In commercial negotiations, an LOI (letter of intent) and an MOU (memorandum of understanding) are often signed early to “lock in” the framework of cooperation before there is a formal contract. Many businesses treat them as formalities, sign quickly and do not review them. In practice, an LOI or MOU that contains a price, quantities, an exclusivity commitment, a deposit or confidentiality can create real obligations, even when the commercial terms are not yet final. This article explains how LOIs, MOUs and contracts differ under the general rules of the Civil Code 2015, when such a document can bind your business, which clauses typically create obligations, and the steps to control before signing.
- Calling a document an LOI or MOU does not decide by itself whether it is binding. The Civil Code 2015 defines a contract by the nature of the agreement (Article 385).
- The intention to be bound, how specific the content is, and how the parties act after signing are the factors to consider.
- Confidentiality, exclusivity, deposit and dispute resolution are clauses that typically create real obligations.
- The duty to keep confidential information received during negotiations can arise even before a formal contract is signed (Article 387, Civil Code 2015).
- The most effective control is to state clearly in the document itself which parts are binding and which are not.
Vietnamese law has no specific definition of an LOI or an MOU. So whether the document is binding is usually decided by its content and the parties’ intention, not just by the title on the first page.
An LOI/MOU may only record an intention to cooperate. But if the document clearly shows an intention to be bound and contains enough specific content, it risks being treated as a contract or as an offer to enter into a contract.
Even when the commercial part is not binding, some clauses, such as confidentiality, exclusive negotiation, deposit or dispute resolution, can still create real obligations. Your business should state clearly which parts are binding and which are not before signing.
1. What problems do businesses typically face?
A hypothetical case: Company A signs an MOU with distributor B “with a view to exclusive distribution cooperation”. The MOU states volumes, prices and a territory, and commits A not to work with any other distributor for 6 months. Three months later, A finds a better partner and argues that “the MOU is just a memorandum”.
The real question at this point is not “Is the MOU a contract?”. The right question is: which clauses in the MOU created obligations for A, and what evidence does B have to require A to perform or pay damages?
Common mistakes:
- Treating an LOI/MOU as a token document, signing it quickly without legal review.
- Using a ready-made MOU template in which binding and non-binding clauses are mixed together.
- Putting price, quantity and timeline into the MOU without making clear that they are only indicative terms.
- The signatory is not a valid representative, because people think “the MOU is not important”.
2. What does the law say about LOIs, MOUs and contracts?
The law has no specific rules for LOIs or MOUs. The general rules on civil transactions and contracts in the Civil Code 2015 are the main basis for assessing them.
Contracts and offers to enter into a contract
- Article 385, Civil Code 2015: a contract is an agreement between parties to establish, change or terminate civil rights and obligations.
- Clause 1, Article 386, Civil Code 2015: an offer to enter into a contract is a clear expression by the offeror of the intention to enter into a contract and to be bound by that offer, made to an identified party or to the public.
- Article 393 and Clause 1, Article 400, Civil Code 2015: acceptance of an offer is the offeree’s reply accepting the whole content of the offer; the contract is concluded when the offeror receives the acceptance.
| Provision | Main content | What it means for an LOI/MOU |
|---|---|---|
| Article 385, Civil Code 2015 | A contract is an agreement between parties to establish, change or terminate civil rights and obligations | The definition is based on the nature of the agreement, not on its title |
| Article 386, Civil Code 2015 | An offer is a clear expression of the intention to enter into a contract and to be bound by the offer, made to an identified party or to the public | An LOI with specific content sent to an identified party may be treated as an offer |
| Articles 393 and 400, Civil Code 2015 | Acceptance of an offer (accepting the whole content; silence is not acceptance, unless agreed or established by practice between the parties) and the time a contract is concluded | Replying “agreed” to a specific LOI may raise the question whether a contract has been concluded |
| Article 387, Civil Code 2015 | Duty to provide information and to keep confidential the information received while entering into a contract; a breach that causes damage must be compensated | Pre-contractual obligations can exist even before a formal contract is signed |
| Article 3, Civil Code 2015 | Principle of good faith and honesty in establishing, performing and terminating civil rights and obligations | A basis for assessing negotiations conducted in bad faith |
| Article 328, Civil Code 2015 | Deposit, and the consequences of refusing to enter into or perform the contract | A deposit stated in an LOI/MOU has its own legal consequences |
| Articles 117 and 119, Civil Code 2015 | Conditions for validity and form of civil transactions (oral, written, by conduct; data messages are treated as written form) | Some transactions must meet statutory form requirements, such as notarisation, certification or registration |
| Articles 142 and 143, Civil Code 2015 | Consequences of transactions made by a person without authority to represent, or beyond the scope of representation | The basis for assessing an LOI/MOU signed by a person without sufficient authority |
