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Determining the statute of limitations for initiating lawsuits in commercial disputes

Determining the statute of limitations for initiating lawsuits in commercial disputes

Written by TNTP LAW on . Posted in Dispute settlement.

Commercial disputes are conflicts over rights and obligations between parties while conducting commercial activities. According to Clause 3 of Article 317 of the Commercial Law 2005, when a dispute related to commercial transactions arises, the involved parties have the right to request the Court or Arbitration to resolve the dispute. However, to ensure the dispute is resolved by the Court or Arbitration, initiating a lawsuit must be within the statute of limitations prescribed by law. In this article, we will address and analyse the legal issues about the statute of limitations for commercial disputes.

1. General provisions on the statute of limitations

The statute of limitations for commercial disputes is stipulated in many laws, specifically as follows:

● Article 319 of the Commercial Law 2005 stipulates that the statute of limitations applicable to commercial disputes is two years from the time the legal rights and interests are infringed, except for the case specified in Point e, Clause 1 of Article 237 of this Law. According to the provision at Point e, Clause 1 of Article 237 of the Commercial Law 2005, Apart from the cases of liability exemption specified in Article 294 of this Law, traders providing logistic services shall not be liable for the goods loss caused in the following cases: … e) After being complained against, traders providing logistic services are not notified of lawsuits against them being instituted at arbitrations or courts within nine months from the date of delivery of goods.

● Article 336 of the Maritime Code 2015 stipulates that the statute of limitations for lawsuits related to marine insurance contracts is 02 years from the time the dispute arises.

● According to Article 33 of the Commercial Arbitration Law 2010, the statute of limitations for initiating lawsuits at arbitration for commercial disputes is 02 years from the time the legal rights and interests are infringed, except for cases where specialized law stipulates otherwise.

As it is regulated in many laws, the statute of limitations for initiating lawsuits at the Court and Arbitration for each specific commercial dispute is determined following the principle below:

● First, the statute of limitations is applied according to the regulations of the specialized law if the dispute relates to specialized law such as the Maritime Code, etc. and the specialized law stipulates a different statute of limitations from the provisions of the Commercial Law 2005.

● Second, the statute of limitations is applied according to the regulations of the Commercial Law 2005.

2. Periods excluded from the statute of limitations

Based on Article 156 of the Civil Code 2015 and Article 44 of the Commercial Arbitration Law 2010, the period excluded from the statute of limitations for commercial disputes is the period during which one of the following events occurs:

● The event of force majeure or objective hindrance prevents the entity with the right to initiate a lawsuit from doing so within the statute of limitations.

An event of force majeure is an event which occurs in an objective manner which is not able to be foreseen and which is not able to be remedied by all possible necessary and admissible measures being taken.

An objective hindrance is a hindrance which in an objective context results in a person with civil rights or obligations not knowing that his or her lawful rights and interests have been infringed or not being able to exercise his or her rights or fulfil his or her civil obligations.

● When the court decides that the dispute falls beyond the arbitration council’s jurisdiction, or there is no arbitration agreement or the arbitration agreement is invalid or unrealizable, the arbitration council shall decide to terminate the dispute settlement. Unless otherwise agreed by the parties, they may bring the dispute to a court within the statute of limitations specified by law. The period from the date the plaintiff initiates a lawsuit at arbitration to the date the court decides to accept the dispute is not included in the statute of limitations for initiating a lawsuit.

3. Recommencement of the statute of limitations

The statute of limitations is the duration prescribed by law, mandatory, and parties are not allowed to agree to extend or shorten it. However, in reality, the statute of limitations can still recommence if it falls within one of the cases according to the provisions of Article 157 of the Civil Code 2015:

● The obligor has acknowledged part or all of its obligations to the plaintiff;

● The obligor has acknowledged or fulfilled part of its obligations to the plaintiff;

● The parties have become reconciled.

When one of these events occurs, the statute of limitations will start again, and the recommencement date is the day after the date these events occur.

Above is the content of the article “Determining the statute of limitations for initiating lawsuits in commercial disputes”. We hope this article will be useful for readers.

