Contract disputes with business partners are a common situation in contemporary business and commercial relations. Such disputes often arise from breaches of obligations, misinterpretation of contractual clauses, or failure to properly perform contractual commitments. The following article by NPLaw provides an overview of legal issues relating to contract disputes with business partners.

I. Current situation of contract disputes with business partners

At present, contract disputes with business partners are becoming increasingly common and complex in commercial practice, particularly in the context of rapid economic development. Many enterprises enter into contracts without paying sufficient attention to the content, binding clauses, or without legal consultation, leading to conflicts during performance.

Typical disputes include: delayed payments, breach of delivery schedules, products not meeting agreed quality standards, unilateral termination without justifiable grounds, etc. In addition, the choice of inappropriate dispute resolution methods, lack of clear evidence, or absence of an arbitration clause often prolongs the settlement process and causes losses to both parties. This reality highlights the urgent need to strengthen contractual compliance and apply preventive and effective dispute resolution mechanisms.

II. Legal provisions on contract disputes with business partners

1. What is a contract dispute with a business partner?

A contract dispute with a business partner refers to a conflict, disagreement, or divergence between contracting parties arising during the performance, interpretation, or termination of a contract.  

2. Methods of resolving contractual disputes with business partners

Pursuant to Article 317 of the Law on Commerce 2005, contract disputes may be resolved through the following three basic methods:

  • Negotiation between the parties;
  • Mediation;
  • Settlement by Arbitration or Court.

3. Jurisdiction to resolve contract disputes with business partners

Under Article 2 of the Law on Commercial Arbitration 2010, Arbitration has jurisdiction to resolve disputes where:

  • The dispute arises from commercial activities;
  • The dispute is between a commercial entity and a non-commercial entity;
  • Other disputes permitted by law to be resolved by Arbitration.

Pursuant to Article 31 of the Civil Procedure Code 2015, Courts have jurisdiction over disputes and petitions in the field of business and commerce, including:

  • Disputes concerning commercial contracts;
  • Petitions for annulment of corporate resolutions, recognition of foreign arbitral awards, or enforcement of foreign commercial judgments.

Under Article 35 of the Civil Procedure Code 2015, People’s Courts at district level have jurisdiction at first instance over business and commercial disputes between individuals and organizations engaged in business registration for profit-making purposes.

Pursuant to Clause 1 Article 40 of the Civil Procedure Code 2015, the plaintiff may select the Court where:

  • The defendant resides, works, has its last registered head office, or assets (if the place of residence is unknown);
  • The head office or branch of the relevant organization is located;
  • The violation occurred or damages were suffered (for non-contractual compensation claims);
  • The contract is executed (for commercial contractual disputes);
  • The immovable property is located (in disputes involving immovable property situated in multiple localities).

Where there are multiple defendants, the plaintiff may choose the Court of the locality where one of the defendants resides or works.

III. Questions on contract disputes with business partners

1. What are the main causes of contract disputes with business partners?

Contract disputes generally arise from the following common causes:

  • Unclear contracts: Clauses lack specificity, are vague about rights, obligations, terms, and payment methods;
  • Non-execution of commitments: One party fails to deliver goods, fails to make payment, or delays in performing obligations;
  • Changes in actual circumstances: Market conditions, legal framework, or financial capacity of a party change, preventing further performance;
  • Different interpretations of the contract: Parties misinterpret or interpret contractual terms differently;
  • Lack of evidence or documents: Oral agreements or unrecorded exchanges make disputes difficult to prove.

2. How should contract disputes with business partners be resolved to ensure protection of rights?

To resolve contract disputes effectively and ensure protection of rights, parties should select appropriate methods, comply with the law, and act in good faith:

  • Direct negotiation: It should be the first step when disputes arise. The parties meet to discuss and seek a solution. Such a method saves time and costs while preserving the partnership. If successful, the negotiation should be recorded in writing to prevent future disputes.
  • Mediation through a third party: If negotiation fails, the parties may engage a neutral third party (a commercial mediation organization or an independent mediator). Mediation helps parties reach common ground with objective support. However, results are only binding if both parties consent.
  • Commercial arbitration: If the contract contains an arbitration clause, the dispute will be referred to arbitration. Arbitration is efficient, confidential, and arbitral awards are final and binding. This is a common choice in commercial contracts involving specialized or cross-border elements.
  • Litigation before the People’s Court: If no arbitration agreement exists or one party refuses arbitration, the ultimate option is to bring the case before the competent Court. Courts review all case files and issue judgments in accordance with law. Although the process may be time-consuming, court judgments carry the highest enforceability.

3. What should be noted to prevent contract disputes with business partners?

To minimize risks of contract disputes, enterprises should:

  • Draft comprehensive and precise contracts: It should include specific clauses on rights, obligations, payment terms, penalties, and termination conditions;
  • Conduct due diligence on partners before signing: It is necessary to assess legal capacity, financial standing, and transaction history;
  • Maintain clear evidence: Invoices, delivery notes, email confirmations, and records of exchanges should be preserved;
  • Update and amend contracts when circumstances change: When risks arise, it is required to prepare addenda or amendments in writing;
  • Proactively seek legal advice: It should engage lawyers during contract negotiation and performance.

IV. Legal advisory services on contract disputes with business partners

The foregoing article by NPLaw has provided insights into contract disputes with business partners. With an experienced team of lawyers and legal specialists, NPLaw is always ready to accompany, advise, and support Clients in matters relating to contractual disputes. Should you require legal assistance, please contact NPLaw.