3. When can an LOI/MOU bind your business?
Analysis: This section is FC Legal’s view based on the rules above; it is not a rule of law. When assessing an LOI/MOU, three questions can help:
- Did the parties show an intention to be bound? Words such as “undertake”, “is obliged to” or “must” are different from “expected”, “intends to” or “will negotiate”.
- Is the content specific enough? The clearer the subject matter, price, quantity, term and method of performance, the higher the risk that the document is treated as a binding agreement.
- Are there any conditions not yet met? For example: due diligence results, approval by the Board of Directors, signing of the formal contract. If so, the document should state clearly that these are conditions.
How the parties act after signing also matters. If they have started delivering goods, paying or implementing under the MOU, the argument that it is “just a memorandum” is usually less convincing.
4. Comparing LOIs, MOUs and contracts
| Criterion | LOI | MOU | Contract |
|---|---|---|---|
| Typical use | One party expresses an intention to the other | Two or more parties record a framework for cooperation | The parties establish specific rights and obligations |
| Specifically defined by law | No | No | Yes (Article 385, Civil Code 2015) |
| Binding effect | Depends on the content | Depends on the content | Binding when the conditions for validity are met |
| Main risk | Treated as an offer to enter into a contract | Binding and non-binding parts mixed together | Unfavourable clauses, lack of control |
| Legal review needed | Yes, if it includes price, exclusivity or a deposit | Yes, if it includes specific commitments | Yes |
5. Clauses in an LOI/MOU that typically create real obligations
Deposit and confidentiality during negotiations
- Article 328, Civil Code 2015: if the party that paid the deposit refuses to enter into or perform the contract, the deposit belongs to the party that received it; if the party that received the deposit refuses, it must return the deposit to the other party plus an amount equal to the value of the deposit, unless otherwise agreed.
- Clauses 2 and 3, Article 387, Civil Code 2015: a party that receives the other party’s confidential information while entering into a contract must keep it confidential and must not use it for its own purposes or other unlawful purposes; a breach that causes damage must be compensated.
| Clause | Why it matters | What to control |
|---|---|---|
| Confidentiality | The other party receives your business information, prices and customers | Scope of the information, confidentiality period, duty to return or destroy |
| Exclusive negotiation | Restricts your right to work with other partners | Term, scope, consequences of breach |
| Deposit | The deposit may be lost, or must be returned plus an equal amount, under Article 328 of the Civil Code 2015, unless otherwise agreed | Purpose of the deposit, cases where it is refunded, conditions under which no deposit penalty applies |
| Costs | Who bears due diligence and advisory costs if the deal does not go ahead | Clear allocation |
| Governing law, dispute resolution | Decides where and how any disagreement is resolved | Align with the plan for the main contract |
| Term and termination | An MOU with no end date can extend confidentiality and exclusivity obligations | Expiry date, how to terminate early |
If your LOI/MOU includes a deposit, exclusivity or confidentiality, send it to the FC Legal team to assess which clauses create obligations for your business before you sign.
6. Common misconceptions
“The MOU says it is non-binding, so we are safe.” Not necessarily. If specific clauses contradict that statement, or the parties have performed it like a contract, the interpretation may be different. List exactly which clauses are binding.
“We only replied by email agreeing to the LOI; we have not signed anything.” If the LOI already has specific content and shows an intention to be bound, an email accepting its whole content may be taken into account when deciding whether a contract has been concluded. Electronic form does not by itself exclude legal effect. On the other hand, an email agreeing only “in principle”, or proposing changes, is usually hard to treat as acceptance of the whole offer.
“The MOU was signed by a department head, so it does not bind the company.” Authority is assessed under the rules on representation, including where the company later accepts or agrees to the transaction, or knows of it and does not object within a reasonable time. Do not rely on this argument to escape obligations. See also the articles “Authority to sign commercial contracts” and “Contracts by email, electronic signatures and scanned copies”.
Email, data messages and authority to represent
- Clause 1, Article 119, Civil Code 2015: a civil transaction made by electronic means in the form of a data message under the law on electronic transactions is treated as a written transaction.
