In practice, many parties still choose to agree to the terms of a BOO contract orally due to mutual trust or a desire to expedite project implementation. However, when disputes arise concerning ownership rights, operation, or the allocation of benefits, the absence of written evidence makes the dispute resolution process significantly more complicated. In many cases, one party denies the existence or contents of the oral agreement, making it difficult to prove the parties' true intentions and the scope of their commitments. As a result, legal risks and financial losses for the parties involved in the BOO project are substantially increased.

I. Common legal risks associated with agreeing to BOO contract terms orally

Agreeing to BOO contract terms orally has significant legal risks, particularly BOO contracts with high-value investment projects, long implementation periods, and complex rights and obligations. In the absence of written documents, the parties may have considerable difficulties in proving the agreed terms, the extent of their commitments, and the timing of contract formation. If a dispute arises, one party's denial of the existence or content of the oral agreement may prolong the dispute resolution process and place the other party at a substantial disadvantage.

Moreover, many transactions in the sectors of investment, construction, or those involving land use rights are required by law to be made in writing and, in certain cases, notarized, certified, or registered. An oral agreement may fail to satisfy the statutory formal requirements and may be declared invalid. Such invalidity may adversely affect not only the parties' rights and obligations but also the project's financing capability, guarantees, and the overall legal stability of the BOO project.

II. Understanding oral agreements to BOO contract terms

1. What does agreeing to BOO contract terms orally mean?

Pursuant to Clause 16, Article 3 and Clause 1, Article 45 of the Law on Investment 2020 under the Public-Private Partnership model, a Build-Own-Operate (BOO) Contract is a type of PPP project contract under which the investor constructs the project, acquires ownership upon completion, and directly operates and commercially exploits the project for the agreed period. Unlike certain other PPP contracts, the investor is not required to transfer the protect to the State upon the expiry of the contract term.

Contractual terms are provisions agreed upon by the parties to establish, amend, or terminate civil rights and obligations. Accordingly, agreeing to BOO contract terms orally refers to the parties reaching a verbal consensus on matters such as the scope of investment, ownership rights, operational mechanisms, and benefit-sharing arrangements without formally recording such agreements in writing as required by law.

2. When should the parties consider agreeing to BOO contract terms orally instead of in writing?

In practice, BOO contracts involve substantial investment value, long-term implementation, and are subject to stringent regulations governing investment, construction, and PPP projects. Thus, as a general principle, the parties should not rely solely on oral agreements.

Nevertheless, oral discussions may arise during the pre-contractual stage, such as preliminary negotiations regarding the intended cooperation framework, principles for allocating benefits, or minor technical adjustments necessary to promptly address issues arising during negotiations.

However, fundamental matters, including ownership of the project facility, financial arrangements, risk allocation, and the operational term, should always be documented in writing. Relying solely on oral agreements for these essential provisions creates considerable risks regarding both enforceability and evidentiary value in any dispute.

3. How can an oral agreement on BOO contract terms be confirmed?

An oral contract may possess the same legal validity as a written contract, but only under certain circumstances. Specifically, an oral agreement is legally valid only if it satisfies all general conditions for the validity of a civil transaction and does not fall within a category of transactions that the law requires to be executed in writing under Clause 1, Article 117 of the Civil Code 2015.

To minimize legal risks, if the parties have initially agreed to BOO contract terms orally, they should promptly confirm such agreement through verifiable means, including:

  • Preparing minutes of meetings or negotiations;
  • Sending emails confirming the agreed contents;
  • Exchanging official messages between duly authorized representatives; or
  • Recording the agreed terms in a contract appendix.

Furthermore, the parties should ensure that those participating in the negotiations possess the legal authority to represent the relevant entity, whether by operation of law or under a valid power of attorney. In a dispute, documents, electronic data, audio recordings (where lawfully obtained), and witness testimony may serve as evidence. However, such evidence generally carries less evidentiary weight than a formally executed written agreement.

4. Can agreeing to BOO contract terms orally lead to disputes?

Agreeing to BOO contract terms orally carries a significant risk of dispute. A BOO contract is a high-value investment agreement involving long implementation periods, ownership of project assets, operation of infrastructure, and complex benefit-sharing mechanisms. If important contractual provisions are agreed upon only verbally, each party may interpret the agreement differently, particularly with respect to the scope of rights, financial obligations, or liability allocation in the case of project risks.

Furthermore, if one party later denies having entered into the oral agreement or alleges that its contents have been misunderstood, the other party will face substantial challenges in proving both the existence and the specific terms of the agreement. In BOO projects, such disputes may result in considerable financial losses, project delays, and even adverse consequences for relationships with government authorities and project financiers. 

III. Legal regulations governing oral agreements on BOO contract terms

1. Are there any formal requirements when agreeing to BOO contract terms orally?

Pursuant to Article 119 of the Civil Code 2015, civil transactions may generally be established orally, in writing, or through specific conduct, unless the law expressly requires the transaction to be made in writing or to be notarized, authenticated, or registered.

However, a BOO contract which constitutes a PPP project contract under the Law on Investment 2020 under the Public-Private Partnership model is legally required to be executed in writing and must comply with strict statutory requirements concerning its contents and signing authority (Clause 16, Article 3 of the PPP Law 2020). 

Accordingly, merely agreeing to BOO contract terms orally will generally fail to satisfy the mandatory formal requirements applicable to an official BOO contract.

2. Are oral agreements on BOO contract terms legally valid?

As a general principle, an oral agreement may be legally recognized if it satisfies all conditions for the validity of a civil transaction, including legal capacity of the parties, voluntary consent, and a lawful purpose and subject matter.

