwillingness to continue negotiations.
5. Is it permissible to refuse contract negotiations due to market price fluctuations without being subject to sanctions?
An enterprise will generally not be subject to penalties and may suspend negotiations due to market price fluctuations where:
- The parties are only at the negotiation stage and no binding MOU or contract exists;
- The MOU, memorandum, or agreement in principle expressly provides the right to adjust or renegotiate prices in the event of market fluctuations, or grants the right to terminate negotiations or refuse contract execution if input prices, exchange rates, tax policies, or similar factors exceed a specified threshold;
- There has been a fundamental change in circumstances under Article 420 of the Civil Code 2015.
Accordingly, a party may refuse to continue negotiations (or refuse to execute the contract) due to market price fluctuations without being sanctioned if the parties have not entered into any binding commitment requiring continuation of negotiations or execution of the contract, or where the MOU/contract contains provisions allowing withdrawal or renegotiation upon market fluctuations.
However, if specific commitments already exist and one party unilaterally withdraws merely because “market prices have become unfavorable”, such conduct may still be deemed a breach, potentially resulting in sanctions and compensation liability.
V. Are you looking for a competent and reputable lawyer to assist with issues relating to refusal to negotiate a contract?
Refusal to negotiate a contract may appear straightforward, but it may involve significant legal risks if not handled properly. With its professional team, NPLaw assists enterprises in optimally protecting their rights and interests when seeking to refuse contract negotiations.
The above information is provided for reference purposes only. Should clients require detailed advice regarding a specific case, please contact NPLaw Firm for immediate consultation.
