A party that terminates a project on the wrong ground, or without the right notice, can turn itself from the aggrieved party into the defendant. In Vietnam, termination construction contract Vietnam disputes are rarely about whether a breach happened; they are about whether the terminating party followed the statutory grounds, the written-notice rule and the contract’s own procedure.
The law governing these steps changed on 1 July 2026, when the Law on Construction No. 135/2025/QH15 and Decree 210/2026/NĐ-CP came into effect. The stakes are highest on large projects, whether an expressway package, an airport terminal, a steel plant, a wind farm or a resort, because a wrongful exit leaves a half-built asset, committed equipment and lenders to deal with.
This article is written for foreign investors, lenders, employers and contractors. It sets out the grounds and notice rules, shows where the FIDIC 1999 edition differs from Vietnamese law, and identifies what a lender or employer should do before sending a termination notice.
Termination construction contract Vietnam: the statutory framework
Article 85 of the Law on Construction (Luật Xây dựng) deals with suspension and termination together. The contract itself must state when work may be suspended, for how long and by what procedure. Beyond that, termination is available under the Civil Code and under the two special grounds in Article 85(2) of the Law.
Decree 210/2026/NĐ-CP, which replaces Decree 50/2021/NĐ-CP, adds detail in Article 26 (suspension) and Article 27 (termination). Several fixed numbers in those articles, including the 56-day and 28-day periods discussed below, are drafted for public-investment and PPP projects. For private projects the parties agree their own periods, within the Law and the Civil Code. Always read a number in this area with that scope in mind.
Special grounds for termination construction contract Vietnam
Article 85(2) of the Law gives two construction-specific grounds in addition to the Civil Code:
- Force majeure without a workable amendment. The contract may be terminated where force majeure occurs, the parties cannot agree on amendments, and one or both can no longer meet the conditions or capacity needed to perform. The consequences follow the civil-law rules on force majeure.
- Prolonged suspension. Where work has been suspended beyond the period stated in the contract, and not through the fault of the other party, the injured party may cancel the contract or terminate it unilaterally.
Both grounds depend on what the contract says. A contract with no suspension period gives the second ground nothing to work with, which is one reason to draft that period carefully. The first ground links to our analysis of force majeure in construction contracts in Vietnam.
Suspension of works Vietnam: the step before termination
Suspension is often the first lever a party pulls, and it is the one most often misused. Article 85(1) of the Law lists four situations in which work may be suspended: serious breach by a party, force majeure, a request from a competent state authority, and a change in law that directly affects performance. The contract must set the permitted periods and the procedure.
Decree 210/2026, Article 26, adds two public-investment and PPP rules. A contractor may suspend if the employer has not paid a fully agreed payment stage more than 28 days after the due date, unless the contract says otherwise. A party may also suspend if the other fails to provide the security required under Article 83 of the Law.
The suspending party must give written notice with reasons; the notice period is set in the contract and, other than for force majeure, may not exceed 28 days. Suspension without a proper basis or notice is compensable under Article 86(2) of the Law.
Under the FIDIC 1999 edition, the contractor may suspend or slow work on not less than 21 days’ notice if the employer fails to provide financing evidence or to pay on time (Sub-Clause 16.1). A contractor may also treat a suspension that continues beyond 84 days, where the employer does not give permission to resume within 28 days of a request, as an omission, or terminate if the whole of the works is affected (Sub-Clause 8.11).
Breach of construction contract Vietnam: serious-breach grounds
Article 27(2) of the decree lists conduct treated as serious breach, which permits cancellation or unilateral termination under the Civil Code. The list is practical, and it is useful to read it as a checklist for evidence:
- assignment of the contract without the other party’s consent;
- the contractor refuses to perform, or does not perform for 56 consecutive days, with serious impact on progress, unless the parties agree otherwise;
- work is stopped for more than 56 consecutive days through the employer’s fault, with no justifiable reason;
- the employer fails to pay more than 56 days after the contractual due date, unless agreed otherwise; and
- other breaches agreed in the contract or provided by law.
