During the process of executing sales contracts, certain mistakes may occur, leading to the contract being unenforceable or disputes arising during the execution. Therefore, when executing domestic sales contracts, certain issues should be noted as follows.
Article table of contents
Important notes when entering into a sale of goods contract in Vietnam (Illustrative image)
Regarding the Contractual Subjects:
According to legal regulations, if the subject is a legal person, the contract must be signed by the legal representative of that legal person or by an authorized person. However, in practice, there have been cases where many contracts were signed by unauthorized individuals, and when conflicts arise, the company refuses to continue executing the contract claiming that the person who signed it was not authorized, thereby avoiding responsibility. This causes significant damage to the partner, especially with high-value contracts, the damage is considerable. As a result, the company does not compensate the partner arguing that the contract signer did not represent the company, while the individual who signed the contract either shirks responsibility or cannot bear the high damage of the partner. Furthermore, there are instances where the signer was authorized but exceeded the scope of their authority.
Therefore, it is crucial to thoroughly understand the information about your partner to avoid contracts being signed by unauthorized individuals of the enterprise, which would render the contracts void in principle. Depending on specific cases, the contract may be entirely or partially invalid.
Regarding the Contract Object:
The object of a sale of goods contract is the goods. The participating parties often dispute over goods not matching the agreed-upon object, goods quality not meeting standards, etc. This is because the contract provisions are not specific and detailed, leading to misunderstandings or one party exploiting loopholes to evade obligations.
Therefore, when signing the contract, the enterprise needs to carefully read each clause of the contract specifying the contract object, goods quality, and quantity. It is crucial to clearly define technical indices, applicable standards, and agree on the understanding of contract terms to avoid different interpretations by each party. Additionally, the quality standards should be made into a separate appendix, stating the specific characteristics of the goods including name, quantity, quality, value, code, structure, composition, weight, production date, production place, etc.
Regarding Price and Payment Method:
In most contracts, the parties only stipulate the agreed price and payment stages, and the form of payment. However, in reality, with market fluctuations and certain other objective conditions, the buyer often makes late payments; hence, interest on late payments, etc., needs to be specified. Clear payment conditions, and interest rates for late payments, etc., should be stipulated.
Regarding Penalization for Violations:
Penalization for violations can only occur if the parties have a specific agreement in the contract; if the parties do not have such an agreement, this sanction cannot be applied.
According to Article 301 of the Commercial Law 2005, the penalization level for violations is restricted as follows:
The penalty level for contractual obligation violations or the total penalty for multiple violations as agreed by the parties in the contract must not exceed 8% of the value of the violated contractual obligation.
Therefore, when the parties agree on a penalty, they must refer to the Commercial Law to choose a penalty within the 8% limit; if the agreed penalty exceeds this percentage, the excess part will be deemed unlawful and invalid. Hence, it is essential to carefully calculate before agreeing on this sanction.
Regarding Force Majeure Cases:
The force majeure clause helps the parties foresee exemption scenarios from responsibility if contractual obligations are violated when force majeure conditions occur during contract execution. In reality, parties often conflict when determining whether an occurring circumstance qualifies as a force majeure event. Therefore, a clear agreement on force majeure cases (natural phenomena or social phenomena) is necessary. Additionally, when drafting the contract, the parties may specify certain events as force majeure to exempt responsibility. Especially, during the complex Covid-19 pandemic period, it is essential to clearly stipulate this issue to avoid future disputes.
The aforementioned are some key points to note when drafting a basic sale of goods contract. The contractual subjects should carefully consider to enable smooth contract execution and performance.
Legal Basis:
Long Binh
