NGUYEN TRONG DAN
11(11 3
HONG TIMING MAI
QUtit TE
Xueit bcin
lein
this 6
International
Trade Contracts
6t
h
Edition
NHA XUAT
BAN LAO DONG
HA NOL 2007
Thu' tit g6p
y
xin
GS.TS. Nguygn Trong Dan
DTDD: 0904 055 077
Email: dhannte,fpt.vn
Tac
gi6 gilt
bgn
quye'n
© Copyright by the author
2
Preface
This book is intended to provide commerce students of international
trade and other readers with guidelines to the language of international
trade contracts as the name of the book suggests.

English Department of the Foreign Trade University for their long and
kind co-operation in the making of this book.
I am deeply indebted to my Australian Collegue, Mr. Timothy Maxwell
Clemons for his valuable suggestions, comments, criticism and
correction during the development of this book.
I am also deeply indebted to all Vietnamese and foreign import and
export organizations and commercial services to their assistance and
permission for reproduction of their contracts and documents.
As always I wish to express my special thanks to my wife and my
children for their understanding and encouragement throughout the
preparation of this book.
I would like to thank Mr. Nguyen Van Chau, BMA, Researcher, at the
Foreign Trade University for his deligence shown in proofreading of the
book and for all other things that he has done on my behalf so that the
book would have been made possible for the first edition.
Finally, I also would like to thank all of my friends and former students
for their assistance in providing the contracts and their translation.
Prof. Dr. Nguyin Trong Dan
4
Contents
Page
PREFACE

3
ACKNOWLEDGEMENTS

4
CONTENTS

5

6.
COMPREHENSION QUESTION

22
THE LANGUAGE OF CONTRACT IN ENGLISH

25
1.
THE CONTRACT SENTENCE

25
2.
THE LANGUAGE OF ANGLO-AMERICAN CONTRACTS

31
3.
THE CLAUSES PATTERN IN CONTRACT ENGLISH

33
4.
THE PASSIVE FORM

37
5.
COMPREHENSION QUESTIONS

38
INTERPRETATION OF THE CONTRACT

43

55
3.
THE ASSIGNMENT OF RIGHTS AND DUTIES

57
4.
COMPREHENSION QUESTIONS

58
Part 5 GOODS AND DELIVERY, PRICE AND PAYMENT

61
I.
SCOPE AND DELIVERY

61
2.
PRICE AND PAYMENT

69
3.
COMPREHENSION QUESTIONS

72
Part 6

THE DEFECT AND THE LIABILITY

75
I. WARRANTY AND GUARANTEE

Part 7 BREACH OF CONTRACT

87
I.
LIQUIDATED DAMAGES AND PENALTIES

87
2.
LIQUIDATED DAMAGE: PROBLEMS

88
3.
TERMINATION

91
4.
THE LIMITATION OF LIABILITY

93
5.
COMPREHENSION QUESTIONS

99
Part 8 FORMATION OF CONTRACTS

104
I.
SOME LEGAL ASPECTS

104


111
Part 9 THE INDUSTRIAL PLANT CONSTRUCTION CONTRACT

114
1.
UNPACKAGING, TENDERING AND NEGOTIATION

114
2. THE PARTIES

117
4.
THE EMPLOYER'S DUTIES: PRICE AND PAYMENT

122
5.
VARIATION

123
6.
TEST AND INSPECTIONS

126
7.
AN EXAMPLE OF A SUPPLY CONTRACT TO DELIVER AND
INSTALL MACHINERY (BILINGUAL)

129
Part 10 EXAMPLES OF CONTRACT

I.
THE ENGLISH VERSION OF THE CONTRACT

340
2.
THE VIETNAMESE VERSION OF THE CONTRACT

354
3.
MODEL CONTRACT FOR THE SALE OF GOODS AND THE CIVIL
CODE OF VIETNAM

369
APPENDIX

385
- CONG 1.fric
VIEN 1980

385
2
HOP DOING MUA BAN TAI SAN THEO LUAT DAN SVCOA NUOC
CONG HOA XA HOI CHU NGHIA VIET NAM

428
6
BIBLIOGRAPHY
Anderson, Ronald A.
Business
Law. Cincinati: South Western 1980.

