Invalid design consulting contracts – Risks and legal consequences
In construction, a design consulting contract is the basis to establish the rights and obligations between the investor and the design consultant. Unlike other service contracts, design consulting contracts fall under the category of consulting contracts in construction activities, subject to direct regulation by the Law on Construction and its guiding documents, while also applying the general principles of the Civil Code.
Dispute resolution practice shows that failure to identify the legal nature of a design consulting contract and the mandatory validity conditions can lead to the contract being declared invalid, resulting in complex disputes over payment and liability for damages.
In this article, TNTP’s lawyer analyzes the risks and legal consequences when a design consulting contract is declared invalid.
1.Validity conditions of design consulting contracts
As a type of consulting contract in construction activities, the validity conditions of a design consulting contract are determined based on Article 117 of the Civil Code 2015 and the provisions of the Law on Construction.
Accordingly, in addition to general conditions regarding legal capacity, voluntary consent, and lawful purpose and content, a design consulting contract is only valid if the consultant fully meets the legal requirements for construction practice capacity. Specifically, consulting organizations must be registered and obtain appropriate capacity certificates corresponding to the type and grade of the project; the chief designer must hold a valid professional practice certificate.
In cases where the design consultant is a foreign contractor, construction law further requires obtai ning a construction operation permit in Vietnam before providing services. Failure to meet these legal conditions may render the contract invalid and give rise to disputes over the legal consequences.
2.Cases where design consulting contracts may be declared invalid
In practice, design consulting contracts may be declared invalid by the Court if they fail to meet validity conditions under civil and construction law.
A common case is when the design consultant does not meet professional capacity requirements at the time of contract conclusion. Under the Law on Construction, consulting organizations must hold appropriate construction capacity certificates, and the chief designer must have a valid practice certificate. Lack of or non-compliance with professional requirements not only constitutes a violation of business conditions but may also render the contract invalid under Article 117 of the Civil Code 2015.
Additionally, a design consulting contract may be deemed invalid if its purpose or content violates prohibitions of the law, such as providing consulting services for projects not eligible for implementation under planning or lacking approval from competent authorities. In such cases, the contract risks being declared invalid under Article 123 of the Civil Code 2015.
Determining whether a design consulting contract is invalid requires a comprehensive assessment, where the Court considers not only the contract’s title but also the parties’ legal conditions and the content of the agreement at the time of conclusion.
3.Legal consequences of invalid design consulting contracts
Dispute resolution practice shows that handling the legal consequences of invalid design consulting contracts has particularities compared to ordinary civil transactions.
Under Article 131 of the Civil Code 2015, when a civil transaction is invalid, the parties must return to each other what they have received. However, in design consulting contracts, the subject matter is primarily design documents and drawings—intellectual and professional products—which cannot be returned in the same material sense as goods or products.
Therefore, in practice, Courts often clarify the actual workload performed by the design consultant based on the contract (such as design documents, drawings, explanatory notes, technical solutions, or other professional materials delivered), and require the investor to pay the corresponding value for that work, even if the contract is declared invalid.
In addition to restitution, liability for damages is also a significant legal consequence of invalid design consulting contracts. Clause 4, Article 131 of the Civil Code 2015 stipulates that the party at fault causing the invalidity must compensate for damages. Accordingly, if the contract is invalid because one party failed to meet professional capacity requirements or lacked legal status to provide design consulting services under construction law, that party may be liable for damages to the other. If both parties are at fault, liability is apportioned according to the degree of fault.
When a design consulting contract is declared invalid, the parties are no longer guaranteed full rights and obligations under the original agreement; payment and compensation are resolved mainly under the Civil Code and the Court’s assessment of actual work performed and fault allocation. This not only creates legal and civil liability risks between the parties but may also delay the project, posing financial risks for both the investor and the design consultant.
Therefore, strict control of validity conditions – particularly professional capacity and legal status of the consultant – is a key factor helping enterprises limit disputes and protect legal and financial interests during project implementation.
This article, “Invalid design consulting contracts – Risks and legal consequences”, was prepared by TNTP’s lawyer. TNTP hopes the article will provide valuable insights to readers and help enterprises minimize legal risks.
