The sale of goods contract is one of the most common commercial contracts. Due to the ongoing development of commercial activities, disputes arising from sales contracts are becoming increasingly, along with the complexity of each case. In this article, we will delve deeper into the sale of goods contract and common disputes that often arise from this type of contract.
1. The definition of sale of goods contract
• According to Article 430 of Civil Code 2015, a Sale of asset contract is an agreement between the seller and the buyer in which the seller transfers the possession right of the asset to the buyer, and the buyer pays the seller.
• In Clause 8 Article 3 Commercial Law 2005, the sale of goods is defined as a commercial activity in which the seller will deliver and transfer the possession of goods to the buyer and receive payment, as the buyer will pay the seller and receive the goods and along with possessing the right as their agreement.
From the above, it can be observed that the sale of goods contract is an agreement between the parties, wherein the seller is obligated to deliver the goods, transfer ownership of the goods to the buyer, and receive payment. On the other hand, the buyer is obligated to pay the seller, receive the goods, and obtain ownership of the goods as agreed upon. The parties should take care to fulfill their respective obligations as stipulated in the contract.
2. Common sale of goods contract disputes
• Disputes in the sale of goods contract are conflicts, disagreements, or breaches of contract terms regarding rights and obligations among the contracting parties involved in the sale of goods contract.
• The contents of disputes in the sale of goods contract are diverse. In practice, the following types of disputes often occur:
The seller delivers the goods late or does not deliver the goods after receiving the deposit payment from the buyer;
The seller delivers goods that are not of the correct type and quantity as committed in the contract signed by both parties;
The buyer violates payment obligations;
The seller violates the conditions on the time of goods transfer;
One party must compensate for damages due to the breach of contract;
One party violates the other party’s information security as stipulated in the contract.
In all those kinds of disputes, the dispute regarding the failure to perform the payment obligation of the buyer is the most common one.
3. The causes of disputes arising from the sale of goods contracts
The reason that leads to the dispute in the Sale of goods contract can lie within each party. Specifically:
• During the contract negotiation process, the parties failed to clearly agree on certain issues such as detailed technical standards of the goods, passing of risk issues, and payment deadlines, leading to difficulties in resolving these issues when they arise.
• When delivering the goods, due to the seller or the transport unit’s lack of due care, the quantity and quality of the goods may not be guaranteed. There are also other reasons that could lead to a dispute regarding the delivery of goods such as: The buyer does not have the capacity to receive the goods, unforeseen circumstances that prevent the delivery of goods,…
• Violations regarding payment obligations are mainly because the payment term is vague on payment time; the buyer provides incomplete payment documentation or the documents do not have the signature of the parties’ representative; The buyer caused difficulty in payment or is unable to pay; discrepancies in the data provided by each party leading to unsettled accounts.
• Disputes over compensation for damages arising from the difficulty of proving the behavior causing the damage as well as determining the value and extent of the damage, which is highly complex among the parties involved.
4. Measures to limit disputes on sale of goods contract
To ensure the rights and interests of the parties, each party needs to properly perform the Contract to minimize possible Contract disputes. In addition, to best prevent disputes from arising, the parties can pay attention to the following measures:
• Draft the contract precisely, in accordance with the contract performance of each party. There are many cases where one party violates their obligations because the circumstances of the contract implementation are unfavorable to the signed terms, or because the contract terms are unclear, leading to a breach of contract. Therefore, when drafting the Contract, it must be precise and suitable for each party. If there are unclear terms, they must be explained or adjusted and supplemented by the parties in the Appendix attached to the Contract.
• The parties need to clearly stipulate penalties for violations and liability for compensation when one party violates its obligations to perform the Contract. Strict sanctions regulation is an effective measure to make the parties self-aware and remind each party to respect and properly perform the Contract as committed.
• When a party violates the Contract, the aggrieved party can remind the breached party to adjust and rectify the existing contractual violation. Negotiation and mediation can be pursued to prioritize voluntary resolution and goodwill among the parties, thus limiting the escalation of disputes that may turn into legal proceedings.
Therefore, to minimize unwanted disputes, before entering into a sale of goods contract, the parties should thoroughly understand the causes of potential disputes and the legal consequences that may arise. This awareness allows the parties to take preventive measures against the risks of disputes that could harm all parties involved. Prior to contract formation, seeking legal advice from lawyers/legal experts can ensure the legal rights and interests of all parties in commercial transactions and provide prompt and timely resolution directions in case of disputes. Additionally, parties should enhance their knowledge of the critical aspects of agreements and clearly define contract provisions to prevent disputes from arising.
Above is the article “Common disputes arising from goods purchase and sale contracts” that TNTP sends to readers. If there is a problem that needs to be discussed, please contact TNTP for answers.
Sincerely,