Dan, Nguyen Trong.
The language of business correspondence in
English.
NXB Gido duc. Ha NO. 1992.
Groner, Sammel B.
Modern Business Law.
Reston. 1983
Mc (Draw Hill - 1992. Gifis, Steven H.
Law Dictionary,
Third Ed.
New York, 1992.
Nguyen Th6 et al.
Ter
dien Phap luat Anh Viet.
NXB KHXH.
1992.
Federation Internationale des Ingenieurs (FIDIC):
Conditions of
Contract
-
1987
International Chamber of Commerce:
+ Force Majeure and Hardship.
Paris. ICC. 1984.
7
+
Guide to Penalty and Liquidated Damages Clauses.
Paris
ICC. 1990.
+

Staple, James G. et al.
"Know - how in the united States" in the know
- how contract in Germany, Japan and the United States
Ed. Herbert Stumpf Deventer:
Kluwer. 1984.
Tixu, Vu Hiru.
Tdchdc ky thugt Ngoai thurnig.
Trtthng Dai hoc Ngoai
thuang. Ha NOi, 1991.
White, James, et al -
Uniform Commercial Code.
St Paul West. 1980.
Trinh, Dinh Xuan.

tay thank loan Quo
.
c
Trubng Dai hoc Ngoai
thtrong
Ha
NO. 1991
Bo
lugt Dan su' dia nu& Cong hoa xar 110i chi nghig Viet Nam.
Vietnam Law & Legal Forum.
1996.
Ludt thumig mai cua niffrc COng hoa xd hgi chi nghra Viet Nam.
1996.
Legal writings on Foreign Investment in Vietnam.
SCCI. 1992.
COng uOc Vien 1980

Phase 2:
-
Understanding legal and technical aspects as explained in each
part
-
Reading sample provisions
-
Reading and understanding short contracts, and then long ones
Phase 3:
- Translating some simple short contracts into Vietnamese, and
comparing them with the ones provided in the book
-
Drafting short provisions, and then long ones
- Drafting a contract
- Discussing it with someone who is an authority on the subject
matter.
In the course of using this book, it should be kept in mind that laws are
constantly changing and it is the drafter, not the author of this book, who is
responsible for the effectiveness of the drafted contract clauses or the
contract itself. It is, therefore, essential and vital that the students, users
and readers should have a good command of English and a comprehensive
knowledege and experience in international business.
Prof. Dr. NGUYEN TRONG DAN
2007
10
Part 1
THE RELATIONSHIP BETWEEN
THE LAW AND THE CONTRACT
1.
BRIEF INTRODUCTION TO THE LAW AND THE CONTRACT

private law: tv phap
provided: vdi diau kian la
public law: cong phap
stringent provisions: nhCing quy dinh nghiem ngat
11
no such provision, they must ask what, if anything, the law obliges them to do.
This raises the most basic question about contracts.
What is the relationship betweenc the contract and the law?
Example
BEC (British Export Co.) is an English company. It makes an offer to supply
the Power Co, (PC) of Vietnam with relays for 2 pounds each.
Under the English Contract Law, the English company has the right to cancel
its offer at any time before PC accepts it. Although BEC has this right, it may
agree with PC not to cancel its offer, say, before Sept. 30. In other words, BEC
can, if it wishes, give up or waive one of its rights under the Law of Contract.
The waivable rights are said to be disposive. Of course, BEC's waiver applies
to the offer it is making to PC only. It keeps its right to cancel offers made to
others.
Reinarks
-
This example shows exactly the relationship between the contract and the
law:
a contract sets out the rights and duties that apply between the two
parties.
A contract sets aside rights and duties that exist under private law
(e.g. BEC's right to cancel its offer) and creates new rights and duties (e.g.
the duty to deliver goods or the right to payment).
-
And the public law? The provisions of the public law are never disposive.
For example, public law in Vietnam forbids the use of certain plastics in

Korean thought. When the present- day Koreans try to follow the Anglo-
American example, they have to depart so far from their traditional ways
of thinking that one cannot help wondering whether it is feasible, let alone
advisable to do so (Pyon-choon 1982 pp. 19 and 30).
If we accept this view as typically eastern, then clearly the gap between
easterner and westerner is wide. For a westerner, a contract is of the highest
significance. It put into words powerful moral forces as they apply to the case
in hand. Behind the contract stands a huge body of law and 3,000 years of
religious and moral tradition. For the easterner, the contract is a simple
agreement without such psychological and philosophical roots. Both sides
should be aware of this gap during contract negotiations. It is the source of
much misunderstanding.
3. EUROPEAN (CONTINENTAL) LAW AND ANGLO
-
AMERICAN LAW
"Continental" law
The so-called "continental" law prevails in most of continental Europe, in
France and Germany for example. This law derives from a code which the
Roman Emperor Justinian developed 1,50Q years ago. For this reason, lawyers
often call it "Roman law". The Code Napoleon of 1803 developed and updated
Justinian's code and influenced many legal systems around the world including
those of Japan and most South American countries. The essence of
"continental" law is
Codification.
A clear code expresses what is legal and what
is not. The German BGC (Civil code) is an excellent example. The continental
accumulation: tich luy
beneath one's dinity: kh6ng xerng vol pha'm cach
cua
chastising: trerng trq

