Unclear business cooperation agreements: causes of disputes and legal risks

In practice, unclear business cooperation agreements remain common due to the parties’ subjectivity or lack of in-depth legal advisory. Ambiguous contractual provisions regarding rights, obligations, profit-sharing, and liabilities often lead to differing interpretations during performance.

In practice, unclear business cooperation agreements remain common due to the parties’ subjectivity or lack of in-depth legal advisory. Ambiguous contractual provisions regarding rights, obligations, profit-sharing, and liabilities often lead to differing interpretations during performance. It leads to disputes, disrupts business operations, and incurs significant time and cost for resolution. In the long term, such lack of clarity also erodes trust and weakens cooperative relationships between the parties.

I. Overview of issues relating to unclear business cooperation agreements

In business activities, cooperation agreements serve as an essential legal basis for parties to establish their rights and obligations during joint investment and benefit exploitation. However, in reality, many cooperation agreements are unclear in terms of content, terminology, or methods of implementation, thereby creating substantial legal risks. Lack of transparency in main provisions, such as scope of cooperation, profit allocation, financial responsibilities, or mechanisms for handling breaches, is often the direct cause of disputes.

Accordingly, identifying and clarifying issues associated with unclear business cooperation agreements is necessary to protect lawful interests and ensure stability in cooperative relationships.

II. Understanding unclear business cooperation agreements

1. What is an unclear business cooperation agreement?

Pursuant to Clause 1, Article 504 of the Civil Code 2015, a cooperation contract is an agreement between individuals or legal entities to jointly contribute assets or efforts to perform certain work, share benefits, and bear responsibilities collectively. In addition, Clause 14, Article 3 of the Law on Investment 2020 defines a Business Cooperation Contract (BCC) as an agreement between investors for the purpose of business cooperation and profit or product sharing in accordance with the law, without establishing a legal entity.

On that basis, an unclear business cooperation agreement is one in which the contractual provisions expressing the parties’ intent are incomplete, insufficiently specific, or ambiguously drafted, making it difficult to accurately determine each party’s rights, obligations, and liabilities. Such agreements often fail to clearly define core elements such as scope of cooperation, governance mechanisms, profit-sharing arrangements, financial obligations, or breach-handling mechanisms, thereby creating potential risks of disputes during performance.

2. What factors typically render an agreement unclear?

A business cooperation agreement may be deemed unclear where one or more of the following factors are present:

Vague provisions on objectives and scope of cooperation, failing to specify business sectors, scale, or limits of each party’s responsibilities;
Ambiguous stipulations regarding rights and obligations of the parties;
Unclear capital contribution ratios and methods, lacking specification of value, timing, or form of contribution;
Lack of transparency in profit-sharing and risk allocation mechanisms;
Absence of or unclear provisions on breach handling and dispute resolution, including sanctions and compensation mechanisms.

These factors indicate that unclear agreements often result from a lack of standardized drafting and failure to comply with fundamental legal principles governing contract formation. Where essential terms are not clearly defined, the contract not only loses enforceability but also becomes a direct source of disputes and legal risks.

3. Why do unclear agreements lead to disputes?

Unclear agreements are a primary cause of disputes as they fail to fully and consistently reflect the parties’ mutual intent at the time of execution. When main provisions, such as scope of cooperation, management authority, financial obligations, profit-sharing, or risk allocation, are vaguely defined, each party may interpret and apply them differently during performance.

Moreover, in Business Cooperation Contracts (BCCs), the absence of a separate legal entity means that all rights and obligations depend entirely on the contract. Therefore, if the agreement lacks clarity, the parties will have no solid legal basis to determine liability in case of breach or damage. In dispute situations, contract interpretation under Article 404 of the Civil Code 2015 may not accurately reflect the parties’ original intentions, thereby intensifying conflicts and prolonging dispute resolution.

4. How can an unclear agreement be identified?

An unclear business cooperation agreement may be identified through the following indicators:

Absence of essential terms required by law;
Failure to clearly define rights and obligations of the parties;
Ambiguous provisions on capital contribution, profit-sharing, and risk allocation;
Lack of or unclear governance and management mechanisms;
Absence of or incomplete provisions on breach handling;
Failure to specify dispute resolution methods;
Use of inconsistent or confusing legal and commercial terminology.

Early identification of such indicators plays a critical role in dispute prevention. Where agreements contain vague or legally non-compliant provisions, parties may have difficulties in performance and risk losing their legitimate interests in the event of disputes.

III. Legal framework governing unclear business cooperation agreements

1. What legal provisions apply to unclear agreements?

Where a business cooperation agreement is deemed unclear, the determination of rights and obligations shall be based on the following legal framework:

The Civil Code 2015: Providing general rules on contract formation, performance, and interpretation (Article 404);
The Law on Investment 2020: Governing the legal nature, form, and essential contents of BCCs (Article 28);
The Commercial Law 2005 (if applicable): Regulating commercial activities, including principles of contract formation and performance (Articles 10–15) and remedies for breach (Chapter VII);
Other relevant laws: Depending on the specific sector, specialized regulations such as construction, real estate, finance, taxation, or foreign investment laws may apply.

Thus, resolving unclear agreements requires not only reliance on contractual terms but also the combined application of relevant legal provisions to ensure protection of lawful rights and maintenance of legal order in business activities.

