Monetary Remedy for Breach of Contract in a Construction Sector: Solution for Practitioners

The monetary remedy for breach of the contract is common in the contract field. In the international construction sector, monetary remedy clauses in a construction contract can take the form of compensation for damages, penalties, and the liquidated damages clause (LD clause). The LD clause often stipulates a certain amount as an approximate representation of the amount of damage that an innocent party would suffer if the contract is not completed on time. In Vietnam, from 2020, the application of these mechanisms by Vietnamese courts has created trouble. This is the reason the present paper delves into presenting the current Vietnamese practice related to monetary remedies for contract breach and comparing them with practices in other regions, including some countries that follow both common law and civil law systems. This analysis aims to assess the appropriateness of the Vietnamese solution, on the one hand, and, on the other hand, to help foreign practitioners understand risks to avoid when engaging in the Vietnamese market. From analyzing this practice, the paper also suggests how to establish an appropriate LD clause so it can better protect the legitimate rights of the parties to contract in the context of Vietnamese law.