Construction Debt Recovery Law Firm – TNTP Law

In construction activities, the occurrence of outstanding receivables among parties participating in a project such as the employer/project owner, main contractor, subcontractors, and material suppliers is a fairly common situation. Due to the nature of the construction industry, where construction works are carried out by multiple entities, the implementation period is prolonged, and payment is highly dependent on the progress of each relevant party, delayed payment or non-payment of monies frequently arises in practice.

When delinquient debts arise, if an enterprise does not adopt an appropriate recover strategy, such amount may remain uncollected for years, directly affecting the enterprise’s cash flow and its ability to maintain business operations. Engaging the services of a law firm specializing in construction debt recovery has therefore become a solution chosen by many businesses in order to protect their lawful rights and interests and to enhance the likelihood of successful recovery of outstanding debts.

However, enterprises should also carefully distinguish whether the issue is merely a debt recovery matter, or whether there already exists a dispute or disagreement between the parties in relation to payment obligations or contractual performance so as to properly select the most suitable action. Through this article, TNTP Law Firm shares key information relating to TNTP’s construction debt recovery services.

1. When should an enterprise engage a construction debt recovery Law Firm?

In construction practice, outstanding debts may arise at various stages and in many different forms throughout the implementation of a project. Some typical and frequently encountered cases include:

• Delayed payment by the project owner despite the contractor having completed the works or obtained acceptance certification: The contractor has fully performed its contractual obligations, and the completed work volume has been duly inspected and certified; however, the project owner continues to prolong payment or invokes unclear and unjustified reasons to defer payment.
• Delayed payment by the EPC contractor or main contractor to subcontractors: In many construction projects, the payment chain generally goes from the project owner to the EPC contractor/main contractor and then to subcontractors. Accordingly, when financial issues arise at any link of this chain, the downstream parties are usually directly affected.
• The purchaser of construction materials or equipment has received delivery but fails to make payment on time: Outstanding debts arise not only from construction contracts but also under contracts for the supply of materials and equipment. In many cases, the goods have been delivered and put into use, yet the buyer or even the construction contractor continues to prolong or delay its payment obligations.
• The debtor delays or refuses debt reconciliation, declines to sign acceptance minutes, or refuses to certify completed quantities: There is a common situation where the contractor or project owner delays debt reconciliation or refuses to sign off on completed quantities. The absence of signed acceptance or quantity confirmation documents may significantly complicate the process of proving and determining the payment obligations.

Beyond the foregoing circumstances, many other complex situations may arise depending on the contractual structure, acceptance and completion documentation, as well as the commercial relationship among the relevant parties. Nevertheless, these situations generally share one common characteristic: the outstanding debts have remained unpaid beyond the contractual payment deadline, while the creditor enterprise has repeatedly issued payment requests but the debtor either fails to respond, deliberately prolongs settlement, or continuously seeks extensions of time for payment. In such circumstances, enterprises should consider engaging a construction debt recovery law firm in order to effectively protect their lawful rights and interests.

Construction debt recovery legal services are suitable for all enterprises involved in the investment, construction, and supply of works and materials for construction projects, as these are the entities that most frequently encounter receivables during the course of project implementation. Engaging the services of a construction debt recovery law firm not only assists enterprises in accurately identifying the legal and contractual basis for the payment claims being asserted, but also supports the preparation of a complete set of documents and evidence, together with the formulation of an appropriate recovery or enforcement strategy, thereby significantly improving the prospects of successful debt collection.

2. What does a construction debt recovery lawyer do for an enterprise?

Each case requires different methods and recovery strategies depending on the available documentation, the status of the outstanding debt, and the level of cooperation from the debtor. In practice, however, construction debt recovery services are commonly implemented through the following three principal stages:

Stage 1: Negotiation and Amicable Settlement for Debt Recovery

This is usually the preferred course of action, as it may facilitate a quicker resolution while also allowing the parties to preserve their ongoing commercial relationship. During this stage, the law firm will assist the enterprise in carrying out tasks such as:

• Reviewing the contract, project records, and relevant documents in order to determine the legal and factual grounds evidencing the outstanding debt;
• Verifying the debtor’s information, including the company name, enterprise registration/tax code, legal representative, operating address, and current business status;
• Contacting and communicating with the debtor via telephone, email, or direct meetings;
• Sending a formal Letter of Demand (LOD) requesting payment of the outstanding amount;
• Representing the enterprise in meetings and negotiations with the debtor to discuss and agree upon a payment roadmap; and
• Drafting and monitoring the implementation of payment undertakings, minutes of meetings, and other written commitments made by the debtor.

Stage 2: Initiating legal proceedings before the competent dispute resolution authority

• Assessing the feasibility of commencing legal action and accurately determining the competent dispute resolution authority (either the Court or Arbitration); 
• Determining the scope of claims to be pursued, including the principal outstanding debt, default interest for late payment, contractual penalties, and damages (if any); and 
• Preparing the litigation/arbitration dossier and assisting the enterprise throughout the dispute resolution proceedings before the competent authority. 

