Commentary on Precedent No. 42/2021/AL: Damages for Breach of Contract
Overview
Precedent No. 42/2021/AL was adopted by the Council of Judges of the Supreme People's Court under Decision No. 42/QĐ-CA dated 28 April 2021. It is a significant precedent on proof of damages in contract disputes — an area where many Vietnamese practitioners still struggle to assemble adequate evidence.
The precedent does not introduce a wholly new principle, but rather systematises the four elements a claimant must prove — converting provisions scattered across the Civil Code 2015 and Commercial Law 2005 into a coherent, consistently applied test.
The four elements under Precedent 42
The Council of Judges held that a claimant seeking damages for breach of contract must prove all four elements:
- Actual damage occurred — not assumed or speculative damage
- A breach of contract — the specific term breached and the conduct constituting the breach must be identified
- Causation between the breach and the damage — no recovery for damage caused by other factors
- Quantified damage with verifiable evidence — measurable in figures, not merely estimated
Failure on any element defeats the claim.
Facts and reasoning
Facts
Company A (plaintiff) entered into a VND 5 billion raw-materials supply contract with Company B (defendant). B delivered 60 days late, causing A to source replacement goods at VND 800 million more than the contract price. A sued for:
- VND 800 million price differential on replacement supply
- VND 1.2 billion in lost-customer damages (per A's estimate)
- VND 200 million in other consequential expenses
Total: VND 2.2 billion.
Outcome
The first-instance court allowed the entire claim. The appellate court reduced the award to VND 800 million only — the price differential. The Council of Judges affirmed the appellate decision, reasoning:
As to the VND 1.2 billion claim for lost-customer damage, the plaintiff could not produce a signed contract with the lost customer, nor any evidence that the customer cancelled because of the late delivery. This is speculative damage, not actual damage with proof.
The VND 200 million consequential-expense claim failed for lack of invoices or supporting documents.
Legal analysis
In light of Article 13 of the Civil Code 2015
Article 13 states the principle of full compensation, comprising:
- Loss to property
- Lost profits the claimant would have earned
- Reasonable expenses to prevent, mitigate, or remediate the harm
Precedent 42 does not displace this principle but clarifies the standard of proof: lost profits must be supported by concrete evidence, not subjective expectation.
In light of Article 302 of the Commercial Law 2005
Article 302: "The amount of damages shall comprise the actual and direct loss suffered by the aggrieved party as a result of the breaching party's conduct, and the direct profit the aggrieved party would have earned but for the breach."
Precedent 42 reads "would have earned" strictly — it requires tangible evidence, not commercial expectation.
Practical implications
For the trial file
Counsel should build a four-layer evidence stack:
1. Evidence of breach: - Original contract and annexes - Handover minutes / breach notices - Email and message trails between the parties
2. Evidence of actual damage: - Invoices and payment records for replacement supply - Contemporaneous market quotes to demonstrate reasonableness of replacement price - Replacement-supplier contracts
3. Causation evidence: - Contract delivery schedule vs. actual delivery (or replacement-procurement) date - Internal memoranda recording the decision to procure replacement and the reasons
4. Quantification evidence: - Independent valuation reports for substantial losses - Detailed working schedules signed by the chief accountant
Note on lost-profit claims
Precedent 42 does not close the door on lost profits, but raises the evidentiary bar:
- A signed customer contract is required, not a forecast
- The customer must have cancelled or reduced the order because of the breach
- A written confirmation from the customer linking the cancellation to the underlying breach is essential
Where counsel cannot satisfy these, it is generally better to omit the lost-profit claim from the complaint — a rejected claim erodes credibility on the others.
Comparison with international practice
The principle in Precedent 42 aligns with common-law doctrine:
- Hadley v Baxendale (1854): damages must be within the parties' reasonable contemplation at contracting
- CISG Article 74: damages are limited to losses foreseeable at contracting
Vietnam is not a CISG party, but practical convergence has produced the same principle: provable + foreseeable damage.
Conclusion
Precedent 42/2021/AL is an expensive lesson for the bar: winning on liability but losing on quantum because the evidence stack was thin. Apolo Lawyers advises clients to assemble the evidence file from the moment a breach is detected — particularly the contemporaneous record of any procurement-replacement or remediation decision, since that evidence is probative only if created before or contemporaneously with the action.
