Legal consultation on unclear contracts

The above article analyzes the current situation and relevant legal regulations concerning unclear contracts including ambiguous terms, and provides answers to common legal questions on such issues.

The above article analyzes the current situation and relevant legal regulations concerning unclear contracts including ambiguous terms, and provides answers to common legal questions on such issues.

I. Current situation of unclear contracts

In the context of an increasingly developed economy, contracts have become an essential legal instrument for establishing, modifying, and terminating civil rights and obligations. However, in practice, unclear contracts including vague terms remain a common issue, particularly in commercial, construction, real estate, labor, and service contracts.

Some notable situations include:

Unprofessional drafted contracts: Many contracts are hastily set up without the involvement of lawyers or legal experts. As a result, essential terms such as the duration, payment method, and rights and obligations of the parties are often recorded superficially, leading to multiple interpretations.
Pre-made templates without proper adjustment: Many individuals and enterprises rely on contract templates downloaded from the internet without proper adjustment of the specific transactions. It results in inconsistencies or insufficient details, making dispute resolution difficult.
Vague terms avoiding binding obligations: Some parties deliberately include open-ended terms such as good quality, progress, or price. Such ambiguities often lead to disagreement during execution.
Difficulties in legal interpretation during disputes: When contract terms are unclear, judicial or arbitral agencies often face challenges determining the true intentions of the parties. It prolongs dispute resolution, increases costs, and may affect legitimate interests.

It can be observed that unclear contracts not only reflect limited legal awareness among contracting parties but also highlight the need to enhance contract-drafting skills and seek timely legal advice to mitigate risks.

II. What is an unclear contract?

In civil and commercial transactions, not all contracts are drafted in a clear and comprehensive manner. When terms are ambiguous and subject to multiple interpretations, such contracts become potential disputes.

1. Definition of an unclear contract

Pursuant to Article 385 of the Civil Code 2015, a contract is an agreement between parties establishing, changing, or terminating civil rights and obligations.

An unclear contract refers to a contract containing ambiguous, incomplete, or contradictory provisions that make it difficult to precisely determine the parties’ rights and obligations.

2. Situations leading to unclear contracts

Common causes include:

Failure to specify the term, subject matter, price, or method of execution.
Use of vague terms such as “good quality,” “reasonable price,” or “payment at the earliest time.”
Contradictions between clauses or between the main contract and its appendices.
Copying templates without adjusting them to the actual transactions.

3. How to resolve unclear contracts

Possible solutions include:

Applying principles of contract interpretation (Article 404 of the Civil Code 2015).
Negotiating and signing an addendum or amendment to clarify the contents (Articles 403 and 421 of the Civil Code 2015).
Requesting settlement by a competent court or commercial arbitration when negotiation fails.
Seeking legal consultation to assess legality and propose appropriate remedies.

III. Legal provisions related to unclear contracts

To ensure transparency in transactions, Vietnamese law provides detailed regulations for handling unclear contracts. Understanding these provisions enables parties to resolve proactively when disputes arise.

1. Relevant legal provisions on unclear contracts

Article 404 of the Civil Code 2015 stipulates:

When a contract term is unclear, interpretation shall not rely solely on the language/wording but also on the parties’ intentions as expressed throughout the process of negotiation, formation, and execution.
When terms or language/wording can be understood in multiple ways, the interpretation most consistent with the contract’s purpose and nature shall prevail.
When terms or language/wording is difficult to understand, it shall be interpreted in accordance with customary practices at the place of contract formation.
All terms shall be interpreted in relation to one another to ensure consistency with the overall contract.
Where there is a conflict between the common intention of the parties and the language/wording used, the common intention shall govern.
When the drafting party includes terms unfavorable to the other, interpretation shall favor the non-drafting party.

In addition, Section 2, Chapter I of the Commercial Law 2005 allows for the application of commercial customs and international practices to clarify issues not explicitly agreed upon.

2. Competent authorities for resolving unclear contracts

When disputes arise due to unclear contract terms, parties may request resolution by:

The People’s Court: Competent under Clause 3, Article 26 of the Civil Procedure Code 2015.
Commercial Arbitration: Applicable when the contract contains an arbitration clause (Articles 2 and 5 of the Law on Commercial Arbitration 2010), offering a faster and more confidential process.
Specialized State Agencies: In certain sectors (e.g., construction, banking, insurance), regulatory agencies may provide assistance in resolving disputes.

3. Consequences of failing to resolve unclear contracts

If the unclear contract cannot be resolved, the consequences may include:

Validity: The court may declare the contract partially or wholly invalid if the parties’ common intent cannot be determined (Article 407 of the Civil Code 2015).
Parties’ interests: The disadvantaged or non-fault party may receive greater protection; however, proceedings often take longer and cause financial loss.
Business reputation: Unresolved disputes may damage business relationships, reputation, and the ability to enter future contracts.

Therefore, unclear contracts not only pose legal risks but may also cause substantial financial and reputational losses.

IV. Questions on unclear contracts

1. How are unclear contracts regarding specialized terminology resolved?

Under Article 404 of the Civil Code 2015:

Ambiguous terms shall be interpreted according to the contract’s purpose and nature.
Misunderstanding language/wording shall be interpreted according to local custom.
Clauses must be construed consistently with the entire contract.

2. Can commercial customs be applied to interpret unclear contracts?

Article 13 of the Commercial Law 2005 permits the application of commercial customs and international practices when the contract or law does not provide specific provisions, provided such customs are not contrary to the fundamental principles of Vietnamese law.

3. Can the signatory be held liable for unclear contracts causing damage?

A person signing a contract on behalf of an enterprise or organization must ensure its clarity and legality. If ambiguous drafting causes serious loss, such a person may take civil or disciplinary liability.

In severe cases involving intentional misconduct, criminal liability may apply (e.g., abuse of trust to appropriate property under Article 175 of the Penal Code 2015, as amended in 2017).

4. Can damages be claimed due to unclear contract terms?

If a party proves that the ambiguity or lack of clarity caused by the drafting party resulted in losses, it may claim compensation under Articles 360 and 419 of the Civil Code 2015.

5. What steps should be taken to renegotiate an unclear contract?

It is necessary to conduct the following steps if raising unclear contracts:

Step 1: Identifying the ambiguous clauses.
Step 2: Discussing and agreeing upon a mutual interpretation based on the contract’s purpose and circumstances.
Step 3: Recording the negotiation results in writing.
Step 4: Signing a contract addendum to amend or supplement unclear clauses.
Step 5: Filling a suit to arbitration or court if no agreement is reached.

V. Looking for a reliable lawyer to handle unclear contract issues

Unclear contracts inherently bring the risk of disputes, potentially causing significant financial and reputational damage. Therefore, consulting experienced lawyers from the drafting and review stages to dispute resolution is essential. A lawyer can:

Analyze and interpret contract terms in accordance with legal provisions.
Propose negotiation or settlement strategies to minimize losses.
Represent clients in arbitration or court proceedings.
Develop a system of standard contracts to prevent legal risks.

If you are facing issues related to unclear contract terms, do not hesitate to contact NPLAW for timely legal consultation and protection of your legitimate rights and interests.