The decree states the 56-day figures as part of the public-investment and PPP framework. In a private contract they are a sensible benchmark, but the parties are free to choose shorter or longer periods. Where a private contract is silent, expect a court or arbitral tribunal to look to the Civil Code’s general concept of serious breach, which makes evidence of materiality essential.
Wrongful termination damages Vietnam: no ground, no safe exit
Article 27(3) of the decree is blunt. A party that stops performing without a legal or contractual ground is in breach, bears civil liability and remains bound to perform. Article 85(4) of the Law adds that unlawful suspension, unilateral termination or cancellation must be compensated.
That is the central risk in any unilateral termination construction contract Vietnam scenario. A termination notice that fails on ground, form or timing may be treated as repudiation by the party that sent it. The correct test is not whether the other side was in breach, but whether the notice fits a ground that the law or the contract actually recognises.
Notice for termination construction contract Vietnam: the 28-day default
Article 85(3) of the Law requires the party that suspends or terminates to give prior written notice, stating the reason, the effective date and the legal consequences, except in force majeure. A party that fails to notify and causes loss must pay compensation.
Decree 210/2026 (Article 27(5)) sets the notice period under Article 85(3) at 28 days unless the parties agree otherwise, and requires the notice to state the reasons, basis and grounds. Take three practical points from that:
- The notice should refer to the contractual clause and the statutory ground, not only to the facts.
- It should be delivered in the manner the contract prescribes, to the contractual address, with proof of delivery.
- It should state the effective date and what the sender requires the recipient to do, such as stop work or begin demobilisation.
Our analysis of payment and final account explains how overdue payments are documented, which is the evidence base for most termination notices on the contractor side.
Before a termination or suspension notice is sent, IVLF Advisors can arrange a confidential preliminary review under NDA of the contract, the available grounds, the notice mechanics and the exposure if the termination is challenged.
Comparing Vietnamese law and the FIDIC 1999 edition
A termination construction contract Vietnam clause in a foreign-form contract is usually built on the FIDIC 1999 edition. The table below uses the Silver Book (EPC/Turnkey) text, which we checked. The Red Book (employer-designed works) and Yellow Book (plant and design-build) route several of these steps through the Engineer, so check the clause numbers in your own form.
| Issue | Vietnamese law | FIDIC 1999 Silver Book |
|---|---|---|
| Employer terminates for contractor default | Serious breach per contract and Civil Code; Art. 27(2) list; 28-day default notice (Art. 27(5)) | Cl. 15.1 notice to correct; cl. 15.2 grounds; 14 days’ notice, or immediate for insolvency or bribery |
| Contractor terminates for non-payment | Public-investment and PPP: more than 56 days overdue, unless agreed otherwise | Cl. 16.2: no payment within 42 days after the payment period expires; 14 days’ notice |
| Suspension for non-payment | Public-investment and PPP: more than 28 days overdue (Art. 26) | Cl. 16.1: 21 days’ notice |
| Termination for convenience | No free-standing statutory right identified; unlawful unilateral termination is compensable (Law, Art. 85(4)) | Cl. 15.5: effective 28 days after notice; not to use another contractor to finish the works |
| Force majeure termination | Law, Art. 85(2)(a) where amendment is impossible | Cl. 19.6: 84 continuous days, or 140 in total, then 7 days’ notice |
| Payment after termination | Liquidation; compensation per contract and Civil Code | Cl. 15.3-15.4 (employer terminates for default); cl. 16.4 and 19.6 (other cases) |
The comparison shows three friction points. FIDIC’s cure-notice step (Sub-Clause 15.1) has no mandatory statutory equivalent, so it must be drafted in. FIDIC’s convenience right is not an obvious fit with Vietnamese rules on unlawful unilateral termination. And FIDIC’s financing-charge and cost recovery language must be read alongside the statutory compensation rules.