It is important to note that the USA has codified its commercial law - tidying up
the chaotic situation in which some fifty states followed often widely different
legal practices. The Uniform Commercial Code (UCC) was written between
1941 and 1952. A 1962 revision was adopted by 49 states. A 1972 revision was
also widely adapted, although different states and courts interpret the UCC
differently, it offers a vital guide to current American thinking.
Because England and the United States were predominant in world trade until
recently, Anglo - American legal thinking strongly influences international
practice. The Anglo - American family has a fully developed private law. In
particular, the big trading countries have developed a strong commercial and
contract law.
Anglo
-
American and Continental Law: the Differences
Anglo - American contract law is largely case - law. Each decision on a new set
of facts or on the construction of a previously undisputed law by a judge creates
a
precedent.
This precedent may be binding, if so future judges will follow it.
The chart below compares how Continental and the Anglo - American law treat
the relationship between a
case
and the
law.
Anglo-American law: luat Anh-M2
case law: luOt an
10
codify: soap thanh luat
barbariaus: ke man rq
code: bq luOt


plaintiff: nguyOn dan
exception: ngoai le

take st into account: tinh den
incure: phat sinh

tend: cO xu fluting.
15
CONTINENTAL
Start with a clear legal code
When a case occurs, the judge simple
applies the code. Sometimes the
judge must
interpret the code
to see
how it applies in a particular case
Very difficult cases go to a higher
court. The higher court
interprets
the
code and decides how it applies in
the difficult case.
ANGLO-AMERICAN
Start with a case decided on its merits.
When a similar case occurs, the judge
decides the case on its merits and in line
with the precedent set by the first case.
A huge body of case law
develops with

What is important in choosing an applicable law? What happens if the parties
cannot agree on an applicable law?
The parties should agree on the applicable law before drafting a contract.
Without a defined applicable law, the parties may write unenforceable
provisions. Further, some applicable laws require a more detailed contract than
others. If the parties simply cannot agree on a law, then they must write a very
long contract.
If a contract is a fish, it swims in water. In principle the parties are free to
decide which water their fish will swim in. A Chinese - German contract could
choose German, Chinese, English, or, to oversimplify a little, any other national
law.
You often find the Applicable Law clause at the end of a contract. Even so, you
should turn to it
first
before reading the rest of the contract. Some provisions of
a contract change their meaning radically under different legal systems.
An example of a carefully worded applicable law provision:
This contract, and all questions concerning its formation, validity, interpretation
and application shall be governed by the laws of the State of New York
Study this wording. It says that the laws of the State of New York govern the
contract. That is clear enough. The clause also mentions four
questions
governed by these laws:
4.1. Formation
Was the contract correctly
formed?
That depends on the applicable law. But if
the contract was not correctly formed, it does not exist, and so there is no
applicable law. And if there is no applicable law, it is impossible to decide if
the contract is correctly formed or not! This legal knot is easy to untie if the

of the contract? As with interpretation, a dispute might arise about a substantive
law and procedural rules. Again the wording makes the situation absolutely
clear.
An applicable law clause not only states the law applicable to the contract, it
sometimes states what law is not applicable. This clause is from a subcontract
for space technology. The main contractor is American; the subcontractor is
German.
The contract shall be governed by, subject to, and construed in accordance
with the laws of the State of Florida; This Contract shall not include or
incorporate the provisions of the "United Nations Convention on Contracts
for the International Sale of Goods"
be subject to: re thu'ec vao

substantive law: lust flux tai
legal knot: chot phap ly

untie: gO cal
rules for procedure: quy tac ye thu tyc
18
This contract was written at a time when both the United States and Germany
were in the process of ratifying the United Nations Convention (the so-called
Vienna Sales Convention). The parties wished to exclude its provisions from
their agreement. Since the matter is disposive, they had every right to do so.
What happens if during negotiations the two parties cannot agree on an
applicable law? If a French company, for example, will not accept Chinese law,
and its Chinese counterpart will not accept French law? First, the parties could
decide on a neutral law, for example, English law, or Swiss law as applied in
their respective countries. Second, the parties might agree to the law of one
side, but write a very detailed and extensive contract leaving almost nothing for
the applicable law to decide. Accepting the law of "the other side" is not

