Choosing the law applicable to international sales contracts when starting a business and exchanging goods beyond national borders is one of the most important and complex legal decisions that enterprises and individuals involved in international trade need to face. Compared to common goods sales contracts, international goods sales contracts are more complex and can be governed by many different legal systems.
1. What is international trading?
Sale and purchase relationship of goods that meets one of the following conditions is considered international trading:
- at least one of the parties is a foreign agency, organization, or individual or Vietnamese person residing abroad;
- grounds for establishing, changing, or terminating trading relationships according to foreign laws arising in foreign countries;
- assets related to trading relationships transferred across the border.
International purchase and sale of goods are carried out in the forms of: export, import, temporary import, re-export, temporary export, re-import and border transfer.
2. Applicable laws
Originating from the principle of freedom of agreement in contractual relations, the laws of all countries recognize that the Law applicable to the content of international goods sales contracts is primarily the Law agreed upon by the parties to the contractual option agreement relationship and this choice must meet the conditions set by the legal system itself.
National Law shall apply where so chosen by the parties. However, the parties should proactively choose the national Law with which they are familiar. The choice of applicable jurisdiction must be specifically recorded in a contract clause, called “Choice of Law clause” or “Governing Law”.
Vietnamese Law (as well as International Law) allows parties to agree to choose the governing Law for international goods sale contracts, but there are still certain limitations.
- The Law agreed upon by the parties in an international goods sale contract applies if the following conditions are met:
- The choice of Law does not contravene Vietnamese legal regulations;
- The selected Law is not contrary to Vietnamese Law, basic principles of Vietnamese Law, and international treaties to which the parties are members;
- The application or consequences of application must not be contrary to Vietnamese Law or basic principles of Vietnamese Law; and
- Choosing the Law is not intended to avoid the Law.
- The parties will not be allowed to agree on a choice of Law in the following cases:
- The contract is concluded and performed entirely in Vietnam, contracts related to real estate in Vietnam must comply with the provisions of Vietnamese Law.
- The form of the contract must comply with the laws of the country where the contract is signed. However, if the form of the contract does not conflict with the provisions of Vietnamese Law, it will still be recognized in Vietnam.
- In case of entering into a contract in absentia, the determination of the place of entering into the contract must comply with the Law of the country in which the party requesting to enter into the contract resides or has its headquarters.
Currently, in international goods purchase and sale relationships, the parties often apply the 1980 Vienna Convention, international trade practices Incoterm 2020, and The Uniform Custom and Practice for Documentary Credit UCP 600. However, when choosing the applicable Law, the parties need to study the chosen law carefully because if the agreement is contrary to applicable Law, the contract will be partially or completely invalid.
In conclusion, choosing the Law applicable to international goods sales contracts is an important legal aspect that cannot be overlooked. This helps ensure the legality and feasibility of the agreement while minimizing risks and legal conflicts during contract implementation. Correct and legal implementation of legal regulations is an important basis for building a strong and sustainable global economy.