{"id":16729,"date":"2026-04-20T14:35:08","date_gmt":"2026-04-20T07:35:08","guid":{"rendered":"https:\/\/ykvn-law.com\/?p=16729"},"modified":"2026-04-20T14:46:53","modified_gmt":"2026-04-20T07:46:53","slug":"comparative-perspectives-on-vietnamese-construction-law-2025-part-i-of-iv-delay-and-liquidated-damages","status":"publish","type":"post","link":"https:\/\/ykvn-law.com\/vi\/comparative-perspectives-on-vietnamese-construction-law-2025-part-i-of-iv-delay-and-liquidated-damages\/","title":{"rendered":"Comparative Perspectives on Vietnamese Construction Law 2025 | Part I of IV: Delay and Liquidated Damages"},"content":{"rendered":"
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Comparative Perspectives on Vietnamese Construction Law 2025 | Part I of IV: Delay and Liquidated Damages<\/h1>\n[\/vc_column_text][vc_empty_space height=”20px”][vc_column_text css=”.vc_custom_1776670381111{margin-bottom: 0px !important;}”]April 20, 2026[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_single_image image=”16730″ img_size=”full” css=””][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text css=”.vc_custom_1776671211685{margin-bottom: 0px !important;}”]This article is Part I of IV of a four-part series summarizing the panel discussion on \u201cComparative Perspectives on Construction Disputes: International Practice and Vietnamese Law,\u201d organized by the Swiss Arbitration Association (ASA) as a side-event at HICAC 2026 on 8 April 2026 in Ho Chi Minh City. The four-part series covers: Part I: Delay and Liquidated Damages (this article); Part II: Non-contractual Liability in Construction<\/a>; Part III: Force Majeure and Fundamental Change of Circumstances<\/a>; Part IV: Multi-tier Dispute Resolution Clauses<\/a>.<\/strong><\/p>\n

On 8 April 2026, the Swiss Arbitration Association (ASA) organized a side-event panel discussion at HICAC 2026 held in Ho Chi Minh City, entitled \u201cComparative Perspectives on Construction Disputes: International Practice and Vietnamese Law.\u201d The panel examined four topics arising under the newly enacted Construction Law 2025 of Vietnam (effective 1 July 2026): (i) delay and liquidated damages (\u201cLD<\/strong>\u201d); (ii) non-contractual liability in construction; (iii) force majeure and fundamental change of circumstances; and (iv) multi-tier dispute resolution clauses. Panelists were Mr. Mino Han (Peter & Kim, Korea\/Singapore), Ms. Lesley Tan (WongPartnership, Singapore), and Dr. Alain Grieder (Schellenberg Wittmer, Switzerland\/Singapore), with the discussion moderated by Mr. Thang Pham (YKVN, Vietnam\/Singapore).<\/p>\n

The panel was organized around the concept of \u201clegal transplants\u201d – the phenomenon whereby legal concepts originating in one system are borrowed and integrated into another, where they interact with local legal culture and evolve over time into something that may differ significantly from the original. This concept is directly relevant to the discussion on the new Vietnamese Construction Law 2025. The central question is not merely whether these concepts exist, but how they will function in practice when interpreted by Vietnamese courts and arbitral tribunals, and how their function compares to what practitioners familiar with FIDIC and international standard forms might expect.<\/p>\n

This article, Part I of the series, summarizes the substantive discussion on Delay and Liquidated Damages, focusing on the Vietnamese law position, the open interpretive questions it raises, and comparative perspectives from Switzerland, Korea, and Singapore.<\/p>\n

    \n
  1. Vietnamese Law<\/strong><\/li>\n<\/ol>\n

    Prior to 2025, Vietnamese law did not recognize a standalone concept of \u201cliquidated damages\u201d as understood in common law systems. The general rule was, and under the Civil Code remains, that damages must be actual, direct, and proven. Vietnamese courts had recognized pre-agreed damage clauses, but their approach was that recovery is capped at lesser of actual loss and pre-agreed amount. The Supreme Court of Vietnam applied this approach in a 2020 judgment involving a distribution agreement (Decision No. 10\/2020\/KDTM-G\u0110T dated 14 August 2020 of the Supreme Court of Vietnam). See also Decision No. 660\/2022\/KDTM-PT dated 10 November 2022 of the People\u2019s Court in Ho Chi Minh City.<\/p>\n

