What is a Commercial Contract?

There are many ways to understand the concept of a Commercial Contract, with the most common understanding as follows: A commercial contract is an agreement aimed at profit with at least one party being a merchant.

To consider a commercial contract, there are two basic factors to keep in mind: the content and the contracting parties.

The Commercial Law 2005 defines the concept: “A merchant includes lawfully established economic organizations, individuals independently and regularly conducting commercial activities with business registration.”

In addition, the Commercial Law also stipulates that the regulated subjects include organizations and individuals engaging in activities related to commerce.

Commercial activities are also defined as “activities aimed at profit, including the purchase and sale of goods, provision of services, investment, trade promotion, and other profit-driven activities.” Thus, the purpose of commercial activities must be profit generation.

In contrast, a Civil Contract is defined as follows: “A civil contract is an agreement between parties on establishing, changing, or terminating civil rights and obligations.” Its scope includes individuals, legal entities, and organizations involved in civil, commercial, labor relations, etc., and profit is not a mandatory factor constituting the contractual relationship.

Both Civil Contracts governed by the Civil Code and Commercial Contracts governed by the Commercial Law and related legal documents, however, in practical application, it can be challenging to accurately determine the type of contract. For example, with regard to the penalty for breach of contract in a commercial contract, the penalty must not exceed 8% of the value of the breached obligation, whereas in a civil contract, the penalty will be as agreed by the parties.

Regarding the concept of a Commercial Contract, PLF believes that: A Commercial Contract is an agreement between the parties (with at least one party being a merchant or an organization or individual engaged in commercial activities) to establish, change, or terminate the rights and obligations of the parties in performing commercial activities for profit.

According to Financial Magazine

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