CORPORATE ARTICLES

5 Term Needed To Be Stipulated In The Contract To Prevent Damage

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Terms of content conflict resolution, validity of the contracts, and transfer of contractual obligations, etc. are the basic terms that often get overlooked, but they can help enterprises to minimize serious damage upon entering into contracts.

Terms of content conflict resolution 

During the negotiation of the contract, especially the complex ones, the parties often refer to other documents such as product manuals, memos and annexes, etc. This might contain hidden risks leading to the conflict between the terms of the contracts and those of the documents. Therefore, the parties should agree upon the documents that will prevail in case of the conflict.

Terms of the contract validity

Unless otherwise agreed, if the contract terminates, the terms of the contract will be considered to expire, except for some cases such as the terms of dispute resolution.
Some provisions should remain effective regardless of the validity of the contract such as terms of confidentiality, warranty, damage compensation and contractual penalties, etc. Enterprises should clearly state such contents in the contracts to bind the parties after the contract termination.

Terms of the transfer of contractual obligations

In the process of implementing the contracts, the law does not prohibit the transfer all or part of the obligations to perform the contract to other organizations or individuals. The transfer of such obligations may affect the interests of the remaining party. Thus to protect their own interests, the parties should be aware of the terms limiting the transfer of contractual obligations to third parties.

Terms of cost of dispute resolution

The process of resolving contractual disputes through arbitration or court may lead to the  costs to the parties. Under the provisions of the laws of Vietnam, in addition to the court costs which shall be borne by the losing party, other costs such as the lawyer’s fee and travel expenses, etc. shall be applied in accordance with the principle that the party which has the costs incurred shall bear such costs.
Agreeing upon the principle of sharing costs of dispute resolution will help the winning party to partially offset the costs and expenses payable to the dispute. At the same time, this provision of sharing costs will encourage the parties to reach a mutual agreement when the conflict occurs, which limits the dispute since the petitioners may be subject to risks of bearing legal expenses if they lose.

Terms of notice

In commercial contracts, each party has the obligation to inform the other party when the contract is violated, unilaterally terminated or changed in its contents.
By clearly identifying the contents including notification forms, how and when to send and receive notice, enterprises can guarantee the rights of the parties receiving notice as well as clarify the responsibilities of the parties getting informed, especially the time of receipt of the notice will affect the clarification, alteration or termination of contractual obligations.

For example, one party has an obligation to make the payment to the other party within 5 days commencing from when they receive the notice.

PLF Law Firm 

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