Standard Clauses in Business Contracts in Vietnam
We have supported the drafting, review, and negotiation of a wide range of business contracts - sale and purchase agreements, service agreements, joint venture agreements, and others - arising as Japanese companies invest and transact in Vietnam. Our particular strength lies in building contract clauses around the differences in commercial practice and legal systems between Japan and Vietnam, because it is precisely these differences that give rise to the most problems in practice.
Who This Article Is For
This article explains, in accessible terms, the typical categories of contract clauses, the points to watch, and the issues that call for negotiation. It is written for readers interested in contract practice in Vietnam, considerations relating to contract clauses, mandatory items when drafting, damages and contractual penalties under Vietnamese law, and the risks involved in translating Japanese contracts into Vietnamese.
Why Contract Terms Must Be Assessed Transaction by Transaction
The terms and conditions required will differ depending on the type of contract, and each must be considered on its own terms. A goods sale contract centers on when title and risk pass, while a service contract turns on the scope of work and acceptance criteria; a joint venture agreement deals with an entirely different set of issues, such as governance structure and exit mechanisms.
For this reason, reusing an existing template for a transaction of a different character is one of the most common causes of disputes. A template should be treated as a starting point, never as a final draft.
Standard Clauses Commonly Found in Business Contracts
Broadly speaking, contracts typically provide for at least the following standard clauses:
Subject matter of the contract: a description of the goods, services, or work agreed between the parties, in sufficient detail to define the scope of the obligations.
Price and payment terms: unit price, total value, payment currency, payment deadlines and methods, and how late payment is handled.
Rights and obligations of the parties: what each party must do, and what each may require of the other, throughout the term of performance.
Contract term and implementation schedule: the commencement date, the end date, and any delivery or acceptance milestones.
Confidentiality: the scope of information treated as confidential, the duration of the obligation, and any exceptions.
Force majeure: how a force majeure event is defined and its consequences for the parties' obligations.
Breach, contractual penalties, and damages: this group of clauses differs considerably between Japanese and Vietnamese practice and therefore calls for careful drafting.
Termination and unilateral termination: the circumstances permitting termination, the notice procedure, and the legal consequences.
Dispute resolution: the choice between courts and arbitration, along with the venue and language of proceedings.
Language of the contract: where a contract is executed in bilingual form, it must be clear which version prevails in the event of a discrepancy between the two.
Points to Note on Japanese - Vietnamese Bilingual Contracts
In transactions between Japanese companies and Vietnamese counterparties, contracts are commonly executed in bilingual form. A legal concept that is familiar in Japanese does not always have an exact equivalent in Vietnamese, and vice versa. A discrepancy in translation can alter the scope of the obligations the parties believed they had agreed upon.
For that reason, reviewing a translation should go beyond a line-by-line comparison of wording. It should be carried out by someone who understands both the legal substance and the commercial practice of the two countries.