Stage 3: Enforcement proceedings for actual recovery of monies

• Assisting with the procedures for requesting the competent enforcement authority to enforce the legally effective judgment or award, and requesting the application of appropriate compulsory enforcement measures in order to recover the outstanding amount for the enterprise; and 
• Coordinating and working with the competent authorities to verify the enforcement capacity and executable assets/conditions of the judgment debtor.

3. Service implementation process

TNTP’s process for handling construction debt recovery matters is carried out in accordance with the following steps:

• Step 1: Receipt of documents and preliminary consultation: TNTP will receive the case information and supporting documents provided by the enterprise, while also discussing with the enterprise to clarify the debt status and other relevant issues.
• Step 2: Issuance of Fee Proposal and Preliminary Recovery Strategy: Based on the information and documents supplied by the enterprise, TNTP will prepare and send to the Client a service fee quotation together with a proposed handling strategy and the recommended recovery stage appropriate to the status of the outstanding debt.
• Step 3: Execution of legal service agreement: The parties will agree on the scope of work, implementation method, and service fees, following which a Legal Service Agreement will be executed.
• Step 4: Implementation of services and progress updates: Upon execution of the Legal Service Agreement, TNTP will proceed with the agreed course of action and will regularly update the enterprise on the progress of the debt recovery matter.

Through this process, the enterprise is able to clearly monitor each stage of service implementation, while also ensuring that the debt recovery process is conducted in a structured, transparent, and systematic manner, with progress that can be readily tracked throughout the handling of the matter.

4. Documents the Enterprise Needs to Prepare

In practice, depending on each specific case, the documents and materials required may vary. However, in this article, TNTP sets out several categories of documents that enterprises are commonly required to provide when engaging in construction debt recovery services, including the following six principal groups of documents:

• Group 1: Legal documents of the plaintiff and the defendant;
• Group 2: Documents related to the agreement between the parties and the basis for the payment obligation;
• Group 3: Documents evidencing the performance of the contract;
• Group 4: Documents related to payment and evidence of the debt;
• Group 5: Documents related to the breach of the payment obligation and the handling of the breach prior to initiating legal proceedings; and
• Group 6: Documents evidencing damages and compensation claims (if any).

For more detailed guidance on each category of documents and the proper method of preparation, enterprises may refer to TNTP’s article entitled “What does a construction debt recovery lawsuit dossier include and how should it be properly prepared?”

The preparation of the above documents in a complete manner will enable the law firm to promptly assess the status of the matter, determine the legal basis of the outstanding debt, and formulate an appropriate recovery strategy. However, in practice, enterprises do not always retain a full set of all relevant documents. Where certain documents or records are missing due to either objective or subjective reasons, the enterprise may still seek assistance from a law firm in order to obtain advice on suitable remedial measures and alternative handling solutions.

5. Handling timeline and influencing factors

The time required for handling construction debt recovery matters may vary depending on the status of the case, the level of cooperation from the debtor, and the dispute resolution mechanism applied.

• Where the matter is resolved through negotiation and amicable settlement, the handling period may generally range from several weeks to several months, depending on whether the parties are able to reach an agreement on a payment arrangement.
• Where negotiation proves ineffective and the matter proceeds to legal action, the resolution period may extend from several months to a number of years, as the case must undergo the litigation or arbitral procedures prescribed by law. The specific duration will also depend on the workload of the competent dispute resolution authority, as well as whether the parties are required to provide additional documents and evidence during the course of the proceedings.
• After a legally effective judgment, award, or decision has been issued, the enforcement stage for actual recovery of monies may continue for an additional period of time and will largely depend on the debtor’s enforcement capacity and the availability of executable assets or other enforceable conditions.

Accordingly, the earlier debt recovery measures are implemented, the greater the enterprise’s prospects of recovering the outstanding amount and minimizing unnecessary prolongation of the handling process.

6. Construction debt recovery service fees

6.1 Service Fees

The costs associated with engaging construction debt recovery services depend on a number of factors, including the value of the outstanding debt, the complexity of the matter, the status of the available documents, and the recovery method to be adopted. Many enterprises are concerned that legal costs may be substantial while the outcome may not meet expectations, or that they may be required to pay a significant amount upfront at a time when their cash flow is already under pressure. At TNTP, however, we develop a fee structure tailored to each specific matter in order to minimize these concerns for our Clients. TNTP’s service fees consist of the following:

• Stage-based fees: TNTP establishes separate fee arrangements for each stage of work, including: Negotiation; Legal Proceedings; and Enforcement. This fee structure enables enterprises to more easily estimate costs in advance and select a service scope that best suits their actual needs.
• Fixed fees combined with success fees: TNTP applies a hybrid mechanism consisting of a fixed professional fee together with a success fee calculated based on the amount actually recovered by the Client from the debtor.

