Regulations on temporary suspension of construction contract performance in Vietnam

Regulations on temporary suspension of construction contract performance in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Regulations on temporary suspension of construction contract performance in Vietnam

Regulations on temporary suspension of construction contract performance in Vietnam according to Article 40 of Decree 37/2015/ND-CP are as follows:

- Situations resulting in temporary suspension of construction contract performance, rights to temporary suspension; procedures for temporary suspension, level of compensation for damages caused by temporary suspension shall be negotiated and agreed by the employer and contractor in the contract;

- The parties to the contract are entitled to temporarily suspend the contract in the following cases:

+ The employer has the right to temporarily suspend the contract performance when the contractor fails to meet requirements for quality, labor safety and contract progress as agreed in the contract.

+ The contractor has the right to temporarily suspend the contract performance and prolong the contract progress when the employer is in breach of payment terms, specifically no adequate payment is made to the contractor as agreed after 28 days since the payment deadline as prescribed in Clause 10, Article 19 of Decree 37/2015/ND-CP except otherwise as agreed by the two parties; no payment guarantee is made for quantity of work to be executed.

- Before one party temporarily suspends the contract performance, a written notice must be made to the other party 28 days in advance with reasons for temporary suspension being specified; the employer and contractor shall be responsible for carrying out negotiations to continue to maintain agreements as signed in the contract except force majeure events.

In case one party fails to make a notice about temporary suspension or reasons specified are found contrary to the signed contract, it shall be responsible for making compensation for losses caused to the other party.

2. Regulations on termination of construction contract in Vietnam

According to Article 41 of Decree 37/2015/ND-CP regulations on termination of construction contract in Vietnam as follows:

- Situations resulting in termination of the contract, rights to terminate the contract; sequence, procedures for termination of the contract, level of compensation for losses caused by termination of the contract must be agreed in the contract and in accordance with the provisions set out of Decree 37/2015/ND-CP and relevant law provisions.

- Either party has the right to terminate the contract without compensation for losses caused in the cases as prescribed in Clauses 7 and 8 of Article 41 of Decree 37/2015/ND-CP.

- In case the default party (party in breach of the contract) fails to correct its mistakes after 56 days since the date of temporary suspension by notice without proper reason except otherwise as agreed, the other party (party ordering suspension temporary) has the right to terminate the contract.

- In case either party unilaterally terminates the contract without the other party’s fault, such party must make compensation for damages caused to the other party.

- Before terminating the contract, one party must make a written notice to the other party some time in advance but no later than 28 days with reasons being specified except otherwise as agreed in the contract. If the party that terminates the contract fails to make the notice causing losses to the other party, such party must make compensation for the losses.

- The contract shall become ineffective since the date of termination and the parties must fulfill the procedures for liquidation with a period of time as agreed in the contract but no later than 56 days since the notice about termination is issued except otherwise as agreed in the contract. After this period, if either party fails to fulfill the procedures for liquidation, the other party is fully entitled to liquidate the contract.

- The employer has the right to terminate the contract in the following cases:

+ The contractor goes bankrupt, dissolved or transfers the contract to other individuals or organizations without consent of the employer.

+ The contractor refuses to execute the construction work under the contract for 56 straight days that results in violations of the contract progress as agreed in the contract except otherwise as approved by the employer.

- The contractor has the right to terminate the contract in the following cases:

+ The employer goes bankrupt, dissolved or transfers the contract to other individuals or organizations without approval of the contractor.

+ The construction work has been suspended for 56 straight days by the employer’s fault except otherwise as agreed by the two parties.

+ The employer fails to make the payment to the contractor after 56 days since receipt of adequate payment documents except otherwise as agreed by the two parties.

- Within two working days since the contract is terminated, the contractor must move all the materials, human force, machinery, equipment and other properties in its possession out of the construction site. After this period, if the contractor fails to do so, the employer has the right to settle these properties.

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