Rights and obligations of the parties to a construction contract in Vietnam

Rights and obligations of the parties to a construction contract in Vietnam (Internet image)

1. What is construction contract?

According to Clause 1, Article 2 of Decree 37/2015/ND-CP, construction contract is a civil contract negotiated in writing between the employer and contractor for execution of a part or whole of the construction investment activity.

2. Rights and obligations of the parties to a construction contract in Vietnam

2.1. Rights and obligations of the employer and contractor in Vietnam

- Rights and obligations of the parties to a construction contract shall be negotiated by the two parties in the contract ensuring no opposition to the law.

- Either party must make written notice to the other party about rights and responsibilities of representatives for management of contract performance. When either party changes its representative for management of contract performance, a written notice must be made to the other party.

Particularly when the contractor changes its representative or key personnel for management of contract performance, this must be approved by the employer.

- In case the contractor is an economic group or corporation, it can assign work to its members but must ensure openness, transparency and suitability for qualifications of individual members and this must be approved in advance by the employer.

- Depending on specific contract type, rights and obligations of the two parties are also prescribed in Section 2.2 - 2.22.

(Article 24 of Decree 37/2015/ND-CP)

2.2. Rights and obligations of the employer (contract for consultancy) in Vietnam

- Rights of the employer:

= Be entitled to ownership and use of consultancy products;

= Refuse acceptance of consultancy products of non-conformity under the contract;

= Inspect quality of the work performed by the contractor without hindrance to its normal operation;

= Other rights as prescribed;

- Obligations of the employer:

= Provide requirements for works and documents to the contractor ensuring payment and necessary means for implementation of works as agreed in the contract (if any).

= Ensure copyright for any copyright consultancy product under the contract;

= Settle the contractor’s proposals on schedule within competence during the implementation of the contract as agreed.

= Make full payment to the contractor according to the payment schedule agreed in the contract;

= Other rights as prescribed;

(Article 25 of Decree 37/2015/ND-CP)

2.3. Rights and obligations of the contractor (contract for consultancy) in Vietnam

- Rights of the contractor:

= Request the employer to provide information and documents relating to consulting duties and working means as agreed in the contract (if any).

= Propose changes on conditions for provision of consultancy services for the benefit of the employer or upon detection of factors imposing adverse effects on quality of consultancy products;

= Refuse performance of inappropriate works beyond the contract’s scope of work and unlawful requirements by the employer;

= Get guarantee of copyright for any copyright consultancy product under the contract;

= Other rights as prescribed by the law;

- Obligations of the contractor:

= Complete the works that meet schedule and quality as agreed in the contract;

= For engineering contract: Take part in work acceptance with the investor according to the Law on Construction Quality Control, designer's supervision and answer questions of engineering document at the request of the employer.

= Preserve and return to the employer documents and working means provided by the employer under the contract after the work is completed (if any);

= Make written notice to the employer about inadequacy of provided information and poor quality of working means;

= Keep confidential information relating to consultancy services as prescribed in the contract or the law;

= Other obligations as prescribed by the law;

(Article 26 of Decree 37/2015/ND-CP)

2.4. Rights and obligations of the employer (contract for work execution)

- Rights of the employer:

= Temporarily halt the construction and request remedial work to consequences when the contractor has violated regulations on construction quality, labor safety, environmental protection and fire and explosion prevention and fighting;

= Inspect quality of the work performed by the contractor, production facilities without hindrance to its normal operation;

= Other rights as prescribed by the law;

- Obligations of the employer:

= In case the employer is an investor, license for construction must be obtained as prescribed.

= Hand over whole or part of the construction site to the contractor for management and use in accordance with the implementation progress and other agreement in the contract;

= Appoint and make a written notice to the contractor about key personnel engaging in management of contract performance;

= Provide design documents, information, means, machinery, equipment and materials as agreed in the contract (if any) and as prescribed by relevant law;

= Make full payment to the contractor according to the payment schedule agreed in the contract;

= Organize construction supervision:

= Inspect the contractor’s measures to ensure labor safety, environmental protection and fire & explosion prevention and fighting;

= Conduct inspection, acceptance, payment and settlement of contract on schedule as prescribed;

= If organizations or individuals are hired to provide consultancy services, specify their duties, authority in the management of contract performance and make notification to the contractor;

= Review and approve in writing the contractor’s proposals about engineering and construction during the construction period;

= Other obligations as prescribed by the law;

(Article 27 of Decree 37/2015/ND-CP)

2.5. Rights and obligations of the contractor (contract for work execution) in Vietnam

- Rights of the contractor:

= Propose additional quantity of work beyond the contract to the employer; refuse performance of the works beyond the contract without agreement between the two parties or unlawful requirements by the employer;

= Change construction measures approved by the employer in order to quicken the progress, ensure quality, safety and efficiency of the construction works on the basis of signed contractual price;

= Be entitled to ask the employer to pay loan interests due to late payment as agreed in the contract; be entitled to ask for compensation for damages caused by late handover of plan layout and other losses caused by the employer.