Sincerely,

Disputes between members and between members and the company under Vietnamese law

Disputes between members, and between members and the company under Vietnamese law

Written by TNTP LAW on . Posted in Dispute Settlement.

Disputes between members, and between members and the company, are conflicts and disagreements that arise throughout the entire process from the establishment, operation, and reorganisation of the business to its dissolution or bankruptcy. As society progresses, disputes between members, and between members and the company, become increasingly common, reflecting an inevitable law of development. In this article, TNTP will analyse some basic content about this type of dispute.

1. Legal regulations on disputes between members, and between members and the company

According to the provisions of Clause 5, Article 6 of Resolution No. 03/2012/NQ-HDTP dated December 3, 2012, by the Council of Judges of the Supreme People’s Court, disputes between members, and between members and the company are regulated as follows:

● A dispute among members of a company is a dispute between members of a company regarding value of their contributions to the company; regarding the transfer of capital holdings in the company between members of the company or the transfer of capital holding in the company of a member of the company to a person who is not a member of the company; regarding the transfer of bearer shares and registered shares; regarding face value of stocks, issued stocks and bonds of the joint stock company or regarding the right to ownership of the property in proportion to the shares of each member of the company; regarding the right to receive profits or the obligation to bear the losses and to settle loans of the company; regarding the disposal of property and the sharing of loans of members of the company in case the company is dissolved; or regarding other matters between members of the company related to the establishment, operation, dissolution, merger, amalgamation, division or organizational transformation of the company.

● A dispute between a company and its members is a dispute regarding the capital holding of each member in the company (usually, such capital holding is calculated by money or by objects or the value of the right to ownership of industrial property); regarding the face value of stocks and the issued stocks (applicable to joint stock companies); regarding the right to ownership to a part of asset of the company in proportion to the contribution to the company; regarding the right to receive prohibits or obligation to bear the losses in proportion to the contribution to the company; regarding the petitions to the company for transform or settlement of loans of the company, disposal of asset and of contracts that the company has concluded when conducting the dissolution of the company; or regarding other matters related to the establishment, operation, dissolution, merger, amalgamation, division or organizational transformation of the company.

2. Methods for resolving disputes between members, and between members and the company under Vietnamese law

Disputes between members within the company, and between members and the company related to the establishment, operation, dissolution, merger, consolidation, division, transfer of company assets, and conversion of the company’s organizational form are determined as commercial business disputes (Article 30 of the Civil Procedure Code 2015 and Article 6 of Resolution 03/2012/NQ-HDTP). Therefore, when disputes arise, parties can apply methods for resolving commercial business disputes. Accordingly, the methods for resolving disputes between members, and between members and the company include:

● Negotiation;
● Mediation;
● Arbitration;
● Court proceedings

Each method has its advantages and disadvantages. The application of which method to resolve disputes will be agreed upon by the parties. However, in complex cases, where parties are not in good faith and cannot reach an agreement, parties often choose arbitration or court proceedings to resolve disputes.

Above is the content of the article “Disputes between members, and between members and the company under Vietnamese law” that TNTP presents to readers. We hope the above shares are useful to those interested in this issue.

Sincerely,

Considerations when using arbitration to resolve disputes arising from M&A transactions

Considerations when using arbitration to resolve disputes arising from M&A transactions

Written by TNTP LAW on . Posted in Dispute Settlement.

Mergers and acquisitions (M&A) have become a popular form of investment in Vietnam today, and disputes arising from M&A transactions are increasingly common. In the event of a dispute, parties can use various methods to resolve disputes, such as negotiation, mediation, arbitration, and court proceedings. So, what should enterprises pay attention to when applying arbitration to resolve disputes arising from M&A transactions? Follow this article by TNTP for answers.

1. Disputes arising from M&A transactions are resolved by Commercial Arbitration only when the parties have an arbitration agreement

According to Clause 1 of Article 5 of the Law on Commercial Arbitration 2010 (“LCA”), a dispute is resolved by Arbitration only when the parties have an arbitration agreement. The arbitration agreement can be made before or after the dispute arises.

