Enforceability of Put and Call Options under Vietnamese laws

Option Agreements (or Put and Call Options), while common in many legal systems, are not explicitly regulated or codified under Vietnamese law. However, given the options resemble contractual rights, they may fall within the general framework of civil transactions in general and contract law principles in particular, which are primarily governed by the Vietnamese Civil Code of 2015.?

Accordingly, these option agreements can be seen as conditional civil transactions or conditional contracts, where the performance of contract (i.e., the exercise of put or call options) depends on the occurrence of a specified event (triggering conditions). Once the condition is met, the obligor is required to fulfill their obligation (one party calls or puts, the other party is compelled to sell or to buy back) when the condition is met. This agreement, if satisfies necessary legal requirements, will be recognized and enforced by third parties, including courts and arbitrators.?

What Makes a Put and Call Option Agreement Legally Enforceable?

Like any valid contract, for Put and Call Options to be legally binding under Vietnamese law, they must meet the essential elements such as:

• Clearly Defined Terms:

Options must be clearly defined, with the exercise price, duration, triggering conditions and any penalties for non-performance are sufficiently detailed to ensure clarity in performance and prevent disputes.?

• Compliance with Applicable Laws:

The agreement must comply with relevant laws governing the subject of the option (the kind of stake to be sold or acquired). For example:

- Securities Laws apply to options involving publicly traded securities;

- Land Laws for land-related transactions;

- Foreign Investment Laws for shares acquisition regarding restrictions on foreign ownership and requirements for regulatory approval in certain sectors;

- Enterprise Laws for matters of shareholders’ rights, issuance of shares, transfer of capital and shareholder approval;

and other applicable laws for different types of assets.??

• Capacity and Consent of Parties:

Parties entering into the Options Agreement must have full legal capacity, give mutual and voluntary consent, and act in good faith and honesty throughout the transaction.?

• Legality and Ethics of the Agreement:

The purpose and content of the options must align with legal requirements and not violate social ethics or public policy.

Vietnamese law upholds the principle of freedom of contract, allowing parties to negotiate terms freely, including the inclusion of put and call options. If these terms comply with the general principles of contract law, the agreement is considered legally binding and enforceable.

Competent authorities, such as courts and arbitrators, are obligated to uphold and enforce the terms of valid option agreements in the event of disputes.

By ensuring that put and call options meet these essential criteria, parties can effectively safeguard their contractual rights and navigate potential complexities with confidence.

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Author: Mai Phuong Le - Managing Associate | Hanoi Office

Le Mai Phuong joined Indochine Counsel in October 2024 as an associate and head of the Hanoi office. Before joining Indochine Counsel, she gained diverse legal experience across a variety of professional environments, including leading law firms in Vietnam and PwC Legal Vietnam.

Phuong’s expertise spans a broad range of practice areas, such as mergers & acquisitions, investment, corporate & commercial transactions, regulatory & compliance, project development, and technology, media & telecoms. She has successfully advised both domestic and international clients on high-profile transactions in key industries such as energy, natural resources, education, pharmaceuticals, transportation, electronics manufacturing, real estate, and construction. With a pragmatic and solution-oriented approach, Phuong is well-versed in Vietnamese licensing and regulatory frameworks. Her deep understanding of clients’ priorities and business environments enables her to craft tailored legal strategies that not only address complex challenges but also ensure compliance and support clients’ commercial goals.

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