Risks In Contracts For The Sale Of Goods Under The New Provisions Of 2015 Civil Code

businessman is analyzing  through  magnifying glass contract and prices

The 2015 Civil Code taking effect from January 01st, 2017 has concealed plenty of risks that enterprises should take into consideration when performing the contracts for the sale of goods, machinery and equipment, and raw materials, etc.
The civil law, basically, respects the freedom of the agreement to the parties involving in the contract, but unless the agreement is made, the parties must comply with regulations of the law.”

Some new worth noting points in the Civil Code No. 91/2015/QH13 (“CC 2015”) include:

1. Ensure the quality of goods

In the course of contract review, we found that most of the parties to the transaction had agreed upon a number of terms regarding goods quality, but those agreements are not consistent with the laws and conceal many risks which may lead to disputes. The reason is that the parties had not collated with the specialized legal provisions applicable to each particular product. In addition, the quality standards should be made in separate annexes, specifying the characteristics of each commodity in terms of names, identification numbers, structure, composition, quantity, date and place of manufacture, etc.

2. Cancel the contract for violating the delivery term

In case of multiple deliveries, it should be noted for the sellers that if one of the delivery violates the delivery term, the buyers will be able to cancel the contract section corresponding to such violation and claim for the damages. In cases where the delivery quantity excesses the required amount, the sellers may bear the risks that the buyers will not accept the excess amount, resulting in cost for returning the goods. If the buyers accept the excess amount, the sellers are entitled to receive the payment for the excess amount with the price stated in the contract.
When the lack of delivery quantity happens, the sellers must deliver the deficit within the time limits required by the buyers. On the other hand, the sellers must bear more risk as the buyers can cancel the contract and claim for damages.
When asynchronous delivery happens, the sellers must replace the asynchronous goods for the buyers. In case the sellers have received the payment for goods, the sellers must pay interest on the amount received during the course of delivering the replacement, and compensate if the buyers request.
Besides, if the delivery goods are at wrong kind, the sellers may bear the risk that the buyers can cancel the contract and demand for compensation. In case that there are many categories of goods and the sellers fail to deliver the right goods for one or more categories as agreed, the buyers can cancel the contract section corresponding to that categories of goods.

3.Disputes over payments due vague provisions

Usually the sellers only specify the offer price and payment mode, including bank transfer or in cash in the contract. In order to avoid unnecessary disputes, therefore, the sellers should specify the following contents in the sale contracts:
– The price of each commodity and whether the price includes excise taxes, import duty or other fees or charges or not, etc.;
– Payment mode: payment currency, transaction account number, which party will bear bank transfer charges, and deferred interest, etc.
In case no agreement on the price and payment mode is made, CC 2015 specifies that:
– The fluctuation of prices will be in accordance with the market price at the time of payment;
– The payment mode will be determined according to the practices at the place and time of contracting (time of delivery, time for the buyers to fully provide the receipts of goods, etc.)

4. Costs of transportation and relevant costs

The parties should clearly specify the time of transfer costs between the parties during delivering such as: when delivering to the first shipping company, or when the goods are delivered to the buyers, etc. In case it is not specified, the parties have to bear the risk that it will be determined in accordance with the costs announced by state agencies, or industry standards, or certain standards appropriate for purpose of contracting.

5. Redemption of sold goods

If the sellers wish to redeem the sold items, they can agree upon the contract on the period of redemption, redemption price and redemption methods, etc. In such contracts that the content is not clear, the provisions of the CC 2015 stipulate that:
– The period of redemption should not exceed 1 year for movable property and 5 years for immovable property from the time the assets are allocated;
– During the redemption period, the sellers are entitled to redeem the goods at any time, but they have to notify the buyers in advance; the buyers cannot sell them to other owners and have to bear the risks for the goods;
– The redemption price will be in accordance with the market price at the time and place of redemption.

6. User manual of goods

CC 2015 supplements the phrase “within a reasonable time” in order to determine the amount of time the sellers must perform the responsibility to perform the instruction to use the goods. Without having it done, the sellers will bear the risk as the buyers are entitled to cancel the contract and claim for damages. CC 2015 will replace CC 2005 from January 01st 2017.

PLF Law Firm 

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