    The Construction Law 2025 makes a significant change. Article 86.2 introduces the concept of \u201cpre-determined levels of damages\u201d for the first time in Vietnamese construction law. The provision reads:<\/p>\n

    \u201cCompensation for damages shall be determined on the basis of actual loss, the pre-determined levels of damages corresponding to the breached obligations under the construction contract, and the extent of the breach\u201d<\/p>\n

    (\u201cV\u1ec7c b\u1ed3i th\u01b0\u1eddng thi\u1ec7t h\u1ea1i \u0111\u01b0\u1ee3c x\u00e1c \u0111\u1ecbnh theo thi\u1ec7t h\u1ea1i th\u1ef1c t\u1ebf, c\u00e1c m\u1ee9c thi\u1ec7t h\u1ea1i \u0111\u1ecbnh tr\u01b0\u1edbc t\u01b0\u01a1ng \u1ee9ng v\u1edbi c\u00e1c ngh\u0129a v\u1ee5 h\u1ee3p \u0111\u1ed3ng x\u00e2y d\u1ef1ng b\u1ecb vi ph\u1ea1m, m\u1ee9c \u0111\u1ed9 vi ph\u1ea1m\u201d<\/em>).<\/p>\n

    Article 86.2 makes clear that pre-determined damages (\u201cthi\u1ec7t h\u1ea1i \u0111\u1ecbnh tr\u01b0\u1edbc<\/em>\u201d) are compensation for damages (\u201cb\u1ed3i th\u01b0\u1eddng thi\u1ec7t h\u1ea1i<\/em>\u201d), not a penalty (\u201cph\u1ea1t vi ph\u1ea1m<\/em>\u201d). They are therefore not subject to the penalty caps under the Commercial Law 2005, the Civil Code 2015, or the Construction Law 2025. Article 86.3 of the Construction Law 2025 retains the penalty cap for public investment and PPP projects of 12% of the breached portion of the construction contract, and clarifies that construction contracts are civil (not commercial) transactions, thereby excluding the Commercial Law 2005 cap of 8% of the breached portion of the obligations from applying to penalty clauses in private construction contracts. For private construction contracts, parties may accordingly agree to any penalty level under Article 418.2 of the Civil Code.<\/p>\n

    Article 86.2 of the Construction Law 2025 raises two interpretive questions that the provision does not resolve on its face. The first is the burden of proof: the text refers to actual loss as one of the bases for determining compensation alongside the pre-determined level of damages corresponding to the extent of the breach. Under the pre-2025 approach, the courts consistently required actual loss to be proven in order to enforce a pre-agreed damages clause up to the amount of actual loss. Whether Article 86.2 still requires proof of actual loss, and if so, which party has the burden of proof, is an open question that will need to be clarified through judicial practice. The second interpretive question is the scope of the proportionality test: the reference to damages \u201ccorresponding to the breached obligations\u2026 and the extent of the breach\u201d implies that courts may be empowered to scrutinize whether the agreed rate bears a proportionate relationship to the nature and severity of the specific breach. Whether this introduces a new ground for reducing or even nullifying contractually agreed amounts, and by what standard, remains unclear.<\/p>\n

      \n
    1. Swiss Law<\/strong><\/li>\n<\/ol>\n

      Swiss law contains no statutory provision on LD, but the concept is accepted by case law. A threshold issue in any Swiss proceeding is whether a pre-agreed damages clause constitutes a LD clause or a contractual penalty clause, since the latter is governed by specific statutory rules. This characterisation is a matter of contract interpretation. Where a clause is found to be a LD clause, the general Swiss law approach is to treat it as a contractual limitation of liability: the employer\u2019s recoverable damages are capped at the agreed amount and the employer cannot claim in excess of that figure. Two exceptions qualify this position.<\/p>\n