use their best efforts to negotiate an equitable compromise acceptable to both
sides hereto; In the event that such a compromise cannot be reached in a timely
manner, then the dispute shall be settled in accordance with the separate
"Arbitration Agreement" between the parties
The parties were (apparently) unable to agree on one applicable law, so they
named
three.
The clause foresees trouble, disputes and arbitration ahead
because of this awkward arrangement. In the end, the arbitrator will decide
what law really applies.
A surprising number of international contracts use the weaker options, in effect
allowing the court or arbitration to decide the applicable law. How does the
court, if required, make its decision? What does it take into account? The ICC
Rules of Conciliation and Arbitration
1988, says:
In the absence of any indication by the parties as to the applicable law, the
arbitrator shall apply the law designated as the proper law by the rule of
conflict which he deems appropriate (Article 13.3)
This doesn't help much: the rules governing conflict of law are a study in
themselves, and so, for the parties to the contract, the arbitrator's decision is
unpredictable. As a rule of thumb, however, the court usually weighs four
factors, whatever conflict - of - law rules it is applying.
awkward: vung ve
clause: diet., khoan
compromise: nhuvng b6
conflict: xung d6t
equitable: cOng bang
foresee: luring trutt
ICC Rules of Conciliation and arbitration 1 986:
quy Mc h6a

relations between the Parties hereto determined in accordance with, the laws of
the Republic of the Philippines
conflict - of - law rules: qui pham luat có xung dOt or otherwise: hoac khac di
designated: chi dinh

regardless of: bat
ke
gravity: trong diem

rule of thumb: qui
tbc
thvc nghiem
specimen: mau
21
In each case, the water round the fish is labeled: Bangladeshi law, Italian law
the law of the Philippines. Even so, the third formulation is clearly better than
the other two: it takes into account most of the legal problems that arise in
disputes about the applicable law.
IMPORTANT REMINDER: The applicable law governs the disposive
provisions (or traditions) of the
private law:
things that the parties could decide
themselves but - for whatever reason - left unregulated.
Public law
always
applies, whatever the parties agree.
6. COMPREHENSION QUESTIONS
6.1. A Tax - Free Contract
BEC, an English company, is selling switchgear for power stations in Vietnam.
The parties agree that "English law applies". BEC, however, wants to ensure

q
NO

q
YES, UNLESS
6.2. Restatement
The clause below is from a contract for the sale of mining equipment to South
Africa:
Before and during the execution of the work, the Contractor shall collaborate
with the Representative authorized by him to ensure that all work is being
carried out in accordance with the requirements of the Mine and Works Act,
1956, the Factories, Machinery and Building Works Act No. 22. of 1941 as
amended applicable, as well as all regulations made in pursuance thereof
1. Are the Mine and Works Act, 1956, and the Factories, Machinery and
Building Works Act No.22. of 1941 Public law or private law?
q
PUBLIC

q
PRIVATE
2. Are "as amended applicable" and "all regulations made in pursuance
thereof" public law or private law?
q
PUBLIC

q
PRIVATE
3. If the Contractor agrees to this clause, is he taking on any additional
duties or giving up any rights that would normally be his?
q

q
NO LAW
common law: th6ng phap (luat tuc le va an le)

presents: hop Jong
equity law: luet tong bring, c6ng chinh

statute law: luet thanh van hay an le
24
Part 2
THE LANGUAGE OF CONTRACT IN ENGLISH
1. THE CONTRACT SENTENCE
The opening sections of an Anglo- American contracts are often puzzling: it is
hard to see how the
whereas,
the
witnesseth,
and the rest fit together. Sadly,
many international contracts are poorly drafted: the wording is often
ungrammatical and sometimes nonsense. What is the key to contract language?
Traditional English-language contracts are drafted as a single sentence: the
"contract sentence". In principle, all the parts of a contract fit into a single
grammatical unit .
Lawyers are conservative. Lawyers working in English today may still draft
contracts in the ancient style, even though these old forms internationally may
be a source of confusion. One tradition is the drafting of contracts as a single
sentence. This sentence pattern has three main variations.
1.1. "This Contract Witnesseth " (Variation 1)
The lease on the next page illustrates the most common contract pattern. No
matter how long a contract is, it can still follow this one sentence pattern. Let's