Drafting the international sale of goods contracts

Trade liberalization is an inevitable trend today and has a great impact on Vietnamese businesses, especially in signing international trade contracts in general and international goods sale and purchase contracts in particular. In fact, Vietnamese enterprises still face many difficulties in drafting, signing and implementing international goods sale and purchase contracts because of lack of knowledge and understanding of international as well as domestic laws. In the below article, Viet An Law would like to give advice on drafting the international sale of goods contracts.

Legal basis

• United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention 1980);
• Civil Code 2015;
• Law on Commercial 2005.

General overview of the international sale of goods contracts

What is an international sale of goods contract?

According to Vietnamese law, an international sale of goods contract is an agreement between parties on the establishment, change or termination of civil rights and obligations related to the international sale and purchase of goods. “International sale of goods” is carried out in the form of temporary export, import for re-import; temporary import for re-export and border-gate transfer.

Subjects participating in international sale of goods contracts

Subjects participating in international goods sale and purchase contracts include:

• Traders: Including individuals and economic organizations;
• Country: The country is considered a special subject in the contract of international sale of goods.

Sources of law governing contracts for the international sale of goods

• International treaties. For example:The 1980 Vienna Convention on the International Sale of Goods, the 1978 United Nations Hamburg Convention on the carriage of goods by sea, etc.
• National Law. It may be the law of the seller’s country, the law of the buyer’s country, the law of any third country;
• International custom. Example: Incoterms 2020; Incoterms 2010; UCP 600.
• International caselaw.

Contract formality

According to the provisions of civil law, the form of a civil contract will be expressed in the following forms:

• Oral contract.
• Contract in written form.
• Contract in the form of certification.
• Contract in other forms as prescribed by law.

However, for international sale of goods contracts, Vietnamese law stipulates that the mandatory form is in writing or other forms of equivalent value such as:

• Fax copy;
• Telegraph, computer;
• Soft documents (like email…).

In addition, the purchase and sale of goods can be concluded by indirectly through the act of offering and accepting offers. Most traders use this method to find new partners. This is also the most common method in international trade.

Basic terms required in an international sale of goods contract

Information about the parties

• This is the basic term of the contract, to identify the subject of the contract. Therefore, the parties need to provide accurate and specific information about name, head office and address.
• In addition, the parties should pay attention to carefully check the subject status of the partner entering into the contract. If the real seller/buyer does not directly sign the contract, it must clarify the reason why they do not directly sign the contract. If accepting the signing through authorization, it is necessary to request a legal authorization document, clarifying the rights and obligations and responsibilities of the authorizing party and the authorized party.

Terms of the subject of the contract

Contents that need to be included in the terms of the subject of the contract include:

Goods name

The parties need to agree to write the name of the goods in the contract in detail and clearly. Some ways to name goods in a contract:

• Name of goods with local name. For example: Phu Quoc fish sauce ;
• The name of the goods and the main specifications of the goods. Example: 4-seat car;
• Product name with manufacturer or brand name. Example: Honda Motorcycle;
• Item name with HS code. Example: Rice. HS Code 1006;
• Names of goods with uses, productivity, characteristics and types to distinguish them from other similar goods. Example: Vietnamese white rice grade I, summer 2024 crop.

In addition, it should be noted that the name of a commodity can have many types of names such as common names, trade names, scientific names. If goods have many names, these names should be clearly stated to avoid confusion.

Quantity, weight

• The parties should note and agree on the conversion of units to calculate the quantity of goods and the weight of goods. Normally, these units must be popular with the commercial practices of each country, avoiding future risks;
• The parties may specify the exact quantity of goods or specify the quantity of goods with tolerance. For example: 1000 MT of rice +/- 5%;
• For the weight of the goods, it should be noted whether the weight is determined by the weight of the package or by the net weight of the goods.

Quality goods

Note that for the content of goods quality, the parties need to clearly specify the quality inspection at the port of arrival and departure, the value of the quality inspection certificates of the goods.

Price Terms

The parties agree on the currency of calculation, the price level and the method of price calculation.

