In business activities, a commercial contract is a fundamental legal tool, recording all agreements on the purchase and sale of goods and provision of services between parties. A fully drafted, clear and tight contract not only helps transactions run smoothly but also acts as a solid “shield” to protect the interests of the business when disputes arise.

However, many businesses, especially SMEs, sometimes take lightly the drafting or careful review of contracts, leading to unfortunate consequences. GMC Consulting Centre will point out the important “vital” terms that you absolutely cannot ignore in any commercial contract.

Why Pay Attention to Each Clause?

Each clause in the contract has its own role, contributing to creating a complete agreement:

• Make the agreement transparent: Clarify the will and commitment of the parties.
• Clearly define rights and obligations: Who does what, when, how?
• Prevent risks: Anticipate bad situations and propose solutions.
• Create a solid legal basis: As a basis for requesting performance and resolving disputes.

Omitting or vaguely specifying any important clause can make the contract invalid, difficult to enforce or put the business at a disadvantage.

Important Terms and Conditions

Whether it is a sales, service, agency or distribution contract, the following core terms must be specified in detail and clearly:

1. Parties’ information: Fully and accurately state the names, addresses, tax codes, and information of the legal representatives or authorized representatives of the signing parties. Incorrect information may affect the legal validity.
2. Subject Matter: Describe in detail and specifically the goods (name, quantity, quality, specifications, origin, etc.) or services (scope of work, technical requirements, quality standards, etc.). This is the basis for determining whether the contract is properly or incorrectly implemented.
3. Price & Payment: Clearly specify the unit price, total contract value, payment currency, payment term (prepayment, postpayment, multiple payments), payment method (cash, bank transfer), account information, related taxes and fees. Late payment penalty clauses are also essential.
4. Time, Place and Method of Delivery/Performance: Specifically determine the time of delivery/completion of services, place of delivery, method of transportation (who bears the costs, risks?), acceptance and handover procedures.
5. Rights and Obligations of the parties: Clearly list the specific responsibilities of each party in performing the contract (for example: obligation to provide goods of the right quality, obligation to pay on time, warranty obligations, etc.).
6. Quality & Warranty: Stipulate the quality standards of goods/services, warranty period, warranty conditions, and handling procedures when goods/services do not meet requirements.
7. Liability for breach of contract: Breach): Identify the cases considered as breach of contract and corresponding sanctions:
   • Breach penalties: Specific penalties for each type of breach (e.g. late delivery penalty, late payment penalty). Note the maximum penalty prescribed by law (usually 8% of the value of the breached obligation in the commercial contract).
   • Compensation for damages: Obligation to compensate for all actual damages arising from the fault of the breaching party (including direct losses and missed benefits).
8. Confidentiality: Commitment to keep confidential sensitive information obtained during the performance of the contract.
9. Force Majeure: Regulations on objective, unforeseeable events (natural disasters, epidemics, wars, etc.) that prevent the parties from performing their obligations and the legal consequences (suspension, exemption from liability, etc.).
10. Termination: Cases of early termination of the contract (by agreement, by serious breach, by force majeure…), procedures and consequences of termination.
11. Dispute Resolution: Choose the agency/method of resolution when there is a dispute: Negotiation, Mediation, Commercial Arbitration or Court? Clearly specify the competent authority (for example: Specific Arbitration Center, Provincial/Municipal People’s Court…).
12. Governing Law: Determine the legal system governing the contract (usually Vietnamese law for contracts performed in Vietnam).
13. Contract validity and other termsc: Effective date of the contract, number of copies of the contract, contract language, appendices (if any), provisions on amendments, supplements, transfer of rights and obligations…

Why Do You Need Professional Legal Services?

Drafting your own contract or using contract templates of unknown origin poses many risks. GMC Consulting Centre‘s lawyers and legal experts can help you:

• Ensure legality: Draft terms that comply with current legal regulations.
• Anticipate risks: Identify and include specific risk prevention provisions in the contract for each type of transaction.
• Balancing interests: Ensure your interests are protected in a reasonable and fair manner.
• Precise and concise language: Use standard legal language to avoid ambiguity and controversy.
• Effective review: Detect disadvantages and shortcomings in the draft contract provided by the partner.

A tight contract is a smart investment for the safety and success of everyone transaction.

Don’t let errors in contracts cause damage to your business. Contact GMC Consulting Centre today for advice on drafting or reviewing commercial contracts professionally and effectively!

• Hotline: 0375751616
• Email: [email protected]
• Website: gmcconsultingvn.com

(Disclaimer: This article provides reference information based on expected legal regulations and practices at the time of writing. Laws may change. To receive the most accurate and updated advice for specific cases, please contact GMC Consulting Centre’s lawyers and experts directly.)