= Other rights as prescribed by the law;

- Obligations of the contractor:

= Provide human force, materials, working machinery and equipment, other related material conditions with adequate quantity and type under the contract; design shop drawings (in case the contractor performs shop drawing design) for implementation of the works under the contract;

= Receive and manage site plan, protect borderline markers of the construction site;

= Carry out construction in accordance with the design, technical instructions, regulations and standards, ensuring quality, schedule, environmental protection safety and fire & explosion prevention and fighting.

= Keep daily records of construction;

= Test materials, equipment and construction product as prescribed in the Law on Construction Quality Control, technical instructions, standards and regulations on construction;

= Manage workers on the site; ensure safety, order and security and no adverse effect on surrounding residential area;

= Establish construction measures, as-built dossiers and take part in work acceptance;

= Take responsibility for quality of the construction undertaken; Take remedial work to any mistake committed during the construction;

= Cooperate with other contractors on the site;

= Make regular reports to the employer on construction schedule, human force and main equipment for the construction;

= Move materials, machinery, equipment, and other properties out of the site within a defined time limit after the works have been accepted, handed over or the contract is terminated according to Article 41 hereof except otherwise as agreed in the contract;

= Return the site plan as agreed in the contract;

= Keep confidential information relating to the contract or as prescribed by the law;

= Other obligations as prescribed by the law;

(Article 28 of Decree 37/2015/ND-CP)

2.6. Rights and obligations of the employer (contract for procurement of technological equipment) in Vietnam

- Provide necessary information, site plan for installation of equipment to the contractor;

- Cooperate with the contractor during training, technology transfer; provide instructions on installation, use and operation;

- Refuse acceptance of technological equipment found contrary to the agreement in the contract in terms of quantity, quality, type and origin;

- In case the employer carries out technological design for the contractor, the employer must take full responsibility for quality and intellectual property rights of this design;

- Other rights and obligations as prescribed by the law;

(Article 29 of Decree 37/2015/ND-CP)

2.7. Rights and obligations of the contractor (contract for procurement of technological equipment) in Vietnam

- Hand over technological equipment to the employer as agreed in the contract on quantity, quality, location, time, packaging, preservation, origin and other agreement in the contract;

- Provide to the employer all necessary information about technological equipment; instructions on installation, use, operation, preservation and maintenance of technological equipment; provide training for management staff and operators in using the works (if agreed in the contract);

- Cooperate with the employer in conducting trial operation of technological equipment;

- Intellectual property rights of technological equipment:

= Technological equipment provided by the contractor must ensure intellectual property rights. The contractor is not permitted to provide technological equipment that violates intellectual property rights. The contractor shall be responsible for any dispute relating to intellectual property rights of technological equipment provided;

= In case the technological equipment is manufactured according to the design or figures provided by the employer, the contractor shall not be responsible for any complaints relating to violations of intellectual property rights arising from such technological equipment.

= Either party shall be responsible for failing to make immediate notice to the other party about complaints filed by the third party about intellectual property rights of the technological equipment upon notification.

- Other rights and obligations as prescribed by the law;

(Article 30 of Decree 37/2015/ND-CP)

2.8. Rights and obligations of the employer (EPC contract) in Vietnam

- Rights of the employer:

= Refuse acceptance of products failing to meet quality as set out in the contract; refuse acceptance of technological equipment found contrary to the agreement in the contract in terms of quantity, quality, type and origin and products that violate intellectual property rights;

= Inspect the contractor’s performance of works as set out in the contract without causing any hindrance to its normal operation;

= Temporarily halt the works as set out in the contract and request remedial work to the consequences upon finding that the contractor has been in breach of the contract or state regulations;

= Request the contractor to hand over documents, information relating to the contract products as signed;

= Examine and approve the lists of qualified sub-contractors not yet included in the EPC contract as requested by the contractor;

= Other rights as prescribed by the law;

- Obligations of the employer:

= Make full payment to the contractor according to the payment schedule agreed in the contract;

= Appoint and make a written notice to the contractor about key personnel engaging in management of contract performance;

= Provide information, documents and necessary means to the contractor for its performance (if agreed in the contract);

= For an EPC contract established by selecting an EPC contractor immediately after the fundamental design is approved: carry out commissioning, appraisal and approval or request a competent authority to promptly appraise and approve the designs implemented after the fundamental design has been approved by the investment decision maker in accordance with regulations of law, excluding the estimated costs of constructing works or work items covered by the EPC contract.

