Vietnam sales contract terms to include under Commercial Law

Vietnam sales contract terms should cover six things: the goods and price, delivery, quality, payment, penalties and the law and forum for disputes. The Commercial Law (Law 36/2005/QH11, in force since 1 January 2006) sets default rules for a goods sale. Most of them apply only when the contract says nothing. A clear contract replaces those defaults with terms both sides chose. This checklist walks through the clauses worth writing down.

Form, parties and goods

A contract for the sale of goods may be oral, written, or formed by conduct. If another law requires a written form for a type of contract, that law must be followed. For anything of real value, put it in writing. A written contract is far easier to prove.

Describe the goods in the first clause. Name the product, the quantity and the packing. The Commercial Law defines goods as all kinds of movable property, including things to be formed in the future, and things attached to land. Some goods are banned or restricted, or need conditions to trade. Check the Government lists before you sign, because a sale of restricted goods may go ahead only when the goods and both parties meet the legal conditions.

Sources: Commercial Law, Law No. 36/2005/QH11 (English translation, english.luatvietnam.vn), Articles 3, 24 and 25.

Price and payment terms

State the price, the currency and how the price is set. If the contract has no price and no method to set one, the law falls back on the price of the same type of goods under similar conditions of delivery, timing, market and payment.

Say whether the price is by weight. If it is, the law treats it as net weight unless you agree otherwise. Then set the payment: the amount of each instalment, the due date, the bank details and the place of payment. If you leave out the place, the buyer pays at the seller's place of business, or at the place of handover when payment is made at the same time as delivery.

Add a late payment clause. Without one, the injured party may claim interest on the late sum at the average market rate for overdue debts for the period of delay. A buyer may also suspend payment in limited cases, such as proof of fraud by the seller or proof that the goods are in dispute.

Sources: Commercial Law, Law No. 36/2005/QH11 (English translation, english.luatvietnam.vn), Articles 50 to 54 and 306.

Delivery, risk and quality

Set the delivery date, the delivery place and who pays for transport. If the contract does not name a place, the default depends on the facts. Where the contract involves transport, delivery happens when the seller gives the goods to the first carrier. In other cases, delivery may be at the place where the goods are stored or made, or at the seller's place of business.

Define when risk passes to the buyer. By default, when the seller must deliver to a set place, the risk of loss or damage passes once the goods are handed over there. The buyer still has to pay for goods lost or damaged after risk has passed, unless the seller was at fault.

Quality needs its own clause. Give the specification, the standard or a sample, and say how and when the buyer will inspect the goods. The law treats goods as not matching the contract when they do not suit common use, do not suit a purpose the buyer told the seller about, differ from an agreed sample, or are not packed or stored in the usual way. A buyer may reject such goods. Spell out the remedy you want, such as replacement, repair or a price cut, and set a warranty period if there is one.

Sources: Commercial Law, Law No. 36/2005/QH11 (English translation, english.luatvietnam.vn), Articles 34, 35, 39, 40, 50, 57 and 58. Civil Code, Law No. 91/2015/QH13 (English translation, english.luatvietnam.vn), Article 398, for the usual contents of a contract.

Penalties, damages and force majeure

Vietnamese law lets the parties agree a fine for breach, but only if the contract says so. The Commercial Law caps the fine at 8 percent of the value of the breached part of the obligation. This cap is one of the most important Vietnam sales contract terms to get right, because a clause above 8 percent can be challenged.

Decide how a fine works with damages. Under the Commercial Law, if the parties agree a fine, the injured party may claim both the fine and damages, unless the law says otherwise. The Civil Code 2015, which took effect on 1 January 2017, adds that when a contract provides a fine but does not say it can be combined with damages, the breaching party owes only the fine. Write the intended result in plain words. Damages cover real, direct loss and the direct profit lost, and the injured party must prove the loss.

Add a force majeure clause. The law frees a party from liability when force majeure occurs, when the other side caused the breach, when an agreed exemption applies, or when a state order the party could not have known about caused it. The party relying on the exemption must prove it and must give prompt written notice. Define which events count and how long the delay may run before either side can cancel.

Sources: Commercial Law, Law No. 36/2005/QH11 (English translation, english.luatvietnam.vn), Articles 294, 295, 300, 301, 302, 304 and 307. Civil Code, Law No. 91/2015/QH13 (english.luatvietnam.vn), Articles 418 and 689.

Governing law and disputes

Two Vietnamese parties will normally choose Vietnamese law. In a deal with a foreign element, the parties may choose foreign law or international commercial practice, as long as it does not clash with the basic principles of Vietnamese law. A treaty that Vietnam has joined can override the Commercial Law where it differs.

Then name the dispute path. The Commercial Law lists negotiation, conciliation by a body or person the parties choose, and then arbitration or a court. A tiered clause is common: talks first, then mediation, then arbitration or court. Name the arbitration centre or the court, the seat and the language.

Finally, know the time limits. If the contract is silent, a complaint about quantity must be made within three months of delivery, and a complaint about quality within six months of delivery. Other complaints have nine months. The limitation period for a commercial lawsuit is two years from the time the right was infringed.

Sources: Commercial Law, Law No. 36/2005/QH11 (English translation, english.luatvietnam.vn), Articles 5, 317, 318 and 319.

A short clause checklist

Before you sign, check that the contract names each party and its legal representative, describes the goods and quantity, fixes price and payment, sets delivery and risk, states quality and inspection rules, adds a fine within the 8 percent cap, covers force majeure, and names the governing law and forum. Have a Vietnamese qualified lawyer review the final text. This article is general information, not legal advice.

Sources: Commercial Law, Law No. 36/2005/QH11 (English translation, english.luatvietnam.vn); Civil Code, Law No. 91/2015/QH13 (english.luatvietnam.vn).