- Article 8, Law on Electronic Transactions No. 20/2023/QH15: information in a data message may not be denied legal effect solely because it is in the form of a data message.
- Articles 142 and 143, Civil Code 2015: a transaction made by a person without authority to represent, or beyond the scope of representation, in principle does not create rights and obligations for the represented person (for the part in excess), except in certain cases, such as where the represented person accepts or agrees to it, knows of it and does not object within a reasonable time, or is at fault in causing the other party not to know, or not to be able to know, of the lack of authority.
7. Practical risks
- Being forced to continue the transaction or pay damages after changing plans.
- Losing the deposit, or having to return it plus an equal amount.
- Being restricted from working with other partners during the exclusivity period.
- Confidential information is misused, but damage is hard to prove if the MOU is not clear.
- Unfavourable clauses in the MOU become the “starting point” in negotiating the main contract.
8. What should your business do before signing an LOI/MOU?
Pre-signing checklist
- Define the purpose: only recording an intention, or already fixing some commitments.
- Divide the document into two parts: non-binding clauses and binding clauses (listed by clause number).
- Use wording consistent with that purpose (“expected”, “will negotiate” for the non-binding part).
- State clearly the conditions for signing the main contract: due diligence, internal approvals, licences.
- Set an expiry date and a way to terminate the LOI/MOU.
- Check the signatories and the powers of attorney of both parties.
- Keep all emails, meeting minutes and drafts exchanged during negotiations.
9. Where should your business start?
Have a lawyer review the LOI/MOU before signing if it contains any of the following: a deposit or advance payment; an exclusivity commitment; sharing of confidential information; an M&A, real estate or investment transaction; a foreign counterparty or an arbitration clause.
If your business has already signed, the first step is to establish exactly which clauses are binding, how much of the term remains and what evidence of exchanges exists between the parties, before deciding whether to continue, renegotiate or terminate. Related articles: “10 legal issues when negotiating commercial contracts”, “Commercial contracts: a management guide from negotiation to termination”.
Gather the LOI/MOU (including any appendices), the email exchanges, the signatory’s power of attorney and any payments or deposits made. This is the minimum set of documents needed to assess how far your business is bound.
10. Frequently asked questions
Do LOIs and MOUs have legal effect?
Vietnamese law has no specific definition of an LOI or MOU. Whether it is binding is assessed under the general rules on contracts in the Civil Code 2015, based on the intention to be bound and how specific the content is. A document that only records an intention may not bind the commercial part, but clauses such as confidentiality, deposit and exclusivity can still create obligations.
Is writing “non-binding” in an MOU enough to be safe?
Not necessarily. If specific clauses contradict this statement, or the parties have performed it like a contract, the interpretation may be different. List clearly, by clause number, which parts are binding (for example confidentiality, costs, dispute resolution) and which are not.
Can replying by email to agree to an LOI conclude a contract?
It can, if the LOI is specific enough to be treated as an offer and the email accepts its whole content. Under the Civil Code 2015, a contract is concluded when the offeror receives the acceptance, and a transaction by data message is treated as a written transaction. Silence does not count as acceptance, unless agreed or established by practice between the parties.
What are the consequences of a deposit in an MOU?
Under Article 328 of the Civil Code 2015, if the party that paid the deposit refuses to enter into or perform the contract, it loses the deposit; if the party that received the deposit refuses, it must return the deposit plus an equal amount, unless otherwise agreed. So the purpose of the deposit and the cases where it is refunded need to be stated clearly.
Does an MOU signed by a person without authority bind the company?
In principle, a transaction made by a person without authority to represent does not create obligations for the company, but there are exceptions: the company accepts it, knows of it and does not object within a reasonable time, or is at fault in causing the other party not to know of the lack of authority (Articles 142 and 143, Civil Code 2015). Do not rely on this argument to escape obligations.
11. Legal basis and references
- Civil Code No. 91/2015/QH13 (Articles 3, 117, 119, 142, 143, 328, 385, 386, 387, 393, 400).
- Law on Electronic Transactions No. 20/2023/QH15 (Article 8 on the legal effect of data messages).
This article reflects Vietnamese law as reviewed up to October 2026. Businesses should check the instruments in force at the time of application.
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This article is for reference. It reflects the rules in force at the time of publication. For legal advice on a specific case, please contact an FC Legal lawyer.
Prepared by the FC Legal legal team and reviewed by FC Legal’s Managing Lawyer. Updated 4 October 2026.
