VIETNAM Law and Practice Contributed by: Tran Thai Binh and Duong Thi Minh Han, LNT & Partners
7.4 Management of Schedule-Related Risk It is provided under the laws of construction that the construction schedule of the project must be properly monitored by the developer, monitor - ing department, main contractors or any related parties. A delay at any stage must not affect the overall investment schedule. The principal of the construction contract is entitled to suspend the performance of the con - tract and to unilaterally terminate the contract if the contractor is causing continuous delays to the schedule agreed by the parties (unless the parties agree otherwise). Penalties and dam - ages are available for the breach in construc - tion schedule, either for the contractual parties or third parties, being the developer or the owner if agreed by the parties. Furthermore, the developer is required to submit a request for amendment to the general invest - ment schedule. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance In order to guarantee the performance of con - tractors, the owner may require contractors to comply with additional forms of security such as a deposit, escrow or any form of guarantee, which may include parent or bank guarantees. The specific guarantee must be agreed in detail between the developer and the main contrac - tors, and duly delivered to the developer before the construction contracts come into effect. The security to guarantee a performance is val - ued within a range of 2% to 10% of the contract value. Higher risks will come with higher rates, but the value is capped at 30% of the contract value and must be approved by the competent body (Article 16 of Decree 37/2015/ND-CP).
7.6 Liens or Encumbrances in the Event of Non-Payment The project developer or owner of the building may provide proof of the ability to make pay - ment to the (main) contractors with whom they have the contractual construction relationship as a preventative measure against non-payment by the developer. Guarantees of payment capacity may be satis - fied by laws involving the following measures: • approved plan on capital distribution; • letters of guarantee by banking or credit institutions; Payment guarantees must be available prior to the execution of the construction contract to ensure that the developer complies with the payment schedule agreed with the contractor in the construction agreement. Laws prohibit the developer from entering into a construction agreement without payment guarantees avail - able as prescribed, unless the construction is for emergency purposes. Alternatively, while this is neither prescribed nor prohibited by law, the developer may agree with the contractor to hold a lien over the building in the event of non-payment by the developer (or the owner of the property). However, this is uncommon construction practice in Vietnam, as are other encumbrances, such as a pledge over the building. 7.7 Requirements Before Use or Inhabitation Before any building or project commences, the developer must obtain a certificate of occupancy issued by the competent authority. • letters of credit; or • loan agreements.
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