Simultaneously, according to Clause 1 of Article 16 of the LCA, an arbitration agreement can be established in two forms: One, as an arbitration clause; or two, as a separate agreement. The arbitration clause is usually defined in the contract signed between the parties or in the annexes of the contract. A separate agreement can be established when a dispute has occurred, and there is no provision for arbitration in the contract.

Moreover, to resolve disputes at Commercial Arbitration, parties also need to properly define the arbitration agreement to ensure that the arbitration agreement is not invalid under Article 18 of the LCA and is not considered impossible to perform under Resolution 01/2014/NQ-HDTP.

Specifically, an arbitration agreement is invalid in the following cases: i) Disputes arise in the domains falling beyond the arbitration’s jurisdiction defined in Article 2 of LCA; ii) The arbitration agreement maker has no competence defined by law; iii) The arbitration agreement maker has no civil act capacity under the Civil Code; iv) The form of the arbitration agreement is incompliant with Article 16 of LCA; v) A party is deceived, intimidated or compelled in the course of making the arbitration agreement and requests a declaration that such arbitration agreement is invalid; vi) The arbitration agreement breaches prohibitions specified by law.

The arbitration agreement cannot be performed in the following cases: i) The parties concerned have an agreement to resolve their disputes at a specific arbitration center which has now shut down without any arbitration center that inherit its cases, and the parties concerned fail to reach an agreement on another arbitration center to resolve their disputes; ii) Bother parties have an agreement on appointment of a specific arbitrator to resolve disputes, but when the dispute arises, because of force majeure events or objective difficulties, such arbitrator cannot resolve the case, or the arbitration center or court cannot find the arbitrator as agreed by the parties concerned, and the parties concerned also fail to reach an agreement to select a substitute arbitrator; iii) Bother parties have an agreement on appointment of a specific arbitrator to resolve disputes, but when the dispute arises, such arbitrator refuses the appointment or the arbitration center refuses the arbitrator appointment, and the parties concerned also fail to reach an agreement to select a substitute arbitrator; iv) The parties concerned have an agreement to resolve their disputes at a specific arbitration center but a set of arbitration rules of another arbitration center, which is different from the arbitration rules of the agreed arbitration center, is applied, the charter of the arbitration selected by both party does not allow the application of arbitration rules of other arbitration centers, and the parties concerned fail to reach an agreement on substitute set of arbitration rules; v) The goods/service seller and consumers have an overall agreement on provision of goods/services that contain arbitration terms drafted by the seller as prescribed in Article 17 of LCA, but the consumers refuse to have the dispute that arises resolved by an arbitral tribunal.

2. Enterprises need to pay attention to the selection of arbitrators

An arbitrator is considered the person who will examine, adjudicate, and make a decision to resolve the case. Typically, disputes related to M&A are complex, requiring the arbitrator with deep expertise, to understand the essence of the transactions as well as the law. Therefore, when choosing to resolve disputes through arbitration, enterprises need to pay attention to the selection of arbitrators. Choosing a suitable arbitrator will be a key factor in ensuring that the dispute is resolved most accurately, objectively, and effectively.

3. Understand and fully implement the arbitration procedures and processes

To best protect their legal rights and interests, parties need to first understand the legal regulations on the procedures and processes of arbitration. In case the parties choose a specific Arbitration Center to resolve the dispute, the parties must further understand the Procedural Rules of this Arbitration Center. The parties who understand their rights and obligations in the dispute resolution process can correctly and fully implement the arbitration procedures and processes. Depending on whether the party’s status in the dispute is as a claimant or respondent, the parties need to pay attention to some contents about filing and sending a lawsuit; and the timing of sending the defence brief to the Arbitration Center;…

Above is the content of the article “Considerations when using arbitration to resolve disputes arising from M&A transactions”. We hope the article is useful to our readers.

Sincerely,

Causes of disputes between members, and between members and the company

Written by TNTP LAW on . Posted in Dispute Settlement.