If the EPC contract is established by selecting an EPC contractor immediately after the FEED is approved: carry out commissioning, appraisal and approval or request a competent authority to promptly appraise and approve the designs implemented after the FEED has been approved by the investment decision maker in accordance with regulations of law, excluding the estimated costs of constructing works or work items covered by the EPC contract.

= Apply for license for construction and hand over clean site plan to the contract under the contract implementation progress;

= Supervise implementation of works as set out in the contract; examine measures to ensure labor safety, environmental protection and fire & explosion prevention and fighting as regulated;

= Negotiate with the contractor on the ITB for procurement of technological equipment (if agreed in the contract);

= Conduct inspection, acceptance, payment and settlement of contract on schedule as prescribed;

= Ensure copyright for any consultancy product under the contract;

= Organize training for management staff and operators in using the works;

= Other obligations as prescribed by the law;

(Article 31 of Decree 37/2015/ND-CP, as amended by Decree 50/2021/ND-CP)

2.9. Rights and obligations of the contractor (EPC contract) in Vietnam

- Rights of the contractor:

= Request the employer to provide information, documents and working means (if agreed in the contract) relating to the contract’s scope of work.

= Propose additional quantity of work beyond the contract to the employer; refuse performance of the works beyond the contract without agreement between the two parties or unlawful requirements by the employer;

= Organize, manage and carry out tasks or activities as set out in the contract;

= Other rights as prescribed by the law;

- Obligations of the contractor:

= Provide adequate human force, materials, machinery, equipment and other necessary means for construction work under the contract;

= Receive, manage, preserve and return documents and means provided by the employer (if agreed in the contract);

= Make written notice to the employer about inadequacy of provided information and poor quality of working means that affect execution of tasks or activities under the contract;

= Keep confidential any contract related information as agreed in the contract or as prescribed by the law;

= Carry out tasks under the contract ensuring safety, quality, schedule and other agreement;

= For an EPC contract established by selecting an EPC contractor immediately after the fundamental design is approved: produce the designs to be implemented after the fundamental design has been approved by the investment decision maker when approving the project in conformity with the approved fundamental design, excluding the estimated costs of constructing works or work items covered by the EPC contract.

If the EPC contract is established by selecting an EPC contractor immediately after the FEED is approved: produce the designs to be implemented after the FEED has been approved by the investment decision maker when approving the project in conformity with the approved FEED, excluding the estimated costs of constructing works or work items covered by the EPC contract.

= Organize procurement, manufacture and supply of technological equipment to meet requirements and contract implementation progress; select sub-contractors (if any) via bidding or no-bid contracts and make submission to the investor for approval; negotiate and agree with the investor on intent of the ITB for procurement of technological equipment (if agreed in the contract).  

Provide to the employer all necessary information about technological equipment; instructions on installation, use, operation, preservation and maintenance of technological equipment; provide training for management staff and operators (if agreed in the contract);

= Carry out tests, corrections and trial overall operation of the works and hand over the completed works to the employer as agreed in the contract and as prescribed by the applicable law;

= Ensure any product provided does not violate intellectual property rights as prescribed by the law;

= Hand over documents, information relating to the contract product to the employer under the contract;

= Other obligations as prescribed by the law;

(Article 32 of Decree 37/2015/ND-CP, as amended by Decree 50/2021/ND-CP)

2.10. Rights and obligations of the employer (turnkey contract) in Vietnam

In addition to rights and obligations as prescribed in Section 2.8, the employer shall be also responsible for carrying out inspection and acceptance of the construction project for submission to competent agencies as prescribed by the Law on Construction, or to a person (who is competent to decide investment) for appraisal and approval or for appraisal and approval within competence.

(Article 33 of Decree 37/2015/ND-CP)

2.11. Rights and obligations of the contractor (turnkey contract) in Vietnam

In addition to rights and obligations as prescribed in Section 2.9, the contractor shall be also responsible for establishing construction project, taking part in protecting the project together with the employer before the competent person’s decision to invest to invest and completing the project as requested by the employer in accordance with agreement in the contract.

(Article 34 of Decree 37/2015/ND-CP)

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