However, in the context of PPP projects and BOO contracts, as the law expressly requires the contract to be executed in writing, an oral agreement concerning the essential contractual terms may not be recognized or may be declared invalid due to non-compliance with statutory form requirements. Moreover, even if the oral agreement is not deemed invalid, its evidentiary value remains considerably weaker in the case of litigation or arbitration.

3. Which authority has jurisdiction over disputes concerning oral agreements on BOO contract terms?

If the parties have not entered into a valid arbitration agreement, disputes relating to oral agreements on BOO contract terms shall fall within the jurisdiction of the People's Court under Clause 3, Article 26 of the Civil Procedure Code 2015, as disputes arising from civil transactions or civil contracts.

Conversely, if the parties have concluded a valid arbitration agreement, such disputes shall be resolved by commercial arbitration in accordance with the Law on Commercial Arbitration 2010. Accordingly, the competent dispute resolution authority primarily depends upon whether a valid arbitration agreement exists between the parties.

IV. Questions regarding oral agreements on BOO contract terms

1. Is the presence of a third party required when agreeing to BOO contract terms orally?

As a general principle, Vietnamese civil law does not require the presence of a third-party witness when parties enter into an agreement orally. According to Article 119 of the Civil Code 2015, a civil transaction may be established verbally, in writing, or through specific conduct, unless the law expressly requires another mandatory form.

However, as a BOO contract is a PPP project contract governed by the Law on Investment 2020 in the form of Public-Private Partnership, it is legally required to be executed in writing. Accordingly, regardless of whether witnesses are present, relying solely on an oral agreement concerning contractual terms entails significant legal risks regarding both enforceability and evidentiary value. In practice, if an oral agreement has already been made, the testimony of an independent third party may strengthen the evidentiary value of the agreement in the event of a dispute, but it cannot substitute the statutory requirement that the BOO contract be executed in writing.

2. What happens if one party denies having agreed to BOO contract terms orally?

If one party denies having orally agreed to the terms of a BOO contract, the other party bears the burden of proving both the existence and the specific content of the alleged agreement in any dispute. Under the principle of burden of proof prescribed in Article 91 of the Civil Procedure Code 2015, the party asserting a claim must prove that the claim is lawful and supported by evidence. If there are no documents, written records, or sufficiently persuasive evidence, the likelihood of the People's Court accepting the claim is considerably reduced.

Moreover, as a BOO contract is a PPP project contract that must be executed in writing under the Law on Investment 2020 in the form of Public-Private Partnership, an agreement made solely in oral form may also be regarded as failing to satisfy the statutory requirements as to form. Consequently, the oral agreement may not only be difficult to prove but may also be denied legal validity altogether, resulting in financial losses, project delays, and complex legal liabilities among the parties.

3. Is an oral agreement on BOO contract terms governed by any particular laws?

An oral agreement concerning the terms of a BOO contract may be governed by several different legal instruments, depending on the nature of the project and the substance of the agreement. First, the general principles governing civil transactions, including contractual form, validity requirements, and grounds for invalidity, are regulated by the Civil Code 2015.

 

In addition, as a BOO contract is a type of PPP project contract, it is directly governed by the Law on Investment 2020 in the form of Public-Private Partnership, which requires project contracts to be executed in writing and to comply with prescribed procedures and formalities. Furthermore, depending on the specific sector involved (such as construction, land, finance, or procurement), other specialized legislation may also regulate the content and enforceability of the agreement. 

4. What risks may arise from relying solely on an oral agreement in a BOO contract?

If the parties rely solely on an oral agreement in a BOO contract, they may face significant legal risks, including:

  • The risk that the agreement may be declared invalid due to non-compliance with the mandatory written-form requirement applicable to PPP project contracts;
  • Difficulties in proving the agreement in the event of a dispute, as the claimant bears the burden of proof;
  • Misunderstandings or inconsistent interpretations regarding ownership rights, operational mechanisms, profit-sharing arrangements, and risk allocation;
  • Inadequate legal protection where one party subsequently denies the agreed terms;
  • Obstacles in obtaining financing, securing guarantees, or entering into transactions with third parties because of the absence of a clear legal basis;
  • The risk of project delays and substantial financial losses arising from prolonged disputes or the non-recognition of the agreement.

V. Are you looking for a reputable legal expert to assist with issues relating to oral agreements on BOO contract terms?

If disputes or uncertainties arise concerning oral agreements on BOO contract terms, consulting legal counsel with extensive expertise in PPP projects, investment law, and commercial contracts is essential for investors and businesses seeking to minimize legal risks and safeguard their lawful rights and interests. The legal team at NPLaw has substantial practical experience in:

  • Reviewing all relevant documents, correspondence, emails, and meeting minutes to assess the legal value of oral agreements relating to BOO contracts;
  • Advising on the legal requirements governing contractual validity, the formal requirements applicable to PPP project contracts, and the potential risk of invalidity;
  • Proposing appropriate legal solutions to formalize previously agreed oral arrangements through contract appendices, written confirmations, or re-execution of the agreement in compliance with applicable laws;
  • Assisting in negotiations where one party denies having orally agreed to the contractual terms;
  • Representing and protecting clients in litigation before the People's Courts or in commercial arbitration proceedings arising from disputes over oral agreements relating to BOO contracts.

The information provided above is for reference purposes only. If your enterprise or investment project is experiencing difficulties or requires comprehensive legal advice concerning oral agreements on BOO contract terms, please contact NPLaw. Our experienced lawyers are ready to provide timely, practical, and comprehensive legal assistance tailored to your specific circumstances.