Disputes between members, and between members and the company, are increasingly numerous and complex. So, what are the causes of the aforementioned disputes? Based on current legal regulations and practical basis, it can be seen that the causes of disputes between company members, and between members and the company, often stem from the following reasons:

1. Not recognizing the importance of legal factors when starting a business

Legal factors directly affect the formation and development of the company. However, some legal issues that need attention when starting a business have not been considered by the company founders, such as:

● Not correctly understanding the moment of the company’s establishment and legal recognition, leading to confusion about the moment of establishing company membership status. According to legal regulations, a company is only allowed to conduct business activities, have a legal personality, and become an independent subject in legal relations from the moment the company is granted the Business Registration Certificate by the competent state authority. Before this moment, entities might have carried out procedures such as capital contribution, renting factories, warehouses, business locations, etc., however, these actions do not mean they have become company members or have the right to do business.

● Not paying attention to issuing internal legal documents, especially the company charter. The company charter is the most important legal document in a company, detailing the company’s organizational structure – management, charter capital, membership status, and other issues related to company operations. However, company founders often think that the company charter is just an administrative procedure required to establish a company. Therefore, they often use available templates on the internet, change company information, and then submit it to the competent state authority to legalize the business registration application without realizing that the contents of the Charter will later affect their rights and obligations towards the company.

2. Not focusing on issues of management, control, and internal organization

The business model in Vietnam is mainly small and medium-sized enterprises with not many members, so it is easy to manage when newly established. However, over time, the business will grow and “recruit” more new members, leading to changes in the ownership ratio of shares/capital contributions, profit/dividend distribution, issues of personnel management, business operation, etc. The larger the company, the more complicated the management, control, and internal organization. If not timely adapted with appropriate solutions, the business will not be able to manage and control the issues arising in the company in time. Then, it is inevitable that disputes between company members, and between members and the company will occur.

3. Not clearly defining the ratio of capital contributions, and share ownership in the company at the time of establishment

According to the Law on Enterprises 2020, charter capital is the total value of assets contributed or committed to contribute by the company members, the company owner when establishing a limited liability company, a partnership company; is the total face value of shares sold or registered to buy when establishing a joint-stock company. The ownership ratio of shares/capital contributions is the basis to determine the extent of rights and the fulfilment of obligations of members, and shareholders towards the company, for example, voting rights, rights to profit/dividend distribution, rights to share the company’s assets upon dissolution, and bankruptcy.

Also, according to the Law on Enterprises 2020, within 90 days from the date the company is granted the Business Registration Certificate, company members/shareholders must contribute the correct and full type of assets they have committed to contribute. However, in practice, the following cases often occur:

● Members do not make capital contributions on time and with the correct type of assets committed to contribute;

● Capital contribution is only made on “paper” and not implemented;

● Capital contribution is not carried out according to the correct procedures, such as no asset handover minutes, not carrying out procedures for transferring ownership or the right to use assets;

● Company members/shareholders use assets that they do not legally own or have the right to use for capital contribution, etc.

If the above cases occur, the company member status may no longer exist, the company’s charter capital is changed, and the ownership ratio of shares/capital contributions is changed, consequently, the rights and obligations of members/shareholders towards the company will also change. However, many businesses and company founders do not fully recognize the importance of establishing member/shareholder status and determining the ownership ratio of shares/capital contributions, thereby neglecting or intentionally violating without foreseeing the consequences leading to disputes.

4. Stemming from the personal interests of members within the company

Sometimes disputes between company members, and between members and the company, stem from the personal interests of these members themselves. Typically, if shareholders believe their interests are infringed, the information about the company’s operations is not provided fully, inaccurately, etc., disputes often arise between members and the company. Especially, in cases where major shareholders, those holding positions such as Legal Representatives or chairman of the Board of Directors do not ensure the interests of “weaker” shareholders, disputes often arise between members as well as between members and the company.

Above is the content of the article “Causes of disputes between members, and between members and the company” that TNTP presents to the readers. We hope the shared information is useful to those interested in this issue.

