Commercial Contract Review: 12-Point Checklist Before Signing

This English version is translated from the Vietnamese original. In case of any discrepancy, the Vietnamese version prevails.

Commercial contract review: 12-point checklist before signing is an indispensable practice if enterprises wish to avoid costly disputes in the future. In practice, most commercial disputes do not stem from an intent to breach, but from poorly drafted, inconsistent, or ambiguous contract clauses regarding obligations. The checklist below has been prepared by A&D Law Firm in accordance with the Law on Commerce 2005 (No. 36/2005/QH11) and the Civil Code 2015, and aims to provide a practical tool for business owners, chief accountants, and investors to conduct self-review before signing.

Why must commercial contracts be reviewed before signing?

A commercial contract is the legal foundation of every business transaction. A contract lacking important clauses or containing internal contradictions may cause an enterprise to lose the right to claim compensation, face heavy penalties, or be unable to terminate the contract when the counterparty breaches. The cost of dispute resolution — whether through negotiation, mediation, or litigation/arbitration — is typically many times higher than the cost of initial legal review.

12-point checklist for commercial contract review before signing

1. Point 1 — Legal capacity of the parties

   Risk: Signing with a person lacking authority to represent may render the contract void or create disputes regarding legal binding.

   How to verify: Request a copy of the Business Registration Certificate, company charter (identifying the legal representative), and resolutions/powers of attorney if the signatory is not the legal representative. Verify information on the national business registration information portal.

   Legal basis: According to Article 117 of the Civil Code 2015, a civil transaction is valid when "the subject has civil legal capacity and civil capacity for action consistent with the civil transaction being established" and "the subject participating in the civil transaction does so entirely of their own volition."

   "A civil transaction is valid when it meets the following conditions: a) The subject has civil legal capacity and civil capacity for action consistent with the civil transaction being established; b) The subject participating in the civil transaction does so entirely of their own volition; c) The purpose and content of the civil transaction do not violate any prohibition in law and are not contrary to social morals." — Article 117(1), Civil Code 2015

2. Point 2 — Contract subject matter clearly defined

   Risk: Vague description of goods, services, or work may lead to disputes over quality standards and scope of performance.

   How to verify: Ensure name, specifications, quantity, technical standards, and scope of services are described specifically — possibly through attached schedules. Missing schedules listing goods/work is the most common source of disputes.

   Legal basis: The contract content must not violate any prohibition in law or be contrary to social morals (Article 117, Civil Code 2015). The principle of freedom of contract allows the parties to determine contract details specifically provided they do not violate law (Article 11(1), Law on Commerce 2005).

3. Point 3 — Price, payment method, and payment currency

   Risk: Failure to specify currency clearly, exchange rate conversion, payment deadline, and payment method may prevent the seller from collecting payment on time.

   How to verify: Check that the contract clearly states: total value, VAT (whether included or not), payment schedule by installment, conditions triggering each payment (e.g., upon delivery, upon acceptance), and payment account. For foreign currency contracts, verify provisions on applicable exchange rate.

   Legal basis: Principle of freedom of contract in commercial activities — the parties may agree to terms not contrary to law to establish rights and obligations (Article 11(1), Law on Commerce 2005).

4. Point 4 — Performance deadline and delivery milestone

   Risk: Time periods expressed as "expected," "approximately," or "possibly" have no binding effect when one party is late.

   How to verify: Time periods must be specific (day/month/year or number of days counted from a defined event). Clearly identify when the time period commences (e.g., from the signing date, from the advance payment date, from receipt of complete documents). If performance is in multiple phases, list each milestone with corresponding obligations.

   Legal basis: Contract practice — undefined time periods are typically interpreted by courts/arbitrators in a manner unfavorable to the party who drafted the contract.

5. Point 5 — Breach penalty clause

   Risk: Penalty exceeding legal limits cannot be enforced; or absence of a penalty clause means the breached party can only claim actual damages (which are difficult to prove).

   How to verify: Confirm the penalty clause clearly states the penalty rate/amount and its calculation basis (value of the breached obligation portion). Note: under the Law on Commerce 2005, the maximum penalty for commercial breach is 8% of the value of the breached obligation portion of the contract — except where valuation services have a different rate prescribed by law.

   Legal basis: The Law on Commerce 2005 prescribes the types of sanctions in commerce including enforcement of contract performance, breach penalties, damages, and other sanctions (Article 292, Law on Commerce 2005).

6. Point 6 — Limitation of liability clause

   Risk: Overly broad or vague limitation of liability clauses may prevent the breached party from claiming damages in situations that are entirely preventable.

   How to verify: Cross-check the list of exempting circumstances in the contract with legal provisions. According to Article 294(1) of the Law on Commerce 2005, a breaching party is exempted from liability when:

   "a) An exempting circumstance agreed upon by the parties occurs; b) A force majeure event occurs; c) The breach by one party is entirely due to the fault of the other party; d) The breach by one party is due to implementation of a decision of a competent state administrative agency which the parties could not have known at the time of contract formation." — Article 294(1), Law on Commerce 2005

   Verify whether the contract clearly defines "force majeure" and requires the exempted party to notify within a specified period.

