The Doctrine of Representations in M&A and Financing Transactions under Vietnamese Law

Introduction

Every share purchase agreement, facility agreement, and subscription document governed or influenced by Vietnamese law that follows an English-precedent template carries a representations and warranties clause — a set of statements about the target, the borrower, or the assets, made as of signing, closing, or each drawdown, on which the counterparty is entitled to rely. In common-law drafting, that reliance is doctrinally loaded: a false representation can void the contract, found a claim in the tort of deceit or under statute, or — if repackaged as a warranty — simply be sued on as a breach of contract, generally without having to show that the counterparty was actually induced by it. Vietnamese statute law recognises none of this apparatus as a discrete body of doctrine.

This article looks at what happens when “representations and warranties” language meets the 2015 Civil Code (Civil Code) and the 2005 Commercial Law (Commercial Law).

What “Representations” Are, and Why the Concept Splits in Two

The common-law bundle

At common law, “representation” and “warranty” are conceptually distinct, even though a modern reps-and-warranties clause blends them by contract.

A representation is a statement of fact made before or at the time of contracting that induces the other party to enter into it; if false, it can support rescission of the contract and, depending on the jurisdiction and the representor’s state of mind, a claim in damages independent of any breach of the contract itself.

A warranty is a contractual promise that a state of facts is true; if false, the remedy is an ordinary claim for breach of contract, and — critically — the innocent party need not show that it was induced by, or even aware of, the specific warranty at the time it contracted. Deal documents deliberately have it both ways: they express representations as warranties (so that truth is a strict, promised state of affairs actionable in damages) while also preserving the possibility of a misrepresentation claim, and they commonly overlay an indemnity so recovery does not depend on proving the ordinary damages elements at all.

No equivalent bundle in the Civil Code or the Commercial Law

Vietnamese legislation does not organise these ideas into a parallel doctrine. What it offers instead are two unrelated things.

The first is a narrow vitiating factor — deception, or lừa dối — which goes to whether a contract was validly formed at all (Article 127 of the Civil Code). The second is the ordinary law of contractual obligations, under which a party can promise anything it likes (Article 385) and can be sued for breaching that promise, subject to the Civil Code’s and Commercial Law’s general rules on proving loss. There is no intermediate category — nothing resembling the common-law warranty, which lets a party recover for a false statement of fact without having to show it was misled by that statement, and without the statement’s falsity having to rise to the level of intentional deception.

Statutory Remedies for Misrepresentation

Article 127 of the Civil Code is the closest Vietnamese law comes to a standalone misrepresentation doctrine, and it is considerably narrower than its common-law namesake. It applies where one party, or a third party with that party’s knowledge, engages in intentional conduct designed to cause the other party to misunderstand the subject, nature, or content of the transaction, thereby inducing that party’s agreement to it. Three features of this route matter for a transactional lawyer.

First, the conduct must be intentional. A careless but honestly mistaken statement in a disclosure schedule — the more common fact pattern in a real deal dispute — does not obviously fall within Article 127 at all; the Civil Code’s separate provisions on transactions entered into by mistake (Articles 126 and 128) are the closer fit for that scenario, and they carry their own, narrower conditions for relief.

Second, the remedy is invalidity and consequently, compensation for damage. Pursuant to Article 127, the aggrieved party may petition a court to declare the transaction invalid; under Article 131, an invalid transaction is treated as never having had legal effect, the parties must restore each other to their original position (returning what was received, or its cash value where restitution in kind is impossible), and the party at fault must additionally compensate the other for damage — but only where actual damage is shown, and only to the extent of that damage. For a completed M&A transaction, this is a blunt instrument: unwinding a share transfer months after closing, once the target has been integrated, refinanced, or its business changed, is frequently commercially unworkable even where the legal elements of Article 127 are satisfied.

Third, the right to invoke it decays. Article 132 sets a two-year limitation period for a claim to invalidate a transaction on the grounds of mistake, deception, threat, or coercion, running from the date the aggrieved party knew or should have known of the relevant defect. After that period lapses without a claim being brought, the transaction is treated as fully effective notwithstanding the deception.

Contractual Remedies for Misrepresentation

Because Article 127 is narrow and its remedy disproportionate to most post-closing disputes, market practice has instead treated a false representation as a breach of an ordinary contractual promise. Vietnamese commentary identifies at least four distinct ways such a breach is likely to be characterised, each carrying different consequences for what the wronged party must prove.

As an independent contractual obligation

Under the Civil Code’s general freedom-of-contract principle (Article 385), nothing prevents a party from promising that a stated fact is true and agreeing to answer for it if it is not. On this characterisation, a false representation is simply a breach of obligation, actionable under the Civil Code’s general compensation provisions (Articles 360 and 419) or, where the agreement qualifies as a commercial contract, under the Commercial Law’s more developed damages regime (Articles 302 to 305). The difficulty is that neither the Civil Code nor the Commercial Law offers specific guidance on how to quantify the loss flowing from a false statement, as distinct from a straightforward failure to perform — is the measure the diminution in value of the shares, the cost of remedying the underlying problem, or something else? Left undefined, a court has little statutory content to draw on beyond the general instruction to award compensation for actual, direct loss (Commercial Law, Article 302) that the claimant must itself prove (Article 304).