2. How are the parties’ rights protected in such cases?

Where contractual terms are unclear, competent authorities will interpret the agreement based on its purpose, the parties’ mutual intent at the time of execution, established practices, and principles of good faith and honesty, thereby safeguarding lawful rights and interests. Where the contract lacks or inadequately regulates certain matters, mandatory provisions under Article 398 of the Civil Code 2015, Article 28 of the Law on Investment 2020, and other relevant laws shall apply directly.

In general, although unclear agreements entail significant risks, the law still provides mechanisms to protect the parties’ rights through general principles and appropriate dispute resolution frameworks, ensuring fairness and stability in business cooperation.

3. What violations commonly arise from unclear agreements?

Unclear business cooperation agreements often lead to various breaches during performance, including:

Failure to perform or improper performance of capital contribution obligations;
Disputes over methods, timing, and ratios of profit and risk allocation;
Abuse or overreach of management and operational authority;
Lack of transparency in information disclosure and financial reporting;
Unilateral termination contrary to contractual terms or applicable law.

Such violations typically stem from ambiguity in contractual provisions, undermining the effectiveness of cooperation and directly leading to legal disputes between the parties.

IV. Questions regarding unclear business cooperation agreements

1. What can the parties do to improve the clarity of an unclear business cooperation agreement?

To enhance the clarity of a business cooperation agreement, the parties may implement the following measures:

Conducting a comprehensive review of the contract: Identifying provisions that are ambiguous, inconsistent, or incomplete in light of applicable legal requirements;
Supplementing and specifying main terms: Clearly defining the scope of cooperation, rights and obligations of each party, management mechanisms, capital contributions, profit-sharing arrangements, and risk allocation;
Aligning interpretations and record them in writing: All agreed understandings should be explicitly documented in the contract or its appendices;
Amending and supplementing the contract in accordance with legal procedures: Any modification must be mutually agreed upon and formalized in a valid written instrument;
Seeking professional legal advice: Lawyers or legal experts can assist in standardizing provisions and ensuring compliance with the Civil Code 2015 and the Law on Investment 2020.

Proactively clarifying contractual content not only helps prevent disputes but also safeguards the parties’ rights and ensures long-term stability in the cooperation relationship.

2. What can a party do if the other party exploits ambiguities in the agreement?

Where one party takes advantage of contractual ambiguities to infringe upon the other party’s rights, the affected party may take the following actions:

Requesting clarification, interpretation, and rectification of contract performance, requiring the breaching party to comply with the original intent and purpose of the agreement;
Engaging in negotiation to amend or supplement the contract (Article 421 of the Civil Code 2015) or executing appendices to detail specific provisions (Article 403 of the Civil Code 2015);
Requiring the breaching party to cease the violation, remedy its consequences, and compensate for damages (if any);
Invoking legal dispute resolution mechanisms, including mediation, arbitration, or litigation before a competent court.

These measures enable the affected party to proactively protect its interests and mitigate risks arising from unclear contractual arrangements.

3. Is refusal to clarify an unclear agreement a violation of law? Why?

Refusal to clarify the contents of an unclear business cooperation agreement is not automatically deemed unlawful. However, during contract performance, if a party intentionally exploits such ambiguity to evade obligations, infringe upon the lawful rights and interests of the other party, or act contrary to the original purpose of cooperation, such conduct may constitute a violation of the principle of good faith and honesty under Clause 1, Article 3 of the Civil Code 2015, which provides that all individuals and legal entities are equal and are entitled to equal legal protection of their personal and property rights.

4. Can damages be claimed in cases arising from unclear agreements?

The parties may claim damages arising from an unclear business cooperation agreement if they can establish a breach of contractual obligations, actual damages, and a causal connection between the breach and the damages, in accordance with Article 303 of the Commercial Law 2005.

Where one party exploits contractual ambiguity to fail to perform or to improperly or incompletely perform its obligations, thereby causing damage, the affected party is entitled to claim compensation corresponding to the actual loss suffered. The lack of clarity in the contract does not negate the right to claim damages; rather, it may serve as a basis for determining legal liability where a breach has resulted in harm.

5. What consequences may arise if the parties fail to address unclear contractual terms?

If the parties fail to promptly clarify and rectify ambiguities in a business cooperation agreement, several legal and practical consequences may arise. First, disputes are likely to be prolonged as each party interprets and applies the contract differently, thereby disrupting or halting business operations. Additionally, the parties may incur financial losses, miss business opportunities, and bear significant costs and time in resolving disputes through courts or arbitration. In the long term, failure to address contractual ambiguities may lose trust, severely damage cooperative relationships, and negatively affect the parties’ reputation in the market.

V. Are you looking for a qualified and reputable lawyer to assist with issues relating to unclear business cooperation agreements?

Legal advisory services relating to unclear business cooperation agreements can assist clients with:

Advising, reviewing, and assessing the legal validity of business cooperation agreements;
Analyzing legal risks and clarifying the rights and obligations of the parties where contractual terms are unclear;
Drafting, amending, and supplementing Business Cooperation Contracts (BCCs) to ensure clarity, consistency, and legal compliance;
Representing clients in negotiation, mediation, and dispute resolution arising from unclear agreements;
Protecting clients’ lawful rights and interests before arbitration tribunals or competent courts.

The above information is provided for reference purposes only. Should you have any inquiries regarding unclear business cooperation agreements, please contact NPLAW for direct consultation and comprehensive legal support from our team of lawyers.