Frequently asked questions regarding incomplete agreements

The conclusion of contracts has become increasingly common in daily life. Contracts and agreements between parties play an extremely important role in protecting the rights and legitimate interests of each party. However, whether a contract can be effectively executed depends on many different factors.

Accordingly, in cases where contractual agreements are incomplete, how will the contract be executed? Below, NPLaw provides legal advice and clarifications on incomplete agreements for our clients.

I. Current situation relating to incomplete agreements

In practice, incomplete agreements remain common and cause numerous legal consequences, leading parties to have difficulties in enforcing their respective rights and obligations.

Common forms of incomplete agreements include:

• Ambiguous or unclear clauses: One of the most common forms of incomplete agreements is where contractual clauses are not clearly defined, leading to misunderstandings or difficulties in enforcement. For example, provisions regarding the rights and obligations of the parties are not described in sufficient detail, or circumstances constituting contractual breach and corresponding remedies are not clearly stipulated.
• Absence of essential clauses: Agreements may lack necessary provisions, such as dispute resolution mechanisms, payment terms, warranty conditions, or force majeure clauses.
• Use of overly complex legal language: In some cases, incomplete agreements arise from the use of legal language that is difficult to understand or inappropriate for the purpose of the contract, making it hard for the parties to comprehend and giving rise to disputes during execution.
• Lack of genuine consensus: In certain situations, parties may sign a contract without fully understanding or truly agreeing to its terms, resulting in an agreement that lacks genuine consensus, despite having been formally executed.

II. Legal provisions relating to incomplete agreements

1. What constitutes an incomplete agreement?

An incomplete agreement is understood as a situation where the terms of a contract or agreement between the parties are not clearly defined, are insufficient, or lack essential elements, thereby causing difficulties in enforcement and execution of the commitments.

Incomplete agreements may lead to legal disputes, conflicts between the involved parties, or even the inability to execute the contract due to the absence of a clear legal basis.

2. Legal consequences of incomplete contractual agreements

When contractual agreements are incomplete or lack clarity, the participating parties may take serious legal issues. These consequences not only affect the parties’ rights and interests but may also result in prolonged disputes, significant financial losses, or even reputational damage in business operations.

Common legal consequences of incomplete contractual agreements include:

• Legal disputes: When contractual terms are not clearly defined, the parties may interpret their rights and obligations differently. It often leads to legal disputes where one party claims the other has failed to execute its obligations, but lacks clear evidence or contractual provisions to substantiate the claim.
• Difficulty in determining legal liability: If the contract does not clearly specify the parties’ responsibilities in the case of a breach, determining which party takes liability can become highly complex. The parties may disagree on the nature or extent of the breach or the appropriate legal remedies, thereby prolonging the dispute.
• Difficulties in executing contractual obligations: Incomplete agreements may prevent the parties from properly executing their agreed commitments, particularly where provisions relating to timelines, quality standards, or methods of execution are unclear. It may result in one party failing to execute or executing improperly, causing damage to the other party.
• Lack of legal basis for claiming damages: Where provisions on damages, contractual sanctions, or remedies for breach are not clearly stipulated, the injured party may have difficulties in claiming compensation or applying legal measures to protect its lawful rights and interests.
• Financial and reputational losses: These may include costs incurred in dispute resolution, failure to obtain expected economic benefits under the contract, and loss of credibility or business reputation.

III. Questions regarding incomplete agreements

1. Is a contract invalid if it does not fully stipulate the parties’ rights and obligations?

An invalid contract is one that fails to satisfy one of the conditions for contractual validity as stipulated under the Civil Code 2015, including:

• Contracts that violate prohibitions of law or contravene social ethics;
• Sham contracts;
• Civil transactions established or executed by minors, persons who have lost civil act capacity, persons with difficulties in cognition or control of behavior, or persons with limited civil act capacity;
• Contracts rendered invalid due to mistake;
• Contracts rendered invalid due to deception, threat, or coercion;
• Contracts rendered invalid where the person establishing the contract is unable to perceive or control his or her actions;
• Contracts rendered invalid due to non-compliance with statutory requirements on form.

Accordingly, a contract may still remain legally valid if it does not violate fundamental requirements concerning form and substance. The absence of specific provisions on the parties’ rights and obligations does not automatically render the contract entirely invalid. However, the lack of clarity regarding such rights and obligations may create difficulties in contract execution. 

2. If a contract does not fully stipulate liability for damages, may the injured party still claim compensation?

If a contract does not fully regulate liability for damages in the case of a contractual breach, the injured party still has the right to claim compensation based on legal principles and the provisions of the Civil Code 2015.

Pursuant to Article 360 of the Civil Code 2015 on compensation for damages arising from breach of contractual obligations, if one party fails to execute or improperly executes its contractual obligations, the injured party has the right to claim damages even where the contract does not clearly stipulate such liability.

If the contract does not expressly regulate compensation for damages, the injured party may still claim compensation in accordance with general principles of civil liability. In such cases, the court will consider the actual damage incurred and determine liability for compensation based on the applicable legal provisions.

3. Does an incomplete agreement constitute grounds for unilateral termination of a contract?

In principle, a contract is based on mutual agreement; thus, upon termination, the parties should negotiate and agree on how to resolve outstanding issues. If the parties can no longer continue executing their respective rights and obligations, termination of the contract may be considered. Article 428 of the Civil Code 2015 provides for unilateral termination of contract execution as follows:

• A party has the right to unilaterally terminate the execution of a contract without compensation for damages if the other party seriously breaches its contractual obligations, if so agreed by the parties, or as otherwise prescribed by law.
• The party unilaterally terminating the execution of the contract must promptly notify the other party of such termination; if failure to give notice causes damage, compensation must be paid.

Accordingly, a contract contains incomplete provisions on rights and obligations does not constitute a direct ground for unilateral termination. However, it may cause one party to have difficulties in contract performance and may indirectly lead to unilateral termination in the following circumstances:

• Inability to execute obligations: If a party is unable to execute its obligations due to the absence of clear contractual provisions or the inability to agree on supplemental terms, that party may request unilateral termination of the contract.
• Damage to the other party: If the lack of clarity in the contract causes damage to one party and adversely affects its rights and interests, the injured party may request termination of the contract to avoid further losses.

IV. Legal advisory services relating to incomplete agreements

The above constitutes all detailed information provided by NPLaw to assist our valued clients regarding issues related to incomplete agreements. Should you require legal consultation or assistance with procedures relating to incomplete agreements, please contact NPLaw immediately for direct advice and guidance from our professional team.