7. Point 7 — Burden of proof and notification requirements for exempting events

   Risk: The breaching party invokes force majeure but fails to notify timely or provide evidence, leading to prolonged disputes.

   How to verify: The contract should clearly provide: (i) the breaching party must notify in writing within a specified time from when the event occurs; (ii) must provide supporting documents (certification from competent authorities, documents from third parties, etc.). According to Article 294(2) of the Law on Commerce 2005: "The breaching party has the burden of proving the exempting circumstances."

8. Point 8 — Dispute resolution mechanism

   Risk: Absence of a dispute resolution clause or selection of an incompetent forum may lead to prolonged and costly proceedings.

   How to verify: Clearly identify: negotiation → mediation (if any) → litigation or arbitration, with specific names (court with jurisdiction according to geographical division or specific arbitration center). For contracts with foreign elements, verify the choice of law provision. Note: an arbitration agreement must be executed separately or explicitly stated in the contract with independent validity.

   Legal basis: Principle of freedom of contract — the parties may agree on a dispute resolution mechanism not contrary to law (Article 11(1), Law on Commerce 2005).

9. Point 9 — Confidentiality and intellectual property clauses

   Risk: Business information, technology, and customer data may be disclosed without any enforcement mechanism.

   How to verify: The contract should clearly specify: (i) what information is deemed confidential; (ii) how long the confidentiality obligation persists after contract termination; (iii) who owns intellectual property created during contract performance; (iv) consequences of breach of confidentiality. A separate NDA (Non-Disclosure Agreement) schedule is a best practice for contracts with high information value.

10. Point 10 — Early termination conditions

    Risk: Absence of clear provisions regarding unilateral termination rights may allow the counterparty to sue when one party seeks to exit due to breach.

    How to verify: List the circumstances entitling termination (material breach, loss of payment ability, change of corporate control, etc.), notice period required before termination, and financial consequences upon termination (return of advance payments, settlement of completed portions, etc.). Distinguish clearly between "suspension of performance" and "contract termination."

11. Point 11 — Schedules and attached documents

    Risk: The contract body references schedules that are not yet signed or the operative version is not clearly identified.

    How to verify: List all schedules comprehensively in the contract body and ensure all are signed on the same date or the effective date is clearly stated. If a schedule conflicts with the contract body, clearly specify which document takes priority. Practical example: IT service contracts often include SLA (Service Level Agreement) — if the SLA is not signed, all quality commitments lack binding effect.

12. Point 12 — Internal consistency and compliance with law

    Risk: Clauses within the same contract contradict each other, or the content violates legal prohibitions, rendering the entire contract or part of it void.

    How to verify: Read the entire contract following the flow of performance (not just reviewing each clause in isolation) to identify contradictions between payment terms — penalty clauses — termination clauses. Verify that the purpose and content do not violate any legal prohibition and are not contrary to social morals.

    Legal basis: Article 117(1)(c) of the Civil Code 2015: "The purpose and content of the civil transaction do not violate any prohibition in law and are not contrary to social morals." Contract form is also a validity condition where required by law (Article 117(2), Civil Code 2015).

Summary: Quick reference table for 12-point review

Point	Content to verify	Main risk if overlooked
1	Legal capacity & signing authority	Contract void
2	Contract subject matter specific	Dispute over scope of performance
3	Price & payment method	Difficulty collecting payment on time
4	Deadline & delivery milestone	Cannot impose penalty for delay
5	Breach penalty clause	Loss of penalty right or penalty exceeds limit
6	Limitation of liability clause	Breaching party easily escapes liability
7	Notification & proof obligations	Prolonged disputes over force majeure
8	Dispute resolution mechanism	Unclear where to sue
9	Confidentiality & IP	Information disclosure without remedy
10	Early termination conditions	Countersuit when seeking to exit
11	Schedules & attached documents	Quality commitments lack binding effect
12	Internal consistency & lawfulness	Contract void in part or in whole

Considerations when applying the commercial contract review checklist

The checklist above applies to typical commercial contracts between merchants operating in Vietnam, governed by the Law on Commerce 2005 and the Civil Code 2015. For specialized contract types — such as contracts in the credit, securities, public investment sectors, or contracts with foreign elements — additional relevant specialized provisions must be applied.

An easily overlooked point: the principle of freedom of contract in commerce (Article 11(1), Law on Commerce 2005) allows the parties flexibility in designing clauses according to their needs, but the limit is that they must not contradict legal provisions, customs, or social morals. A clause, even if agreed and signed by both parties, may still be declared void if it violates this limit.

A&D Law Firm assists in commercial contract review and negotiation

A&D Law Firm — a business law advisor in Vietnam — provides in-depth commercial contract review services, including: risk analysis by clause, comparison with market standards, proposed amendments with legal reasoning, and negotiation support with counterparties. If your enterprise needs contract review before signing or needs to standardize internal contract templates, please contact our legal team at andlaw.vn for tailored advice.

This article is for reference only, provides general legal information, and does not substitute for professional legal advice for specific cases. Each contract has unique characteristics regarding industry, value, risk, and transaction context — please contact a lawyer for advice suitable to your situation.