For each stage of negotiation, legal proceedings, or enforcement support, TNTP’s service fee shall therefore comprise a fixed fee component and a success fee component determined by reference to the amount successfully recovered in practice.

This fee structure allows enterprises to better anticipate legal expenses while also aligning TNTP’s interests directly with those of the Client in achieving an effective recovery outcome.

6.2 Costs excluded from Service Fees

TNTP’s professional service fees do not include court fees, tribunal charges, expert assessment fees, asset valuation expenses, enforcement fees, notarization and certification fees, or other administrative charges imposed by the competent authorities in accordance with applicable regulations.

In addition, TNTP’s service fees do not include travel and business trip expenses incurred in connection with work performed outside certain inner urban areas of Hanoi and Ho Chi Minh City.

Any additional expenses that may arise during the course of service performance will be specifically discussed and agreed upon with the Client before TNTP proceeds with implementation.

6.3 Preferential fee policy

Clients may be entitled to reductions in the success fee in the following cases:

1. Where the Client engages TNTP’s services for two (02) or more matters;
2. Where the outstanding debt arisen within 180 days; and
3. Where the debt is successfully recovered within 180 days from the date of execution of the Legal Service Agreement. 

For detailed information regarding TNTP’s service fees and preferential policies, Clients may refer to the publicly available Fee Schedule on TNTP’s website under the section “Debt Collection Services from TNTP”

7. Why should an enterprise engage a law firm for construction debt recovery?

Debt recovery in the construction sector often involves extensive technical documentation, acceptance and completion records, multi-stage payment arrangements, and the potential for complicated contractual disputes. For this reason, engaging the services of a construction debt recovery law firm offers enterprises a number of significant advantages, including:

• Ensuring handling in compliance with applicable laws: A law firm is able to review the relevant documents, determine the legal basis of the outstanding debt, and select an appropriate recovery strategy. The debt recovery measures adopted will therefore be legally appropriate and implemented in accordance with applicable legal regulations.
• Minimizing legal risks during the debt recovery process: Debt recovery actions are carried out in compliance with legal requirements, thereby avoiding potential violations of law in the course of pursuing payment. Payment demands are made at the proper time, in the correct procedural order, and on the basis of clear legal grounds.
• Representing the enterprise in dealing with the debtor: A law firm may act on behalf of the enterprise in communications with the debtor, issue formal payment demand notices, participate in negotiations and settlement discussions, or work directly with the debtor in order to facilitate resolution of the outstanding debt.
• Ability to continue handling the dispute when necessary: Where negotiation does not produce a satisfactory outcome, the law firm can continue assisting the enterprise by initiating legal proceedings and providing enforcement support in order to recover the outstanding amount.

Accordingly, using the services of a law firm not only enhances the enterprise’s prospects of successful debt recovery, but also ensures that the entire recovery process is conducted in compliance with applicable laws while minimizing the legal and procedural risks that may arise.

8. Frequently asked questions

Can an enterprise still recover the debt if it does not have a complete set of acceptance minutes?

In many cases, debt recovery is still possible if the enterprise possesses other documents evidencing the performance of the work or the delivery and receipt of goods and equipment, such as correspondence emails, handover minutes, final account/settlement records, or other related supporting documents.

What should be done if the debtor avoids debt reconciliation?

Where the debtor refuses to cooperate in reconciling the outstanding debt, the enterprise may rely on the documents currently available to establish the payment obligations and proceed with appropriate actions such as issuing formal payment demands or commencing legal proceedings.

When should an enterprise initiate legal action to recover the debt?

Legal action is generally considered appropriate where negotiations and payment demands have failed to produce a result, or where the debtor shows signs of intentionally delaying or evading its payment obligations.

How are construction debt recovery service fees usually calculated?

Service fees are generally structured flexibly on a case-by-case basis and may include stage-based fees together with a hybrid mechanism combining a fixed fee and a success fee calculated based on the amount actually recovered.

What common obstacles arise during enforcement proceedings for debt recovery?

Enforcement proceedings may be prolonged where the judgment debtor fails to cooperate or does not have clearly identifiable assets available for enforcement. In such cases, it is often necessary to conduct asset verification procedures and request the application of compulsory enforcement measures in accordance with law.

Debt recovery in the construction sector often involves extensive documentation, multiple payment stages, and the potential for complex disputes. Conducting a thorough review of the available records and selecting the appropriate handling strategy from the outset will enable an enterprise to improve the prospects of recovering the outstanding debt while minimizing potential legal risks. Enterprises may submit their case documents or relevant matter information to TNTP Law Firm for a preliminary assessment of the debt status, based on which an appropriate recovery strategy can be proposed.