International commercial contracts are agreements between parties located in different countries for the purpose of establishing rights and obligations relating to the sale and purchase of goods, provision of services, or other cross-border commercial transactions. As such contracts are governed by multiple legal systems and international trade practices, drafting them requires enterprises to pay particular attention to legal considerations and risk management issues.
In the article below, LawPlus highlights important issues that enterprises and individuals should carefully consider when drafting international commercial contracts.
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1. Introduction to International Commercial Contracts
An international commercial contract is a legal document recording the agreement between parties established in two or more countries regarding the sale and purchase of goods, provision of services, investment activities, technology transfer, or other commercial transactions.
Such contracts must comply with international law, the laws of relevant jurisdictions, and international trade standards such as Incoterms and the United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG). Common types of international commercial contracts include: International sale and purchase agreements; Franchise agreements; Distribution and agency agreements; International service agreements; International processing/manufacturing agreements.
2. Important Considerations When Drafting the Contents of an International Commercial Contract
In the context of global economic integration, international commercial contracts play a crucial role in safeguarding enterprises’ interests and minimizing legal and commercial risks. However, due to differences in laws, customs, and business environments among countries, contract drafting requires prudence and specialized legal knowledge. Below are several important issues enterprises should pay particular attention to:
2.1. Clearly Define the Subject Matter of the Contract
The subject matter of the contract refers to the goods, services, or rights exchanged between the parties. This content should be described clearly and comprehensively to avoid future disputes.
For contracts involving the sale and purchase of goods, the following details should be specified: Product name; Quantity; Quality standards (ISO standards, technical standards, etc.); Origin of goods. The more detailed the description, the lower the risk of disputes during contract performance.
For service contracts, the parties should clearly specify: Scope of work; Technical requirements and completion standards; Timeline for performance.
2.2. Clearly Determine the Legal Capacity of the Parties (Contracting Parties)
The contracting parties are entities participating in the execution of the contract, including the seller (supplier), buyer (customer), and intermediary entities (if any). The following information should be verified and clearly stated: Full legal name of the enterprise/organization/individual according to business registration documents; Registered address, tax code, and contact information; Legal representative, title, and authority to execute the contract; Rights and obligations of each party under the contract.
Note: Enterprises should thoroughly verify the legal status and capacity of their counterparties before execution of the contract in order to prevent fraud and legal risks. In addition, where the counterparty is a foreign company, enterprises should verify whether such entity has the authority to enter into the contract. This verification helps minimize risks associated with transactions conducted with parties lacking legal capacity or authority of representation.
2.3. Payment Terms
Payment terms constitute one of the most important provisions in an international commercial contract. The parties should clearly determine: Currency of payment (USD, EUR, VND, or other foreign currencies); Payment timeline; Conditions for payment.
In addition, the payment method should be specified, including:
- Telegraphic Transfer (T/T): a common and relatively secure payment method;
- Letter of Credit (L/C): bank-guaranteed payment suitable for high-value contracts;
- Documentary Collection (D/P, D/A): the exporter authorizes a bank to collect payment on its behalf.
Enterprises should also clearly regulate responsibilities in cases of exchange rate fluctuations and refund conditions where disputes or issues arise.
2.4. Delivery of Goods and Services
The contract should contain detailed provisions regarding: Delivery method; Place of delivery/receipt; Delivery timeline. These provisions are essential to avoid disputes regarding liabilities and obligations.
For import-export goods, common methods of transportation include sea freight, air freight, and land transportation. The contract should also specify: Estimated delivery schedule; Required documents such as commercial invoices, bills of lading, and certificates of origin.
Special attention should be paid to insurance obligations during transportation, and the parties are advised to apply Incoterms 2020 to clearly determine delivery responsibilities between the parties.
2.5. Dispute Resolution Clause
Disputes in international commercial contracts often arise due to differences in legal systems, languages, and business practices. Therefore, the contract should clearly stipulate the dispute resolution mechanism, including:
- International commercial arbitration (ICC, SIAC, VIAC, etc.) or courts;
- Governing law, whether Vietnamese law, international law, or the law of the counterparty’s jurisdiction;
- Contract language, such as English or another language agreed upon by the parties.
In practice, international arbitration is often preferred due to its procedural flexibility and confidentiality. Note for bilingual contracts, the parties should clearly specify which language version shall prevail in the event of inconsistencies.
3. Legal Considerations When Drafting International Commercial Contracts
Drafting international commercial contracts requires prudence and strict compliance with legal principles to ensure transaction safety, minimize risks, and protect the lawful rights and interests of the contracting parties.
3.1. International Trade Rules and Practices
Note: Proper understanding and application of international trade regulations help ensure legality and minimize legal conflicts. International commercial contracts are commonly governed by:
- The United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG): governing rights and obligations in international sale of goods contracts;
- Incoterms 2020: regulating delivery obligations between buyers and sellers (EXW, FOB, CIF, DDP, etc.);
- Letters of Credit (L/C) under UCP 600: internationally recognized banking rules applicable to payment transactions.
3.2. Laws of Relevant Jurisdictions
Due to the multinational nature of international commercial contracts, the parties should clearly determine: Governing law (national law or international treaties); Dispute resolution method (arbitration or court proceedings).
In addition, the parties should determine the contract language and the legal validity of each language version in the case of bilingual contracts. Note where the contracting parties are from different countries, they should expressly agree upon the applicable law in the event of disputes.
4. Conclusion
Drafting international commercial contracts is a complex process requiring a combination of legal expertise and practical experience. Enterprises should proactively review potential risks and seek professional legal advice to ensure that contracts are carefully drafted in compliance with applicable laws and international commercial practices.
