Latest Update on Types of Commercial Contracts Under Vietnamese Law

In today’s high-risk business environment, even a minor error in a commercial contract can lead to severe consequences, causing significant losses for enterprises. Legal disputes, financial damages, or negative impacts on reputation are common issues when contracts are not drafted correctly. To ensure all transactions proceed smoothly and the rights of all parties are protected, entering into a commercial contract requires caution and necessary legal understanding. Join Inter Justice Law Firm to explore the prevalent types of commercial contracts today and some crucial notes before signing a commercial contract. 

Commercial Contracts Under Vietnamese Law

Current Vietnamese law does not provide a specific definition of a commercial contract or commerce in general. Therefore, to clarify the characteristics of a commercial contract, it is necessary to refer to the provisions on commercial activities in the Commercial Law 2005.

According to Clauses 1 and 2 of Article 3 of the Commercial Law 2005, commercial activity is an activity aimed at generating profit, including the purchase and sale of goods, provision of services, investment, trade promotion, and other profit-oriented activities. Goods include all types of movable property, including movable property formed in the future, and objects attached to land.

Accordingly, a commercial contract can be understood as an agreement between merchants or between merchants and related parties to establish, change, or terminate the rights and obligations between the parties in commercial activities.

Prevalent Types of Commercial Contracts Today

Goods Sale and Purchase Contracts

A goods sale and purchase contract is a common type of contract in commercial transactions, regulated by the Commercial Law 2005. This is a contract in which the seller transfers ownership of goods to the buyer, and the buyer is obliged to pay the seller as agreed. Important contents in a goods sale and purchase contract include:

• Description of goods
• Price and payment method
• Regulations on goods delivery and receipt
• Legal liability and compensation for damages if disputes arise

There are two types of commercial contracts for the sale and purchase of goods: international goods sale and purchase contracts and domestic goods sale and purchase contracts. A domestic goods sale and purchase contract is executed between buyers and sellers of the same nationality and operating within the territory of Vietnam. The parties involved in the contract will comply with the provisions of the Commercial Law 2005 and the Civil Code 2015. For international goods sale and purchase contracts, the contract is signed between parties in two different countries, subject to international regulations and the laws of the relevant countries.

Service Provision Contracts

According to Articles 513 and 514 of the Civil Code 2015, a service contract is an agreement between parties whereby the service provider performs work for the service user, and the service user must pay the service fee to the service provider. This type of contract defines the obligations, rights, and responsibilities of the parties during the service provision process. Important clauses include:

• Scope of work and service requirements
• Implementation timeline
• Costs and payment method
• Regulations on compensation for damages if the service does not meet requirements

The object of a service contract is work that can be performed, does not violate legal prohibitions, and is not contrary to social ethics. Software service contracts, financial service contracts, insurance service contracts, etc., are considered service provision contracts.

Trade Promotion Contracts

A trade promotion service contract is a written agreement between relevant parties regarding the provision of services aimed at promoting commercial activities, advertising products, and enhancing brand reputation, thereby increasing sales and competitiveness. This type of contract is established and executed in accordance with the Civil Code 2015 and relevant legal documents.

Examples of trade promotion contracts include advertising service contracts, trade fair organization service contracts, and promotional service contracts.

Commercial Intermediary Contracts

A commercial intermediary contract is a legal agreement in which one merchant (the authorized party) undertakes to perform commercial intermediary activities at the request of the authorizing party. The main objective is to bring benefits to the authorizing party, and in return, the authorizing party is obliged to pay remuneration to the authorized party.

According to the Commercial Law 2005, Articles 141, 150, 155, and 166, commercial intermediary contracts include types such as:

• Contracts for Commercial Representation: In this contract, the representative party is responsible for performing commercial tasks in the name and for the benefit of the authorizing party.
• Commercial Brokerage Contracts: This is an agreement in which the broker acts as a connector and introduces potential partners to the authorizing party to proceed with the conclusion of sale and purchase contracts or other commercial transactions.
• Goods Purchase and Sale Entrustment Contracts: This contract stipulates that one merchant entrusts another merchant to perform the purchase and sale of goods on their behalf and receives remuneration from these trading activities.
• Commercial Agency Contracts: Under an agency contract, the agent acts on behalf of and is responsible for distributing the principal’s products, goods, or services to customers to generate revenue or economic benefits.

In addition to the above common types of commercial contracts, some other current forms include processing contracts in trade, transit service contracts, goods auction organization service contracts, and franchise agreements.

Forms of Commercial Contracts

According to Article 119 of the Civil Code 2015, a commercial contract can be concluded in one of three forms: oral, written, or specific conduct.

• Oral: Parties can enter into a commercial contract through verbal exchange, directly or by phone, or through electronic messages in audio file format. This form offers convenience, speed, and low cost. However, in case of disputes, verifying the rights and obligations of the parties can be difficult due to a lack of concrete evidence.
• Written: This is the most common form and has high legal validity. A contract concluded in writing provides more solid legal evidence compared to other forms. Some types of commercial contracts are mandatory to be in writing according to the law.
• Specific Conduct: The conclusion of a commercial contract can be done through specific actions when the parties have no oral or written agreement but through actual behavior. This form is less used by merchants due to high risk and difficulty in storing evidence, making dispute resolution more complex.

Important Notes When Signing Types of Commercial Contracts

To protect rights and avoid legal risks, businesses should note some important points when signing a commercial contract:

• Carefully Review Contract Content: Ensure that the clauses in the contract fully reflect the interests of all parties and comply with legal regulations. Commitments, rights, and obligations should be carefully considered to avoid misunderstandings or disadvantages during implementation.
• Seek Legal Advice: For high-value or complex contracts, consulting a lawyer or legal expert is essential. This helps minimize risks and ensures that the contract is drafted in accordance with the law.
• Retain Contract Documents: Copies of the contract, minutes of agreements, and related documents should be carefully stored to serve as evidence in case of disputes or the need to resolve arising issues later.

These notes will help businesses mitigate risks and ensure that commercial contracts are implemented effectively and safely. 

To optimize benefits, businesses must always ensure that commercial contracts are carefully drafted, seek legal expert advice when necessary, and fully retain all relevant documents. Through this, businesses will have a solid legal foundation for sustainable development in a volatile business environment.