Sincerely,

The obligation to provide pre-contractual information in franchising

The obligation to provide pre-contractual information in franchising

Written by TNTP LAW on . Posted in Contract Law.

In the franchising business, a lack of sufficient information can lead to parties making inaccurate decisions and encountering disadvantages, especially for the franchisee, as the franchisor is usually the one who provides the standard franchise contract applicable to the franchisees. Franchisees often have little opportunity to negotiate contract terms. Therefore, to ensure the provision of information in franchising, Decree 35/2006/ND-CP has some regulations regarding the obligation to provide information during the negotiation phase of the franchising contract, thus each party has the responsibility to provide information to each other. Let’s explore this issue further with TNTP through the article below.

1. Parties obligated to provide information

In the pre-contractual phase, the legal regulations on franchising mainly govern the behaviour of two main entities: the Franchisor and the intended Franchisee.

Regarding the franchisor’s obligation to provide information, Clause 1 of Article 8 of Decree 35/2006/ND-CP stipulates: “The franchisor shall have to supply copies of the franchising contract form and the written introduction of its franchising to the intended franchisee at least 15 working days before signing the franchising contract unless otherwise agreed by the parties. Compulsory contents of the written introduction of franchising shall be specified and promulgated by the Ministry of Trade”.

Conversely, in the pre-contractual phase, the intended Franchisee has the obligation “to supply the franchisor with information reasonably requested by the latter before deciding on the grant of commercial rights to the former”.

Thus, according to Vietnamese law, the entities obligated to provide information in the pre-contractual phase include both the Franchisor and the intended Franchisee.

2. Scope of provided information

As mentioned above, the law stipulates the obligation to provide pre-contractual information for both the Franchisor and the intended Franchisee. However, the scope of information required from each party is different.

The Franchisor is responsible for providing a copy of the sample franchising contract and an introduction to their franchising as detailed and specifically regulated in Article 11 of Decree 35/2006/ND-CP and Annex III of Circular 09/2006/TT-BTM.

Specifically, in the case the parties choose to apply Vietnamese law, the franchising contract must include the following main contents: (i) The content of the franchising rights; (ii) Rights and obligations of the Franchisor; (iii) Rights and obligations of the Franchisee; (iv) Price, periodic franchising fees, and payment methods; (v) Duration of the contract; and (vi) Contract renewal, termination, and dispute resolution.

For the franchising introduction, according to Annex III issued together with Circular 09/2006/TT-BTM, it must include the following information: (i) General information about the Franchisor; (ii) Information on intellectual property rights; (iii) Information about the Franchisor; (iv) Initial costs the Franchisee must pay; (v) Other financial obligations of the Franchisee; (vi) Initial investment of the Franchisee; (vii) Obligations of the Franchisee to purchase or lease equipment to comply with the business system prescribed by the Franchisor; (viii) Obligations of the Franchisor; (ix) Market description of the goods/services traded under franchising; (x) Contents of the sample franchising contract; (xi) Information about the franchising system; (xii) Financial reports of the Franchisor; and (xiii) Rewards, recognitions to be received, or organizations to join.

Where the franchised commercial right is a common one, besides providing the above information, the secondary franchisor has to notify in writing the intended franchisee of the following contents: (i) Information on the franchisor that has granted commercial rights to it; (ii) Contents of the common franchising contract; (iii) Method of handling secondary franchising contracts in case of termination of the common franchising contract.

While the franchisor’s obligation to provide information is quite detailed, the scope of information that the intended Franchisee needs to provide is still quite general. Accordingly, the intended Franchisee will provide the Franchisor with the information reasonably requested by the Franchisor to decide whether to grant franchising rights to the intended Franchisee or not.

3. Duration for providing information

Regarding the duration for providing information, Clause 1 of Article 8 of Decree 35/2006/ND-CP stipulates that the Franchisor must provide the regulated information to the intended Franchisee at least 15 working days before signing the franchising contract unless otherwise agreed by the parties.

The duration for providing information by the intended Franchisee will be carried out according to the request of the Franchisor.

