Contracts for purchase and sale of goods are contracts that record the terms and conditions related to transfers of ownership of goods specified in the contract. This is a professional form to ensure transfers of ownership of goods as well as payment obligations of the parties involved in the contract are fulfilled.
Besides the purpose of contracts for purchase and sale of goods to protect the parties involved, such contracts also hide significant risks if the signing parties are not serious in making or fully understanding the terms. Let's find out with NPLAW the common risks in contracts for purchase and sale of goods.
Contracts for purchase and sale of goods are contracts that record the terms and conditions related to transfers of ownership of goods specified in the contract. This is a professional form to ensure transfers of ownership of goods as well as payment obligations of the parties involved in the contract are fulfilled.
Besides the purpose of contracts for purchase and sale of goods to protect the parties involved, such contracts also hide significant risks if the signing parties are not serious in making or fully understanding the terms. Let's find out with NPLAW the common risks in contracts for purchase and sale of goods.
What problems will arise if there is a lack of understanding among the contracting subjects?
a. Before signing any contracts, specifically contracts for purchase and sale of goods related to a large amount of money, we need to carefully consider whether the signing subjects (known as “parties”) have the authority to sign or not (usually the legal representatives of companies as prescribed in Article 13 of the Law on Enterprise 2014).
The signing parties must have full civil capacity as prescribed in Article 19 of the Civil Code 2015, as follows: The civil capacity of an individual is the act of establishing and implementing civil rights and obligations by such an individual.
If subjects have limited civil capacity or don’t have full civil capacity, such subjects will be limited in their rights to transfer assets as well as purchase and sell movables and real estate. For example, minors (known as under 18 years old) need to have the consent of their guarantees (legal representatives) if they expire to purchase or sell large assets as prescribed in Article 21 of the Civil Code 2015.
b. It is necessary to determine whether the duties of the contracting parties are in accordance with the legal requirements or not.
For example, in a contract for purchase and sale of goods with a business household, do you have to require the business household to issue a red invoice (VAT)? And will you not pay for the goods if they don’t issue this type of invoice?
In the above example, this clause will not be enforced according to the Law on Tax and the Law on Enterprise, business households are not eligible (competence) to print red invoices, so this clause is invalid and you must fully pay for the goods even if the other party does not issue the red invoice.
You are reading information about risks in sales contracts that is currently of interest.
The terms of the contract are incomplete
Many goods purchase and sale contracts have the worth of Vietnamese dong billions, but only have a few lines of provision in these agreements that lack information and lead to unnecessary risks. Therefore, to have a quality contract, the contract’s content must include the following full and accurate information:
- Names and permanent addresses of the involved parties;
- Subjects of the contract;
- Quantity and quality;
- Price or remuneration;
- Rights and obligations of the parties;
- Duration, places and methods of performance;
- Liabilities for breach of contract;
- Dispute resolution methods, moreover, the parties may agree on other terms and provisions depending on the nature of each contract and the transaction purpose. In addition, the documents and languages in contracts must be accurate, not using ambiguous concepts and misspelling words, and using correct punctuation.
The above provisions are stipulated in the Commercial Law 2005 and the Civil Code 2015.
The payment terms of the contract are unclear
Firstly, these contracts should be obvious about the payment terms to avoid cases of not paying after receiving the goods or not delivering the goods after receiving the money. Purchasers should use the method of receiving goods before paying, while sellers should use the method of depositing money before delivering goods, paying through intermediaries or making payments in installments to reduce risks for each other.
If the parties don’t have obvious agreements with the payment terms, these terms will be regulated by Article 55 of the Commercial Law 2005. In cases the two parties do not have these agreement, the payment terms are determined, as follows:
- The purchasers have to pay the sellers at the time the purchasers deliver goods or related documents;
- The purchasers are not obliged to pay until they have inspected the goods, in which case the purchasers have the right to inspect the goods before performing the transaction as agreed;
- The purchasers have to still pay for the goods, even if they are lost or damaged, in which cases problems arise after the risk points that have been transferred from the sellers to the purchasers, except in cases of loss or damage caused by the sellers’ fault.
The above are 3 common risks in contracts for purchase and sale of goods. Besides, there are many other potential risks if the parties in the contracts are subjective. To minimize risks when signing these contracts with many blinding clauses and provisions, you need legal experts to draft and review them. Please contact NPLAW. We are always willing to help you!