• Usually, the currency of the contract for the international sale of goods is USD.
• The price calculation methods that the parties can agree in the contract include:
• Fixed price: is specified at the time of signing the contract and does not change during the performance of the contract;
• The price specified as follows: determined after the conclusion of the contract or by negotiation or agreement for a certain period of time, or by means of the world price at any date before or during delivery;
• Revised price: price determined at contract signing but may be revised later, at delivery, due to market fluctuations.

Payment Terms

A few notes that the parties need to pay attention to when drafting this clause include:

• Payment currency: may or may not be the same as the price currency. If they do not match, it is necessary to calculate the conversion rate
• Payment term: the parties need to agree on a payment term, such as payment in advance, payment later, partial payment before delivery or partial payment after delivery of a certain quantity of goods. .
• Payment method: can be bank transfer, cash payment, payment using documents such as L/C, D/A or D/P, etc.
• Payment documents: must clearly specify the payment to be made when there are enough papers: bill of exchange, certificate of quantity, quality, certificate of origin, etc.

Terms of delivery

• The parties agree on specific delivery location, delivery time and receipt of goods.
• The parties agree on the delivery party or hire a third party to deliver the goods
• Delivery method: Waterway, land or air;
  delivery costs to be paid by which party;
• The parties can also choose to deliver goods according to some common international practices in INCOTERMS such as FOB, CIF, DAP, DAT…
• Delivery method: in whole or in part, single or multiple, whether transshipment or not from the place of loading of the investment to the place of final holding

Warranty Terms

It is necessary to clearly define the quantity of goods subject to the warranty, the warranty period, and the obligations of the seller in case of detecting damaged or defective goods.

Terms of fines/compensation for damages

• The parties should negotiate this provision to ensure their interests more firmly;
• For fines for violations, according to Vietnamese law, the fines for violations must not exceed 8% of the total contract value. In addition, the parties will only be applied penalties for violations when there are agreed terms in the contract;
• Compensation for damage and fines for violations may be applied simultaneously if the parties have an agreement on penalties for violations;
• If the parties do not have an agreement on fines for violations, the aggrieved party is only entitled to claim compensation for damage.

Terms of force majeure

The parties need to clearly specify the circumstances that, when happening, make the Contract impossible to perform, but neither party is responsible. For example:

• Happens out of control;
• Unforeseeable;
• Unable to fix.

In addition, the parties should stipulate that such events will only suspend the execution of the contract or will void the contract.

Terms of applicable law and dispute resolution

• The applicable law the parties need to stipulate in the contract includes the applicable law for the performance of the contract and the law applicable to the settlement of disputes. In case the parties do not choose a law, when a dispute arises, the arbitration body will decide to choose a law;
• For dispute settlement, the parties clearly stipulate in the contract the method of choice to resolve a dispute when a dispute occurs, including: negotiation, conciliation, arbitration or court.

In general, contracts for the international sale of goods are complex contracts that need to be drafted carefully, in detail, and in accordance with the provisions of law to avoid disputes.

Drafting service of international sale and purchase contracts of Viet An law firm

• Advising on the provisions of law and practice in contracting activities;
• Participating in negotiations and negotiations to sign contracts with enterprises, ensuring all contents of the agreement between the parties and in accordance with the law;
• Studying relevant documents, finding out relevant information about the parties to the contract in specific cases at the request of the enterprise, thereby providing the optimal solution for drafting and signing the contract, ensuring ensure maximum benefits for the enterprise and balance the interests of the parties in the contract;
• Examination the contents of the draft contract of the enterprise with its partners according to the requirements of the enterprise and the provisions of law;
• Drafting the contract on the basis of the requirements of the enterprise and in accordance with the law, ensuring maximum benefits of the customer and balancing the interests of the parties in the contract;
• Legal advice on other related issues on the basis of legal provisions on contracts at the request of enterprises;
• Consulting, participating in negotiation, conciliation, settlement of contract disputes;
• Confirming the consulting contract in the capacity of a lawyer;
• Support customers with contract notarization procedures in accordance with the law.

If you have any questions regarding the drafting the international sale of goods contracts, please contact Viet An Law for the most specific and detailed advice!