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Legal service on Penalties For Breach Of Contract

The legal institution on penalties for violations is an important institution to protect the parties in commercial relations. In the context of such extensive economic integration, it is important to understand the provisions of the law on fines for violations of contracts. Therefore, Apolo Lawyers (Hotline: +84 903 419 479) provides our clients with legal service on penalties for breach of contract helping our clients protect their legitimate rights and interests.


There are some outstanding issues about penalties for breach of contract that clients shall focus on:

1. Conditions to impose contractual penalties

Both Civil Code and Commercial law stipulate that there are three conditions to impose the contractual penalties as follows:

  • Parties shall have an agreement on the penalties. The aggrieved party is not allowed to impose the penalties even the breach of contract occurs if there is no agreement on penalties in the contract.
  • There is an exited breach and be a condition that is agreed in the contract to impose penalties. As we could see, only those specified breaches in the penalty agreement may result in such imposition, not all breaches result in the imposition of penalties.
  • There are some cases of exemption from liability in accordance with the law and the breach must not fall into these cases.

2. Limitations on levels of contractual penalties

While the Civil Code 2015 stipulates that “the penalty levels shall be agreed among the parties unless prescribed by relevant laws” meaning that there is no limitation on levels of penalties, the Commercial Law and Construction Law impose the limitation on contractual penalty levels. According to the Commercial Law 2005, the maximum penalty level for commercial contracts is 8% of the value of the breached contractual obligation, except for cases of incorrect assessments caused by unintentional faults. Concurrently, the penalty level shall not be over ten times the assessment service charge. The Construction Law 2014 regulates that the maximum penalty level for works using public investment funds, non – public investment state funds is 12% of the value of the breached contract.

Note: It is important to distinguish “the value of the contract” and “the value of the breached contractual obligation” to impose penalties legitimate.


Currently, there are no regulations to resolve if contracting parties agree on a penalty level exceeding the maximum prescribed by law. However, based on the practice of adjudicating commercial contracts, the Court usually settles the case by reducing the penalty level to 8% as the Commercial Law stipulates. 

Therefore, although parties agree on a penalty higher than the capped amount, the penalty agreement is still valid and contracting parties are not subject to any sanctions. But when a dispute arises and parties can not agree and come to the Court will they agree to adjust the penalty to the amount prescribed by laws?

>>> Read more: Risks in entering a contract for the sale of goods

>>> Read more: Contracts: Compensation in the event of the overdue payment

4. How can Apolo Lawyers support our clients?

With a team of experienced lawyers, Apolo Lawyers can support our clients no limit but including the following tasks:

  • Drafting contracts;
  • Reviewing contracts;
  • Consulting about the provisions of penalties for breach of contract;
  • Participating in protecting the legitimate rights and interests of customers when a dispute occurs.

Apolo Lawyers is proud to be a law firm with many years of experience in business consulting that will support clients with commercial contracts. In case you need advice related to commercial contracts, please contact us via email at or Hotline - +84 903 419 479 for the best advice and support.


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