The Disputes Settlement of Contracts for International Sale of Goods in Vietnam

In the context of deeper and wider international integration by Vietnam and the Covid-19 pandemic threading in the world, the disputes settlement of contracts for international sale of goods in Vietnam is a remarkable issue. The regulations of the Commercial Law 2005 and the Vienna Convention 1980 play an important role in the disputes settlement of contracts for international sale of goods in Vietnam.

Contracts for international sale of goods is typically signed between traders having a place of business or habitual residence in different countries, to bring goods from one country to another or in case the parties to a contract for sale of goods have the same nationality (their businesses   are registered in the same country), but their respective place of business is located in different countries, the parties may also be deemed to have entered into a contract for international sale of goods under the Vienna Convention 1980.

 The disputes settlement of contracts for international sale of goods in Vietnam generally includes issues: (i) the disputes settlement of contracts for international sale of goods in Vietnam due to differences in legal provisions between the relevant States regarding the entity’s status as a signatory of a commercial contract, the form of a contract for international sale of goods or a change to related legal provisions that the two parties fail to acknowledge in time, leading to conflicts of interest and disputes; (ii) the disputes settlement of contracts for international sale of goods in Vietnam related to the parties’ performance of their obligations to the contracts for international sale of goods; (iii) the disputes settlement of contracts for international sale of goods in Vietnam over the location of the contract and the signing date of the contract as a basis for determining the law governing the contract, the terms and form of the contract. For example, in the actual case of dispute, a contract for international sale of goods was signed between two parties in which the buyer has a place of business in Singapore, because the quality of imported goods under the contract for international sale of goods is not in compliance with the provisions of Singapore law, so the buyer has requested the seller to substitute goods. The two parties have a dispute. Through the process of dispute settlement, the jurisdiction declares the cancellation of the contract for international sale of goods between the parties and forces the seller to compensate the buyer for damages. Thus, a thorough understanding of the relevant countries laws before signing a contract for international sale of goods, especially the disputes settlement of contracts for international sale of goods in Vietnam, is one of the important issues to the contracting parties if they want for the international sale of goods process to go smoothly.

Ordinarily, documents applicable to the disputes settlement of contracts for international sale of goods in Vietnam include the Vienna Convention 1980 (Vietnam is a member to this Convention), and the ICC rules on the responsibilities of the parties to an international commercial contract (Incoterm versions), Unified Credit Documentary Rules and Practices (UCP versions); and all legal normative documents related in Vietnam, particularly, the precedents: No. 13/2017/AL on validity of the letters of credit payment (L/C) in the case that the contract for international sale of goods which is the basis for cancelation of L/C that is approved by the Council of Judges of the Supreme People’s Court on December 14, 2017 and announced under Decision No. 299/QD-CA dated December 28, 2017 of the Chief Justice of the Supreme People’s Court (“Law No. 13/2017/AL”).

Precedent No. 13/2017/AL is the result of the dispute settlement of contract for international sale of goods in Vietnam between a Vietnamese trader and a foreign trader. Accordingly, in contracts for international sale of goods, the two parties agreed to choose the method of payment by letter of credit (L/C) under international trade practices (The 6^th Unified Credit Documentary Rules and Practices in 2007 (UCP 600) by the International Chamber of Commerce) and in accordance with the provisions of the Vietnamese law. The contract for international sale of goods on the basis of the L/C is terminated due to a party’s breach of contractual obligations.  According to the ruling by the Council of Judges of the Supreme People’s Court, it is understandable that, in a case similar with the Precedent No. 13/2017/AL without legal documents, custom or applicable law, the Court must determine that the letter of credit (L/C) is not voided because the international sales contract is the basis of the letter of credit (L/C). In addition, it should be noted that, Clause 2 of Article 100 of the Vienna Convention 1980 states: “This Convention applies only to contracts concluded on or after the date when the Convention enters into force in respect of the Contracting States referred to in subparagraph (1)(a) or the Contracting State referred to in subparagraph (1)(b) of article 1”. Therefore, this Convention is only applicable to the disputes settlement of contracts for international sale of goods in Vietnam entered into on January 1, 2017 (the date of enter into force of this Convention in Vietnam) or after this date by subjects that meet specified conditions. For contract for international sale of goods entered into before January 1, 2017, but when the disputes arise after January 1, 2017, the Vienna Convention 1980 is not automatically applied to the related dispute settlement, except where the parties agree in a contract that the applicable law is the Vienna Convention 1980 or the Vienna Convention 1980 is selected by the competent Court/Arbitrator to settle the dispute.

Above is an overview of the disputes settlement of contracts for international sale of goods in Vietnam in current. If you have trouble with legal issues regarding of the disputes settlement of contracts for international sale of goods in Vietnam in Vietnam, please contact us: Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms specializing in business law in Vietnam that has leading practice areas in the legal market such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.