In the course of conducting business activities, particularly transactions for the purchase and sale of goods that are established during meetings, through referrals, or on the basis of trust-based relationships, parties often conclude agreements verbally or confirm them via communication applications on mobile devices or by email without executing a written document bearing the confirmation of the parties. Such simplification in the process of contracting frequently gives rise to disputes concerning terms of the contract that the parties had previously overlooked or assumed unlikely to occur in practice. Furthermore, in certain circumstances, the parties fail to anticipate the risks that may arise from such simplification or the shortening of the contracting process. In the following article, we wish to present to you a discussion on whether it is advisable and in some cases obligatory to formalize a contract.
1. “Oral Agreement” – Is It Sufficient to Protect Your Business?
In the business environment, it is not uncommon for parties, out of mutual trust or for the sake of “convenience and efficiency,” to establish transactions merely through spoken words. A phone call, a handshake, or simply a confirmation message via Zalo may appear sufficient to express consensus and mark the beginning of cooperation. However, matters can shift very quickly once a dispute arises.
A typical example you may encounter is when the parties have agreed on the price and quantity of goods, yet the quality standards are not specifically stipulated, relying instead on a vague assurance such as “the best quality.” Similarly, the delivery deadline and incidental costs are not clearly recorded, but only loosely agreed upon as “the earliest possible.” In such circumstances, what do you have to safeguard your rights and interests? In practice, certain types of contracts are legally required to be executed in writing. Therefore, oral agreements not only fail to record and preserve the parties’ consensus, but may also entail risks of violating statutory form requirements in some cases. For this reason, entering into transactions through oral agreements should be limited to simple, low-value arrangements concerning goods or services used in the ordinary course of business.
2. What is a contract? Conditions for a contract to take effect and the forms of a contract
“Civil contract means an agreement between parties in relation to the establishment, modification or termination of civil rights and obligations.”, under this provision, agreements expressed in writing, verbally, or through specific conduct are also recognized as contracts. In order for such a contract to have legal validity, or in other words, to take effect, it must satisfy the fundamental conditions prescribed by law as follows:
- The agreement of the parties must be voluntary, without coercion, fraud, or mistake. The purpose and content must not contravene the law or social morals. The transaction must serve a lawful purpose, must not involve prohibited activities, and the content of the contract must comply with applicable legal regulations and must not be contrary to ethical standards.
- The parties must possess appropriate legal capacity and civil act capacity. Accordingly, in the case of individuals entering into contracts, it is required that they have full civil act capacity. In the case of enterprises, the signing representative must hold lawful authority pursuant to the company’s charter or by authorization from the legal representative, depending on each specific case.
- Regarding the form of a contract, under the provisions of law, contracts for the sale of goods and contracts for the provision of services may be made verbally, in writing, or established through specific conduct. In cases where the law requires the contract to be made in writing, such requirement must be complied with; for example, contracts for the sale and purchase of real estate, employment contracts, and franchise agreements…
Although the law permits parties to establish agreements in various forms without requiring every case to be in writing, in light of current economic fluctuations as well as potential internal disputes within enterprises, opting to formalize contracts in writing is the most effective means of preserving good relationships between the parties and managing risks when disagreements arise concerning the interpretation of the contract or when disputes occur.
With a written contract, matters such as quality, accompanying standards, price, progress, payment conditions, responsibilities, and remedies are recorded in detail and serve as lawful evidence for judicial authorities to consider when resolving disputes, thereby also reducing the time needed to collect evidence.
In today’s business context, “simplifying” the contracting process may offer immediate convenience but always carries long-term legal risks. A written contract, carefully drafted and thoroughly reviewed, is not only a basis for protecting the rights and interests of the enterprise in the face of disputes but also a tool for risk management and for building trust with business partners. Therefore, instead of relying on oral agreements or messages, enterprises should treat the execution of written contracts as a “golden rule” in all significant transactions. At the same time, investment should be made in reviewing contractual terms to ensure feasibility and compliance with the law, so that each contract is not only legally valid but also genuinely practical when applied to business operations.
Time of writing: 27/08/2025
The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer at info@cdlaf.vn
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You can refer for more information:
- Rights of foreign enterprises in importing veterinary medicines and equipment and distributing them in Vietnam
- Labor Regulations – Are they truly necessary for Businesses and Guidelines for Drafting (Part 2)
- Labor Regulations – Are they truly necessary for Businesses and Guidelines for Drafting (Part 1)
- Procedures for adjustment of investment project implementation location and enterprise headquarters in accordance with the 2025 legal provisions