Above is the content of the article “The obligation to provide pre-contractual information in franchising” that TNTP presents to the readers. We hope the information provided is helpful to those interested in this issue.

Sincerely,

Legal consequences of failing to fulfill the pre-contractual information providing obligation in franchising

Written by TNTP LAW on . Posted in Contract Law.

Franchise relationships are inherently fraught with potential conflicts and interest clashes between parties. To minimize disputes and protect the interests of each party in a franchise relationship, the law stipulates the obligation to provide information right from the pre-contractual stage (before signing the contract). If any party violates this obligation, the following legal consequences may arise.

1. The violating party will have to compensate for damages

Article 24.2 of Decree 35/2006/ND-CP stipulates that where traders conducting business by mode of franchising commit acts of violation, causing material damage to involved organizations and/or individuals, they must pay compensations therefore according to the provisions of law. Accordingly, violating the obligation to provide information in the pre-contractual stage, if it causes material harm to the interests of the Franchisor, the intended Franchisee, or other related organizations or individuals, the violating party must compensate for damages.

2. The contract may be invalid

According to the provisions of Article 127 and Article 407.1 of the Civil Code 2015, a contract can be invalid if it was established due to deception. Deception in civil transactions is the intentional act of one party or a third party to make the other party misunderstand the subject, nature of the object, or content of the civil transaction, leading to the establishment of that transaction.

Franchising businesses are conducted by the parties through a franchise contract. During the contract negotiation phase, the decision of the Franchisee to sign the contract is mainly based on the information provided by the Franchisor. Therefore, if the Franchisor provides incorrect, incomplete, or inaccurate information causing the Franchisee to misunderstand the subject, nature of the object, or content of the contract and sign the franchise contract, the Franchisee may request the Court to declare the franchise contract invalid due to deception.

3. Other legal measures

Based on Article 16.1 of Decree 35/2006/ND-CP referring to Article 287.1 of the Commercial Law 2005, the Franchisee has the right to unilaterally terminate the contract if the Franchisor violates the obligation “to provide documentation on the franchise system to the Franchisee”. The law stipulates this because the content of the franchise introduction is very important for the prospective Franchisee in deciding whether to join the franchise system of the Franchisor.

Furthermore, according to Vietnamese law, traders involved in franchising that breach the obligation to supply information in franchising, depending on the nature and severity of the violation, may also be subject to administrative penalties (Point c, Clause 1 of Article 24 of Decree 35/2006/ND-CP). Based on Article 75.2 of Decree 98/2020/ND-CP, individuals who fail to provide, provide incomplete, or inaccurate information in franchising businesses may be fined from 3,000,000 to 5,000,000 VND, and organizations committing the above act may be fined from 6,000,000 to 10,000,000 VND.

Above is the content of the article “Legal consequences of failing to fulfill the pre-contractual information providing obligation in franchising” that TNTP presents to readers. We hope the information provided is useful to those interested in this issue.

Sincerely,

TNTP CELEBRATES THE LUNAR NEW YEAR 2024

Written by TNTP LAW on . Posted in Our Activities.

Dear our precious Clients and Partners,

TNTP would like to dedicate this article to looking back to 2023, a year which filled with challenges and difficulties. The prolonged aftermath of the COVID-19 pandemic and socio-economic crisis have led to economic stagnation and the emergence of numerous disputes.

Throughout this challenging year, TNTP is always grateful and proud to be the trusted choice of many Clients and Partners in providing legal services.

TNTP extends to our clients and partners a couplet from Nguyen Du’s masterpiece, “The Tale of Kieu”:

“Sen tàn, cúc lại nở hoa,
sầu dài ngày ngắn, đông đà sang xuân”.

(English translation: “The lotuses wilted, and the mums bloomed; Long hours of melancholy while the day grew shorter, then winter passed and spring arrived”).

This message conveys that life is always in motion and development and eventually, all hardships will go away. Let us all have faith in moving towards the Year of the Wood Dragon 2024, a year of growth and prosperity.