      First<\/em>, where the limitation of liability relates to gross negligence or intentional conduct, it is null and void by operation of law. Second<\/em>, the recoverable amount may be higher than the agreed amount if, upon contract interpretation, the tribunal concludes that the parties did not intend the clause to function as a limitation of liability, in which case the employer may be entitled to prove and claim actual loss in excess of the contractual figure.<\/p>\n

      On reduction, Swiss law contains a mandatory provision empowering courts and tribunals to reduce contractual penalty amounts deemed excessive in the specific circumstances. The prevailing view in Swiss legal doctrine, though not yet confirmed by a direct ruling of the Swiss Federal Supreme Court, is that this discretionary reduction power applies by analogy to LD clauses. There are Federal Supreme Court decisions that have alluded to this analogous application under certain conditions without directly deciding the point.<\/p>\n

      A further feature of Swiss law directly relevant to the debate on Article 86.2 of the Vietnamese Construction Law: a claimant invoking a LD clause under Swiss law is not required to prove the amount of actual damage. However, it must be established in principle that some damage occurred. A LD clause is not engaged in the complete absence of any loss; the preconditions for a damages claim, including the existence of a breach and, in principle, of some resulting harm, must still be met.<\/p>\n

        \n
      1. Korean Law<\/strong><\/li>\n<\/ol>\n

        The starting point of Korean contract law is not strict liability but fault-based liability. Under this framework, a contractor\u2019s failure to complete works by the agreed date does not automatically give rise to damages liability: if the contractor can establish that the delay was not attributable to its fault, for example, because the employer provided drawings late, failed to obtain necessary permits, or otherwise contributed to the delay, it can escape damages liability without any contractual mechanism such as an extension of time clause. The Korean Supreme Court has confirmed that this fault-based defense operates even in the presence of an express LD clause. The contractor does not need an EOT provision, a notice condition precedent, or a prevention principle argument; the absence of fault, if proven by the contractor, is a standalone statutory defense.<\/p>\n

        This is a structural difference from English law, under which the contractor is strictly liable for delay unless relieved by the contractual extension of time mechanism; the entire architecture of EOT clauses, notice provisions, and the prevention principle is built around this strict liability foundation. However, under Korean law, much of that architecture is theoretically redundant, because the fault-based defense already delivers relief that those mechanisms are designed to provide in a strict-liability system.<\/p>\n

        On judicial oversight of pre-determined amounts, Article 398(2) of the Korean Civil Code provides an express statutory power: courts may reduce pre-determined damages if they are deemed \u201cunduly excessive.\u201d Korean arbitral tribunals regularly apply this provision, and the resulting awards have been upheld on enforcement. In practice, courts are unlikely to exercise this reduction power in respect of amounts that fall within a range that could be regarded as commercially reasonable for a construction project, commonly cited as 10\u201320% of the contract price. A distinction also exists in Korean law between LD clauses (subject to the Article 398(2) reduction power) and penalty clauses (valid unless violative of public order and good morals, but not subject to the same reduction power). In practice, parties to construction contracts in Korea predominantly opt for LD provisions rather than pure penalties.<\/p>\n

          \n
        1. Singapore Law<\/strong><\/li>\n<\/ol>\n

          Singapore follows the common law tradition. A LD clause will be enforced as agreed if the stipulated rate represents a \u201cgenuine pre-estimate\u201d of the loss that would flow from the breach at the time of contracting. Where the rate bears no credible relationship to that anticipated loss, particularly if it is extravagant or unconscionable in comparison to the greatest conceivable loss, the clause will be characterized as a penalty and struck down as unenforceable. The Singapore Court of Appeal in Denka Advantech Pte Ltd v Seraya Energy Pte Ltd<\/em> [2020] SGCA 119 provided comprehensive guidance on this penalty\/LD distinction. The practical illustration offered in the discussion captures the test well: if a main contract sets an LD rate of SGD 500 per day for the project as a whole, a downstream subcontract that provides for SGD 5,000 per day for the same project has no credible relationship to any loss the main contractor could conceivably suffer from the subcontractor\u2019s delay, and would likely be struck down as penal.<\/p>\n