As non-conforming goods

Because a sale of shares is, for these purposes, may be arguably treated as a sale of goods, the Commercial Law’s provisions on non-conforming goods offer a second, more concrete route. Article 39 sets out when goods are not appropriate to the contract — including where they are unfit for their ordinary purpose or fail to match an agreed description; Article 40 makes the seller liable for defects existing before risk passes to the buyer, even if the defect is only discovered afterwards (subject to an exemption where the buyer knew or should have known of the defect at the time of contracting); and Article 41 gives the buyer remedies including replacement, cure, or a corresponding adjustment. Market practice increasingly recommends drafting representations expressly as part of the description and quality of the shares being sold, precisely so that a breach is characterised under this regime rather than left to the vaguer independent-obligation analysis above. The risk of not doing so is that a court reads “quality” narrowly — share count and par value — and treats the warranted state of the underlying business (accuracy of accounts, absence of undisclosed liabilities, clean title, litigation status) as falling outside the concept of conformity altogether.

As a breach of the pre-contractual duty to provide information

The Civil Code separately requires a party possessing information material to the other party’s decision to enter into a contract to disclose it, on pain of liability for compensation (Article 387, read together with the Article 3 good-faith principle). Where a seller withheld or misstated information about the target that a representation was designed to cover, a buyer may have a disclosure-duty claim independent of whatever the contract itself says about representations. This route is doctrinally distinct from Article 127: it does not require intentional deception, and its remedy is damages rather than invalidity — but it requires the buyer to show both that the seller possessed (or should have possessed) the relevant information and that non-disclosure caused quantifiable loss, which can be a difficult evidentiary burden in practice, particularly where the information in question was arguably available to a diligent buyer through its own due diligence.

As a trigger for an indemnity

Finally, parties frequently pair a representation with an indemnity, so that a breach produces a payment obligation without the buyer having to satisfy the proof-of-loss, causation, and mitigation requirements that would otherwise apply. As our earlier note on indemnity clauses discussed at https://lawetalk.com/2026/07/31/indemnity-clause/, this route carries its own characterisation risk: whether a Vietnamese court treats the indemnity as an independent payment obligation or recharacterises it as a species of compensation for damage — with the ordinary proof requirements reattached — turns on how the indemnity itself is drafted, not on the label the parties give it.

Representations play a structurally different role in a facility or loan agreement than in an M&A share purchase. Rather than being made once, at signing, and sued upon after the fact, they are typically repeated on signing and at each drawdown, and their falsity is defined as an Event of Default — entitling the lender to decline to advance further funds, accelerate outstanding amounts, cancel commitments, and enforce security. This is a self-help contractual mechanism, not a claim for compensation, and it accordingly sits closer to the “independent obligation” and freestanding-payment characterisations discussed above and in our earlier note on indemnities: a lender exercising an acceleration or cancellation right is not asking a Vietnamese court to award it damages for a loss it has suffered, but to recognise a contractually agreed right that Article 385’s freedom-of-contract principle gives it little reason to disturb.

That distinction matters because it can evaporate the moment the lender’s claim changes character. Where a facility agreement goes further and seeks affirmative money damages from a borrower, guarantor, or sponsor because a representation proved false — rather than simply accelerating or declining to lend — that claim reintroduces the same proof-of-loss, causation, and quantification difficulties that attend an independent-obligation claim in the M&A context. The safer drafting position keeps the two remedies analytically separate: the Event of Default mechanism as a freestanding contractual trigger, and any damages claim against a guarantor or sponsor treated, and pleaded, as an ordinary compensation claim subject to the Civil Code’s and Commercial Law’s usual requirements.

Drafting Recommendations

Five practical conclusions follow for a Vietnam-governed, or Vietnam-connected, contract carrying representations-and-warranties language.

Draft representations as express warranties forming part of the description and quality of the shares, business, or assets being sold, rather than as free-standing statements of fact. This is what gives a Vietnamese court the clearest textual basis to apply the Commercial Law’s non-conforming goods remedies under Articles 39 to 41, rather than leaving the buyer to an undefined independent-obligation compensation claim.
Define the measure of loss, materiality thresholds, and disclosure/anti-sandbagging mechanics expressly in the contract. Vietnamese law gives no default guidance on quantifying a warranty claim as distinct from an ordinary breach of obligation — the gap has to be filled by the parties’ own drafting, or it will be filled, unpredictably, by a court.
Treat Article 127 invalidity as a reserve remedy, not a primary one. It requires intentional deception, decays after two years from discovery, and its remedy — mutual restitution — is frequently unworkable once an acquisition has closed and the target has been integrated. Where pre-closing walk-away rights matter, draft them as express conditions and termination rights in the contract itself rather than relying on the statutory invalidity route.
In financing agreements, keep the Event of Default mechanism analytically distinct from any damages claim against a guarantor or sponsor. The former is a freestanding contractual right with a strong footing under Article 385; the latter is an ordinary compensation claim that will attract the Civil Code’s and Commercial Law’s proof-of-loss, causation, and mitigation requirements. Drafting that blurs the two risks having the stronger characterisation contaminated by the weaker one.
Finally, and consistent with our earlier note on indemnity clauses, where transaction structure and negotiating leverage permit it, consider whether representations-and-warranties-heavy provisions are better placed under a foreign governing law more accustomed to the doctrine, with disputes resolved by arbitration — Vietnam’s accession to the New York Convention continues to give foreign arbitral awards a more reliable path to recognition and enforcement in Vietnam than a foreign court judgment currently enjoys.