Stepping into the new year, TNTP wishes to be not only a legal companion but also a reliable partner, ready to support our Clients and Partners in overcoming hardships to achieve great success.

TNTP respectfully announces the Lunar New Year 2024 holiday schedule as follows:

• Holiday period: TNTP will be on the Lunar New Year Holiday from February 8, 2024 to February 14, 2024 and will be back to work on February 15, 2024.

• During the holiday, TNTP will continue to provide emergency support as necessary. You may contact us via phone number 0931.798.818 or email at ha.nguyen@tntplaw.com for timely assistance.

Once again, TNTP extends our deepest thanks to our Clients and Partners. We wish you and your loved ones a joyful and warm Lunar New Year holiday.

Happy Lunar New Year, the year of the Wood Dragon 2024!

Sincerely,

 

 

 

 

Methods Businesses Can Apply to Minimize Disputes Arising from Contracts

Methods Businesses Can Apply to Minimize Disputes Arising from Contracts

Written by TNTP LAW on . Posted in Dispute Settlement.

When businesses wish to collaborate, they hope that the cooperation process will be smooth and free from unnecessary conflicts and disputes. So, what can businesses do to minimize these disputes when disagreements arise during the implementation of agreements? In this article, TNTP will point out some methods that can be applied to reduce disputes arising from contracts.

1. Disputes that may arise in contracts

In a contract, the following types of disputes can arise:

• Disputes regarding the Subject of the Contract: There are cases where the person signing the contract has no actual authority to represent a Party in the contract; Or the Contracting party does not have the capability to sign the contract, resulting in the contract being void.

• Disputes regarding the subject matter of the contract: Describing goods or services to be provided in the contract is crucial. However, in practice, there are still cases where the description of the contract’s subject matter does not match the reality, and the characteristics of goods or services are not specified. This can lead to disputes when the goods or services may not be suitable within the contract.

• Disputes related to contract content: If the content and terms of the contract are not specifically and thoroughly defined, disputes can arise when issues arise during implementation.

• Disputes during contract performance: During the performance of the contract, due to various reasons, parties may fail to perform or not perform as agreed, leading to potential disputes.

2. Minimizing disputes during the contract signing phase

Minimizing disputes can be achieved during the negotiation and contract signing phase. The following methods can be applied:

• Thoroughly research your partners: Conducting thorough research on potential partners can help businesses gather essential information about them and avoid entering into contracts with parties not having authority to enter into a contract or lacking the capacity to fulfill contract requirements or with companies that exist only on paper. Businesses should investigate tax identification numbers, business registration details, operational status, financial reports (if available), legal representatives, etc.

• Specify the detailed provision of contract terms: To prevent difficulties that may occur during contract performance, parties should draft the contract with the most detailed provisions possible regarding matters directly related to contract performance. This helps guide both parties in fulfilling their mutual agreements. Specific provisions may vary depending on the nature of the contract.

• Meticulous contract review: Thoroughly reviewing the contract draft is a necessary step to minimize errors in the contract preparation process and identify contract terms that may lead to a dispute. Terms related to the interests of the parties are often the ones with the highest dispute risks, as there may be cases where the contract imposes many obligations but grants very few rights, or vice versa. Therefore, reviewers should focus on such terms.

• Resolving any remaining issues: The fact that the parties have different desires and expectations can lead to differences in their viewpoints regarding rights and obligations in the contract. For such matters, direct negotiation with the partner based on a cooperative spirit is necessary, but there still need to be limits to protect one’s own rights and interests.

3. Minimizing risks during the contract implementation phase

• Properly perform the Agreed Terms: To avoid conflicts and disputes arising from contract execution, all parties must conscientiously adhere to the terms and conditions stipulated in the contract, ensuring they are performed precisely and completely as agreed upon.

• Utilizing Alternative Dispute Resolution Methods: In the event of issues arising during contract implementation, it is important to promptly notify the other party and actively cooperate to resolve the matter. Parties should use methods such as negotiation and mediation to address differences amicably.

