Process for Claiming Damages Due to Breach of Construction Contracts

The process for claiming damages due to a breach of construction contracts is a crucial factor in ensuring fairness and responsibility among related parties. When an incident or breach occurs, determining liability not only protects the injured party but also encourages compliance. In this article, Long Phan Consulting Company analyzes legal regulations and proposes effective solutions for compensation issues in construction.

Cases where compensation for damages arises due to breach of construction contract.

Construction activities always carry risks. Compensation liability typically arises in the following cases (Law on Construction 2025, effective July 1, 2026):

1. Investor’s Liability (Point e, Clause 2, Article 60): Compensate for damages caused by selecting unqualified supervision consultants, incorrect acceptance of volume, design errors, and other violations.
2. Contractor’s Liability (Point k, Clause 2, Article 61): Compensate for contract breaches, use of incorrect materials, failure to meet approved designs/quality, environmental pollution, and other violations.
3. Supervision Contractor’s Liability (Point dd, Clause 2, Article 63): Compensate for falsifying supervision results regarding incorrect volume/designs/standards without reporting to the investor/competent authority.
4. Termination/Cancellation (Clause 4, Article 85): Parties illegally suspending, unilaterally terminating, or canceling contracts must compensate the other party according to civil laws.

Regulations on compensation for damages due to breaches and dispute resolution of construction contracts, effective from July 1, 2026.

According to Article 86 of the Law on Construction 2025:

• Agreement: Bonuses, penalties, and compensation must be agreed upon in the contract.
• Actual Damage: Compensation is determined based on actual damages.
• Penalty Cap: For public investment/PPP projects, the penalty for breach shall not exceed 12% of the value of the breached contract portion. Besides penalties, the violating party must also pay compensation.
• Third-Party Cause: If a breach is due to a third party, the violating party is still liable to the other party. Disputes with the third party are settled separately.

Methods for resolving construction contract disputes.

According to Clause 5, Article 86 of the Law on Construction 2025:

1. Negotiation/Mediation: Prioritized through self-negotiation or mediation.
2. Arbitration/Court: Applying international practices, arbitration, or court.
   • Public/PPP Projects: Domestic arbitration is prioritized. International models apply if required by international treaties or approved by the investment decision-maker and agreed in the contract.
3. Costs: Investor’s dispute resolution costs (if any) are included in the total investment.

>>>See more: Liability for compensation in construction contracts

Procedures for claiming damages due to breach of construction contracts.

The typical process includes:

Step 1: Identify Breach Collect evidence (acceptance minutes, progress reports, photos/videos of quality, etc.).

Step 2: Notify Breach Send a written notice to the violating party stating the violation and requesting rectification within a set time.

Step 3: Determine & Prove Damages Identify specific damages and gather supporting documents/invoices.

Step 4: Send Compensation Claim Send a formal written claim stating the legal basis, violation, damages, and requested amount.

Step 5: Negotiate the compensation level, payment method, and conditions.

Step 6: Dispute Resolution If negotiation fails, proceed to Mediation, Commercial Arbitration, or Court as agreed/regulated.

Step 7: Enforcement Execute the compensation payment.

>>>See more: Resolve construction contract disputes by commercial arbitration

Consulting services on compensation for damages due to breach of construction contracts in Long Phan.

Long Phan Consulting Company provides in-depth consulting on construction damages:

• Advisory: Analyzing regulations on compensation for contract breaches.
• Drafting: Preparing compensation clauses for enterprise contracts.
• Assessment: Evaluating damage levels and liability.
• Negotiation: Representing clients in fair negotiations.
• Dispute Resolution: Representing clients in Commercial Arbitration.
• Prevention: Advising on risk prevention strategies.

Frequently Asked Questions about Compensation for Damages Due to Breach of Construction Contract

Below, Long Phan Consulting provides some frequently asked questions regarding compensation for damages due to breach of construction contracts. We invite interested clients to refer to this information:

What if the party suspends the contract without notice?

The suspending party must notify in writing (stating reason, time, consequences). Failure to notify causing damage results in liability for compensation under civil laws. (Legal Basis: Article 85, Law on Construction 2025).

What are the regulations on performance security?

Parties can agree on security measures (guarantees, deposits) until obligations are fulfilled.

• Investor: Can request contractor security; can handle security assets if the contractor violates quality/progress/safety.
• Contractor: Can request investor payment security (except public investment projects). (Legal Basis: Article 83, Law on Construction 2025).

What are the incentive policies for construction activities from July 1, 2026?

Based on Article 11 of the 2025 Construction Law, the following policies are stipulated regarding incentives in construction activities:

• Encourage construction activities aimed at preserving, restoring, and promoting the value of historical and cultural relics and scenic spots; build social housing; and carry out construction activities in accordance with planning in mountainous areas, islands, areas with difficult or extremely difficult socio-economic conditions, and areas negatively affected by climate change.
• Entities from all economic sectors involved in construction activities are encouraged and provided with favorable conditions.

What are the exemption cases for compensation?

According to Article 294 of the Commercial Law 2005, liability is exempted if the breach is due to:

1. Force majeure.
2. Fault of the aggrieved party.
3. Compliance with decisions of competent state agencies (unknown at signing).
4. Agreement of the parties.

Conclusion

Claiming Compensation for Construction Contract Breaches requires adherence to specialized laws. For legal support, please contact Long Phan Consulting Company via Hotline 1900636389. We are committed to optimal legal solutions to protect your legitimate rights.