Termination for convenience Vietnam: use with care
Under Sub-Clause 15.5 of the FIDIC 1999 edition the employer may terminate at any time for its convenience on notice, taking effect 28 days after the later of the contractor’s receipt of the notice and the return of the performance security. The employer may not use the right in order to execute the works itself or to give them to another contractor. The contractor is then paid under the Sub-Clause 19.6 formula, which covers work done, ordered plant and materials, reasonable costs incurred in expectation of completion, removal costs and repatriation costs.
We have not identified a free-standing statutory right of this kind, and Article 85(4) of the Law makes unlawful unilateral termination compensable. In our view, a convenience clause therefore needs to be treated as an express contractual right that is drafted precisely, priced fully, and tested for enforceability against the governing-law and forum choices.
Insolvency and dissolution
Under Article 27(4) of the decree, termination on bankruptcy or dissolution follows the contract, provided it is consistent with the law, or a decision of the court or competent authority. Lenders should not assume that an ipso facto termination clause will work automatically; insolvency rules and the identity of the decision-maker may matter. We have not reviewed the insolvency legislation in detail here.
Consequences of termination: demobilisation, liquidation and money
A termination construction contract Vietnam notice takes effect at the moment stated in the notice or the contract. Article 27(6) of the decree requires the contract to set a time for the contractor to remove materials, personnel, machinery and equipment from the site. If the contract is silent, the employer decides the time, and afterwards the Civil Code on lost or abandoned property applies. This is another detail that rarely appears in foreign forms.
Liquidation must follow. The parties settle within the agreed period, which under the decree may not exceed 56 days from the notice of termination unless agreed otherwise. For public-investment and PPP contracts, Article 31 governs, with a 45-day period (90 days for large and complex contracts). A party that refuses to liquidate can be overtaken by the unilateral procedure in Article 87(5) of the Law.
On money, the claim for loss is governed by Article 86 of the Law. Damages follow actual loss, or a pre-agreed sum proportionate to the breach. For public-investment and PPP contracts, the contract penalty may not exceed 12% of the value of the breached part of the contract, in addition to damages as agreed. In a private contract the cap does not apply by statute, and the parties set the amount, though other commercial legislation may limit penalties and should be checked.
A practical sequence before terminating
The following sequence reflects how well-run terminations proceed. It is a framework, not a substitute for advice on a live dispute.
- Identify the ground. Match the facts to a ground in the contract, the Law and the decree, and note whether the project is private or public-investment or PPP.
- Collect the evidence. Acceptance minutes, progress reports, payment applications, notices and correspondence matter more than narrative.
- Serve a cure or warning notice if the contract allows it. This reduces the risk that termination is treated as disproportionate.
- Serve the termination notice in the contractual form. State the ground, the basis, the date and the consequences.
- Secure the site and the securities. Plan demobilisation, handover of documents, calls on bonds and the payment valuation.
- Prepare the dispute forum. Check the dispute clause and the arbitral rules, for example those of the ICC, before the other side moves first.
A hypothetical example: a foreign employer on a privately funded plant project issues a termination notice after four months of slow progress, but its contract has no cure-notice step and the notice cites only “general breach”. The contractor responds that the notice is defective and claims wrongful termination. A cure notice with specific obligations, followed by a notice citing the clause, would have placed the employer on much firmer ground.
Dispute resolution after termination
Article 86(5) of the Law allows negotiation, mediation, an international-practice dispute board, arbitration or court. For public-investment and PPP contracts, domestic arbitration institutions are preferred; an international model requires an international treaty basis or permission from the investment decision-maker and agreement in the contract. The detailed rules are set out in the text of the Law on Construction 2025.
The decree also provides that performance of the unaffected parts continues during a dispute, except in force majeure, on an order of a competent authority, or on a lawful suspension. A termination that is wrongly characterised can therefore also breach this continuing-performance duty.
