Commercial Contract Legal Consultation

Normally, in order for a contract document to be clear and easy to understand, people divide issues into terms or items, in order from small to large. In the content of a commercial contract, it is necessary to pay close attention to the following provisions:

1. Terms of definition
Definition terms are used for the purpose of defining (explaining) words and phrases that are used repeatedly or require a uniform understanding between the parties or abbreviated symbols.
This is important for international commercial contracts, technology transfer contracts, construction supervision consultancy contracts
Because in these contracts, there are many words and phrases that can be understood in many ways or professional words and phrases that only those who are knowledgeable in that field will understand
Therefore, in order to make the performance of the contract easy and limit the arising of disputes, the parties must clarify (definition) right from the signing of the contract, not wait until the implementation before discussing and agreeing on the understanding
On the other hand, when a dispute or litigation occurs, this clause helps the adjudicators understand the contents agreed upon by the parties and make accurate judgments

2. Terms of row name
The name of the goods is an indispensable content in all contracts for sale and purchase of goods.
In order to facilitate the performance of the contract and limit disputes arising, the name of the goods should be clearly defined.
Goods usually have common names and proper names. Example: goods - rice (common name), tedious rice, glutinous rice (proper name).
Therefore, when determining the name of goods, it must be a proper name, especially for goods that are machinery and equipment products
Depending on the type of goods, the parties may choose one or more of the following ways to determine the name of goods accordingly: Name + origin; name + manufacturer; name + appendix or catalogue; trade name; scientific name; names accompanied by uses and characteristics; name according to the label of goods or packaging.

3. Terms of quality of goods
The quality of goods combined with the name of goods will help the parties identify the goods in a clear and detailed way.
In fact, if this clause is not clear, it is difficult to perform the contract and it is easy to arise disputes.
In general, the quality of products and goods is expressed through technical indicators and their characteristics.
To determine the quality of goods, depending on each specific type of goods to determine, based on mechanical and physical criteria, chemical criteria or other characteristics of that goods.
If the parties agree on the quality of goods according to a common national or international standard, it may refer to that standard without specific interpretation.

4. Terms of quantity (weight)
This clause shows the quantity of goods in the contract, the content to be clarified is: unit of calculation, total quantity or method of determining quantity.
Example: In the contract for sale and purchase of construction stone, to determine the quantity, the parties can choose one of the following ways: by net weight (kilograms, quintals, tons), by cubic meter, by wagon, carriage, or by boat compartment.
For contracts for the international sale of goods, it is necessary to specify how quantities and units of measurement are determined by different countries' measurement systems.
For goods with large quantities or due to the characteristics of goods that can be changed by themselves, increase or decrease in quantity according to the weather, it is also necessary to specify a tolerance (deviation rate) in the total quantity accordingly.

5. Price Terms
The parties when agreeing on the price should mention the following contents: unit price, total value and payment currency.
Regarding the unit price, it is possible to determine the fixed price or give a way to determine the price (mobile price).
Fixed prices are usually applied to contracts for sale and purchase of goods with high price stability and short delivery term.
Mobile pricing is often applied to contracts for sale and purchase of sensitive (volatile) prices and are executed over a long period of time.
In this case, it is usually stipulated that the price will be adjusted according to the market price or according to the change of factors affecting the product price.

6. Payment terms
Payment method is the way in which the parties fulfill the obligation to deliver and receive money when buying and selling goods.
Based on the specific characteristics of the contract, relationship and other conditions, the parties can choose one of the following three payment methods accordingly:
Direct payment method: when doing this method, the parties directly pay with each other, which can be cash, cheque or draft.
The parties can deliver and receive in person or through the money transfer service of the post office or bank.
This method is often used when the parties have a long-term trading relationship and trust each other, with contracts of small value.
The method of collecting and crediting documents (L/C) are 2 methods commonly applied to the international sale and purchase of goods.
Implementing this method is very convenient for both the buyer and the seller in payment, especially ensuring that the buyer gets the money when the goods have been delivered.
Regarding specific procedures, the bank will be responsible for explaining and guiding the parties when choosing this payment method.

7. Terms of penalties for violations
Penalty for breach is a type of sanction chosen by the parties themselves, it is meant as a measure of punishment, deterrence, prevention of breach of contract, in order to raise the sense of respect for the contract of the parties.
The penalty level is agreed upon by the parties, which can fix a specific amount of fines or offer a flexible penalty calculation method as a percentage of the value of the breach contract.
According to the Civil Code (Article 422): "Penalty for breach is an agreement between the parties to a contract, according to which the breaching party is obliged to pay a sum of money to the aggrieved party; Penalties for violations shall be agreed upon by the parties”.
But according to the Commercial Law (Article 301), the parties' right to agree on fines for violations is limited, specifically: "Penalties for breach of contractual obligations or total penalties for many violations agreed upon by the parties in the contract but not exceeding 8% of the value of the breached contractual obligations”.
Therefore, when agreeing on the penalty, the parties must base on the provisions of the Commercial Law to choose a penalty in the range of 8% or less, if the parties agree on a larger fine (for example 12%), the excess (4%) is considered a violation of the prohibition of law and is void.
violations
Example: The agreement is that "If the seller violates the quality of goods, he will be fined 6% of the value of the goods of improper quality. If the payment period expires and the buyer still fails to pay, a penalty of 5% of the late payment amount will be imposed."

8. Force majeure clause
Force majeure is a legal event arising against the subjective will of the parties, directly affecting the performance of the signed contract.
These are natural or socio-political events such as hurricanes, floods, droughts, earthquakes, volcanoes, wars, riots, strikes, economic crises.
These are common circumstances that make one or both parties unable to perform or improperly perform their obligations.
When a party breaches the contract due to force majeure events, the law is not required to be responsible for the property (no penalty for violation, no compensation for damage).
In fact, if there is no clear agreement on force majeure, it is easy for the breaching party to take advantage of force majeure to abdicate responsibility, leading to damage to the aggrieved party.
In this clause, the parties need to define force majeure and stipulate the obligations of the party experiencing force majeure events.

9. Dispute Resolution Terms
For the choice of settlement at arbitration or court, the agreement must comply with the provisions of law, specifically:
The first case: Contracts for sale and purchase of goods between traders and other organizations and individuals that are not traders, when there is a dispute, shall be settled by a competent court. The parties cannot choose Arbitration to settle according to Article 1, Article 7, Article 10 of the Ordinance on Arbitration dated 25/02/2003 and Article 2 of Decree No. 25/ND-CP dated 15/01/2004.
The second case: When there is a dispute, the parties have the right to choose the form of settlement at arbitration or court; if there is the participation of foreign traders, the parties may also choose a Vietnamese arbitration institution or a foreign arbitration institution to settle.
The second case: When there is a dispute, the parties have the right to choose the form of settlement at arbitration or court; if there is the participation of foreign traders, the parties may also choose a Vietnamese arbitration institution or a foreign arbitration institution to settle.
For example: "Any dispute arising out of or in connection with this contract will be resolved at the International Arbitration Center next to the Vietnam Chamber of Commerce and Industry." If only the general agreement is: "during the performance of the contract, if any dispute will be resolved at Arbitration", this agreement is null and void.
Particularly for contracts for sale and purchase of goods between Vietnamese traders and foreign traders, the parties must also pay attention to the choice of applicable laws when settling disputes: law of the buyer, law of the seller or international law (international conventions such as the Vienna Convention of 1980 on sale and purchase of goods).
This is a very important issue, in order to avoid losses due to ignorance of foreign or international laws, Vietnamese traders should choose Vietnamese law to apply to commercial contracts.