          The prevention principle operates as a further qualification on LD enforcement: where the employer\u2019s own acts (e.g., late issuance of instructions, delayed approvals, employer-instructed variations) have contributed to the contractor\u2019s delay, the employer cannot rely on the LD mechanism to impose liability for delay caused by those acts. In such circumstances, time is set at large and the contractor\u2019s obligation is to complete within a reasonable time.<\/p>\n

            \n
          1. Comparative Observations for Vietnamese Practitioners<\/strong><\/li>\n<\/ol>\n

            Three comparative observations are of direct relevance to practitioners working under Vietnamese law. First<\/em>, on judicial oversight: all four systems maintain some form of judicial control over the amount recoverable under a pre-agreed damages mechanism, but through materially different instruments. The Korean and Swiss approaches are structurally closer to what Article 86.2 of the Construction Law 2025 appears to be establishing with its proportionality reference. The Singapore approach focuses instead on the character of the clause at the time of contracting (genuine pre-estimate or penalty). The Vietnamese approach, both before and after 2025, is anchored in actual loss. A practical consequence is that a party seeking to reduce a Vietnamese pre-determined damages claim has a stronger foundation in Article 86.2 than existed under the pre-2025 law, but the grounds for that challenge, and the standard applicable, have not yet been tested.<\/p>\n

            Second<\/em>, on proof of actual loss: the Swiss position, where a claimant need not prove the quantum of loss, only that some loss occurred, is probably the closest to what the drafters of Article 86.2 may have had in mind. But the Vietnamese provision expressly references actual loss as one of the determining factors of damages compensation, which the Swiss concept of LD as a liability cap does not. This suggests that proof of actual loss will remain relevant under Vietnamese law in relation to compensation for damages at a pre-determined level, even if its precise role under Article 86.2 is yet to be determined.<\/p>\n

            Third<\/em>, on the fault-based defense: Korean law\u2019s position is that a contractor can escape LD liability without any contractual EOT mechanism simply by proving an absence of fault. Under Singapore\u2019s prevention principle, the employer cannot rely on the LD mechanism to impose liability for delay caused by employer\u2019s own acts. This is an area where Article 86.2 of the Construction Law 2025 has not resolved the ambiguity: whether a contractor can resist a pre-determined damages claim under Article 86.2 by pointing to employer-side causes of the breach is not addressed by the text.<\/p>\n

             <\/p>\n

            <\/a>[\/vc_column_text][vc_column_text css=”.vc_custom_1776671179151{margin-bottom: 0px !important;}”][1]\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Thang Pham is a Partner and Head of YKVN Singapore Office. The views expressed in this article are the individual views of the author and the panelists, and are not attributable to YKVN or to any of the law firms represented by the panelists.<\/em><\/p>\n

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            This article is Part I of IV of a four-part series summarizing the panel discussion on \u201cComparative Perspectives on Construction Disputes: International Practice and Vietnamese Law,\u201d organized by the Swiss Arbitration Association (ASA) as a side-event at HICAC 2026 on 8 April 2026 in Ho Chi Minh City. <\/p>\n","protected":false},"author":17,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[96],"tags":[],"class_list":["post-16729","post","type-post","status-publish","format-standard","hentry","category-legal-updates"],"acf":[],"yoast_head":"\nComparative Perspectives on Vietnamese Construction Law 2025 | Part I of IV: Delay and Liquidated Damages - YKVN<\/title>\n<meta name=\"description\" content=\"This article is Part I of IV of a four-part series summarizing the panel discussion on \u201cComparative Perspectives on Construction Disputes: International Practice and Vietnamese Law,\u201d organized by the Swiss Arbitration Association (ASA) as a side-event at HICAC 2026 on 8 April 2026 in Ho Chi Minh City.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ykvn-law.com\/comparative-perspectives-on-vietnamese-construction-law-2025-part-i-of-iv-delay-and-liquidated-damages\/\" \/>\n<meta property=\"og:locale\" content=\"vi_VN\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Comparative Perspectives on Vietnamese Construction Law 2025 | Part I of IV: Delay and Liquidated Damages - 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