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As companies doing business in Vietnam expand into cross-border trade and global supply chains, international commercial contracts play a critical role in defining the rights, responsibilities, and risk allocation between parties. These contracts must not only reflect business intentions but also comply with both Vietnamese law and relevant international frameworks such as the CISG (United Nations Convention on Contracts for the International Sale of Goods).
For Vietnamese businesses, having a well-structured international commercial contract drafting skill is essential to minimize disputes and ensure enforceability across jurisdictions. The following are the most important clauses to include.
1. Governing Law and Dispute Resolution
Governing Law
The contract should specify which country’s laws will apply. This is especially important in cross-border contracts where Vietnamese law may not automatically govern.
Dispute Resolution
Businesses must decide between litigation (in courts) or arbitration (domestic or international). Arbitration is often preferred due to its neutrality and enforceability under the New York Convention.
2. Scope of Work and Obligations
The contract should clearly define the scope of products, services, or deliverables. Obligations of each party—such as quality standards, timelines, and performance metrics—must be explicitly stated to avoid ambiguity.
3. Payment Terms
- Currency of payment (USD, VND, or other).
- Method of payment (bank transfer, letter of credit, escrow).
- Payment schedule and conditions for release.
- Interest and penalties for late payment.
4. Delivery Terms and Risk Allocation
International commercial contracts should incorporate Incoterms® rules (such as FOB, CIF, DDP) to define when risk and cost transfer from seller to buyer. This reduces disputes over delivery responsibilities.
5. Intellectual Property Protection
For contracts involving licensing, technology transfer, or brand usage, clauses should cover:
- Ownership of intellectual property (IP).
- Restrictions on use of IP.
- Duration and territorial scope.
- Remedies in case of infringement.
6. Confidentiality and Non-Disclosure
Confidentiality clauses protect sensitive business information exchanged during cooperation. Clear definitions of “confidential information” and permitted disclosures must be included.
7. Force Majeure
This clause exempts parties from liability if non-performance arises from unforeseen events such as natural disasters, war, or government restrictions. Vietnamese businesses should ensure force majeure definitions align with both Vietnamese law and international practice.
8. Termination and Exit Strategies
The process of contract drafting and contract reviewing should outline conditions under which termination is allowed, including breach, insolvency, or prolonged force majeure. Termination procedures, notice periods, and settlement of obligations must also be addressed.
FAQs
1. Why is the governing law clause important in international contracts?
It determines which country’s legal framework will apply in case of a dispute.
2. Should Vietnamese businesses choose arbitration or court litigation?
Arbitration is often preferable due to neutrality, confidentiality, and easier enforcement abroad.
3. How do Incoterms® help in commercial contracts?
They standardize delivery obligations and risk transfer, reducing misunderstandings in international trade.
4. What is the role of confidentiality clauses?
They protect trade secrets and sensitive data, ensuring trust and security in business cooperation.
5. Can a force majeure clause excuse payment obligations?
Generally, no. Force majeure may excuse delivery or performance but usually does not waive payment obligations.
Conclusion
International commercial contracts are essential tools for companies doing business in Vietnam engaging in global trade. By including well-drafted clauses on governing law, payment, delivery, IP protection, and dispute resolution, companies can minimize risks and ensure smoother cross-border transactions. Careful attention to these provisions provides legal certainty, protects business interests, and builds stronger international partnerships.
ASL Law is a leading full-service and independent Vietnamese law firm made up of experienced and talented lawyers. ASL Law is ranked as the top tier Law Firm in Vietnam by Legal500, Asia Law, WTR, and Asia Business Law Journal. Based in both Hanoi and Ho Chi Minh City in Vietnam, the firm’s main purpose is to provide the most practical, efficient and lawful advice to its domestic and international clients. If we can be of assistance, please email to [email protected].
ASL LAW is the top-tier Vietnam law firm for Contract Reviewing and Drafting. If you need any advice, please contact us for further information or collaboration.