Termination construction contract Vietnam across infrastructure, industry, energy and real estate
The statutory grounds and notice rules above are general, but a termination construction contract Vietnam dispute looks different on each asset class because the cost of a half-finished project differs.
Infrastructure and transport: continuity of works
Expressways, rail lines and airport terminals are often public-investment or PPP projects, although classification depends on the funding source of each project. The public-law numbers in Decree 210/2026, such as the 56-day non-payment rule, apply to public-investment and PPP projects only, not to private contracts. On large programmes, including the North–South high-speed railway (about 1,541 km, Hanoi to Ho Chi Minh City), termination of one package can affect neighbouring packages, so owners often prefer suspension, step-in or re-scoping to termination. A contractor should assume the employer will want an orderly handover of the site, design and records.
Factories, steel, petrochemical and power: equipment and financing
On a factory or heavy-industry project, termination raises questions about long-lead equipment already ordered, title to materials, and who takes over supply contracts. For a solar farm, wind project, grid connection or LNG-to-power plant, the construction contract usually sits beneath financing documents and a power purchase arrangement. A termination notice can trigger lender cure or step-in rights, and a delayed commercial operation date can put the PPA at risk. Check these cross-defaults before sending any notice, and remember that whether public rules apply depends on ownership and structure.
Hotels, resorts, urban areas and mixed-use complexes
A private resort, hotel, urban area or mixed-use project follows the party agreement, with the Law on Construction as the backstop. The practical issue is the unfinished building: weather damage, security of the site, and obligations to buyers or operators. If units have been pre-sold, a termination can create parallel exposure under real estate and housing law. Termination for convenience clauses should price the loss of profit and demobilisation explicitly.
| Sector | Typical contract or risk feature | What to check on this topic |
|---|---|---|
| Expressway, rail, airport terminal | Often public or PPP; continuity of public works; interdependent packages | Classification, notice route, step-in or re-scoping alternatives |
| Steel, petrochemical, cement, FDI factory | Long-lead equipment, title and supply contracts | Ownership of materials, assignment of orders, demobilisation costs |
| Solar, wind, grid, LNG-to-power | Financing and PPA cross-defaults | Lender cure rights, offtaker deadlines, direct agreements |
| Hotel, resort, urban area, mixed-use | Unfinished structure; buyer and operator exposure | Site security, pre-sale obligations, convenience-termination pricing |
Conclusion
Treat termination construction contract Vietnam decisions as a procedural exercise first and a commercial one second: identify the ground, observe the notice rules, and prepare liquidation and evidence. The practical next step is to compare your contract’s termination and suspension clauses with Articles 85 to 87 of the Law and Articles 26, 27 and 31 of the decree, and to correct any foreign-form clause that depends on a right Vietnamese law may not recognise.
Frequently Asked Questions
How much notice is required to terminate a construction contract in Vietnam?
The Law requires prior written notice. Decree 210/2026 sets the default at 28 days unless the parties agree otherwise, and the notice must state reasons, basis and grounds. Force majeure is an exception.
Does the 56-day non-payment rule apply to private contracts?
The 56-day figures are part of the public-investment and PPP framework in Decree 210/2026. In a private contract the parties agree the period, subject to the Civil Code.
What if I terminate without a valid ground?
Stopping performance without a legal or contractual ground is a breach. The party remains bound to perform and may owe compensation under the Law and the Civil Code.
Can an employer terminate for convenience under Vietnamese law?
FIDIC Sub-Clause 15.5 provides such a right, but we have not identified a statutory equivalent, and unlawful unilateral termination is compensable. Its enforceability depends on the governing law and forum.
Who prepares the liquidation after termination?
The parties settle it within the agreed period. If one party refuses, the other may liquidate unilaterally under Article 87(5) of the Law.
Disclaimer: This article is general information, not legal advice for a specific matter. The law is stated as at 22 October 2026. Any termination decision should be taken only after review of the full contract and the primary legal texts.
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