Above is the article “Methods Businesses Can Apply to Minimize Disputes Arising from Contracts” that TNTP sends to readers. If you have any questions or need further clarification, please contact TNTP for timely assistance.

Sincerely,

Common commercial practices in goods contracts

Common commercial practices in international sale of goods contracts

Written by TNTP LAW on . Posted in Contract Law.

In international sales of goods contracts, commercial practices play an important role in regulating and supporting international goods sales transactions to be performed properly. In this article, TNTP will present which practices and customs are commonly used in international goods sales contracts.

I. Definition of commercial practices

The Commercial Law 2005 provides definitions for commercial customs and commercial practices. According to Clause 3, Article 3, commercial customs in commercial activities are understood as clear and repeatedly established rules of conduct over an extended period among the parties, which the parties implicitly recognize to determine the rights and obligations of the parties in commercial contracts. Clause 4 of Article 3 defines commercial practices as a set of commercial practices and customs widely recognized in commercial activities in a region, area, or commercial sector, acknowledged and regularly applied by multiple entities in commercial relationships with clear content for the parties to determine their rights and obligations in commercial transactions.

Commercial practices are usually categorized into the following groups:

Common Commercial Practices: These are commercial customs recognized and applied in many countries and regions worldwide. For example, Incoterms (International Commercial Terms) compiled and drafted by the International Chamber of Commerce (ICC) are widely recognized and applied in international trade transactions.

Regional Commercial Practices: These are international commercial customs applied in each country, region, or port. For instance, in the United States, the FOB (Free on Board) delivery terms are commonly used. The FOB terms in the United States are outlined in the “Revised American Foreign Trade Definitions of 1941,” which specifies six types of FOB with certain differences in rights and obligations for the seller and buyer compared to the FOB terms in Incoterms 2000.

II. Common commercial practices in international sale of goods contracts

When entering into international sales contracts for goods, due to the international nature of the contract, parties may encounter barriers related to language, culture, legal systems, etc. This can lead to situations where the same clause is interpreted differently by the parties, thereby posing a risk of disputes. Commercial pratices, especially widely recognized ones, play a crucial role in clearly defining consistent rights and obligations for the parties, thus reducing some of the barriers mentioned. In practical international sales contract negotiations, some typical commercial customs include:

• Incoterms: Incoterms, or International Commercial Terms, are a set of international trade rules established by the International Chamber of Commerce (ICC) and used in international sales contracts. Incoterms provide a set of common rules and general guidelines to facilitate international trade. Essentially, they offer a common language that traders can use to set terms for their transactions. Incoterms govern various aspects, including the responsibilities of the buyer and seller, delivery of goods, risk transfer, transportation responsibilities, and insurance obligations. While Incoterms are commonly used for sea and inland waterway transport, they can also be applied to all modes of transportation. A unique feature of Incoterms is that different versions of Incoterms are valid independently of each other. That means that parties can use the 2000 version of Incoterms for transactions in 2023, provided they explicitly specify this in their contract.

• Uniform Customs and Practice for Documentary Credits (UCP): UCP is a set of rules issued by the International Chamber of Commerce (ICC) that provides guidelines for the uniform practice of documentary credits applied by financial institutions issuing Letters of Credit—a financial instrument that facilitates trade financing. Many banks and lenders must adhere to these rules to standardize international trade, reduce risks in the exchange of goods and services, and manage international trade. These rules are applied to international payment transactions in many countries worldwide.

• Institution Cargo Clauses: It is a part of the initial marine insurance developed by the International Chamber of Commerce (ICC), an agency that manages global businesses. These clauses were first introduced in 1982, and they have been modified over time to accommodate changes in global business practices, risk levels, and threats. Insurance clauses are categorized into levels A, B, and C, each with different coverage, value, and insured cargo types to suit the needs of parties requiring insurance for goods during transportation.

Above is the article “Common commercial practices in international sale of goods contracts” that TNTP sends to readers. If have any questions or need further clarification, feel free to contact TNTP for timely assistance.

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TNTP & ASSOCIATES INTERNATIONAL LAW FIRM

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