Conditions on the forms of contracts for the international sale of goods

 A contract for the international sale of goods is only recognized as valid if it is expressed in a certain form, by the provisions of applicable law. What conditions on the forms of contracts for the international sale of goods can make the contracts valid? In this article, Apolo Lawyers - Solicitors & Litigators (Tel: (+84) 903.419.479) will answer these questions.

The form of a contract is the outward expression of the contract content, including the synthesis of forms, procedures and means to express and announce the will of the parties, record the contract contents and represent the indicates the existence of the contract. 

1. General provisions on international goods sale and purchase contracts

A contract for the international sale of goods is only recognized as valid if it is expressed in a certain form, by the provisions of applicable law. This is a mandatory condition to prove the existence of the contract.

International sales contracts can be governed by international treaties, national laws or international commercial practices. To determine the law applicable to the form of international sale of goods, the laws of countries mainly apply the principle of “locus regit actum”.

2. Provisions of international treaties on contracts for the international sale of goods

Unlike the provisions in the laws of other countries, as well as the mutual legal assistance agreements that Vietnam has signed with other countries, the United Nations Convention on Contracts for the International Sale of Goods, 1980 (CISG) Article 11 “A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses”. However, the CISG also allows States to reserve the right not to apply this Article 11, according to which contracts for the international sale of goods are required to comply with certain formal conditions of international law. The new country is recognized in force.

According to the 2010 PICC, paragraph 2 of Article 1 provides that a contract can be proved “including by witness”. Paragraph 2, Article 9 of the 1980 Rome Convention on the Law Applicable to Contractual Obligations provides that in the case of the parties entering into a contract in different countries, the contract is still valid if it satisfies the condition of formality of the law governing the contract of one of these countries. Thus, the provisions in these documents are quite open to most widely recognizing the conditions of validity of the contract.

>>> Read more: Time of risk transfer in the international contract for the sale of goods in Incoterms 2020

Conditions on the forms of contracts for the international sale of goods​

3. Regulations of Vietnamese law on international goods sale and purchase contracts

To determine the validity of a contract, Vietnamese law in Clause 7, Article 683 of the Civil Code 2015 provides that “Form of a contract shall be determined by the law applied to such type of contract. In the case where the form of a contract does not comply with the form of the law applied to such contract but complies with the form of the law of the country where the contract is entered into or the law of Vietnam, such form of contract shall be recognized in Vietnam”.

Thus, the provisions of Vietnamese law are consistent with the provisions of the Mutual Legal Assistance Agreement that Vietnam has signed with other countries, similar to the provisions of the Nordic countries, Western Europe and the United States. With the above-mentioned general principles, it can be seen that Vietnamese law does not allow subjects to choose the law to regulate the form of a contract.

Thus, if Vietnam joins the United Nations Convention On Contracts For The International Sale Of Goods 1980, Vietnam is entitled to reserve, not apply Article 11 of this Convention, because Vietnamese law contracts for the international sale of goods must be signed in writing.

>>> Read more: Legal service on Penalties For Breach Of Contract

Conditions on the forms of contracts for the international sale of goods​

4. Legal service about the commercial contract of Apolo Lawyers

Apolo Lawyers is confident in providing Clients with optimal and effective legal service,  including the following:

• Consulting on the right and obligation of the parties in the contract sale of goods;

• Consulting to determine the basis for dispute settlement and legal basis for dispute settlement;

• Consulting, and preparing to contact and negotiate with related parties in the settlement of international contract sale of goods disputes;

• Guide customers to collect documents and evidence, and provide information;

• Authorized representative lawyers meet and discuss with Arbitration, Courts, and judgment enforcement agencies to protect the legitimate rights and obligations of clients.

>>> Read more: Dispute settlement of goods sale contract by commercial arbitration in Vietnam

Apolo Lawyers is proud to be a law firm with many years of experience in business consulting that will support clients in the field of commercial contracts. In case you need advice related to a commercial contract, please contact us via email at contact@apolo.com.vn or Hotline – (+84) 903 419 479 for the best advice and support.

APOLO LAWYERS

Liability for compensation on late delivery

 A contract for the sale of goods, also known as a commercial contract, is one of the most common types of contract in daily life. The performance of the contract is according to the contractual agreement between the parties when entering into each other. However, in the process of performing, it is quite common for one party to deliver the goods not according to the agreement. So what responsibility does the party that fails to deliver on time have to take?  Apolo Lawyers - Solicitors & Litigators (Tel: (+84) 903.419.479) will help you determine the responsibility in this case.

Contract penalty due to delay in delivery is one of the sanctions of the contractual relationship. Contractual penalties are applied when both parties have an agreement on the contract. As follows:

1. Obligations about the delivery time by Vietnamese law

According to the provisions of Article 37 of the Commercial Law 2005, the seller must deliver the goods at the time of delivery as agreed in the contract.

2. Forced the correct performance of the contract

The contract performance process cannot avoid errors such as late delivery, missing delivery, violation of the terms of quantity and quality of goods, technical requirements of the work, and incorrect provision of services contract, etc. The aggrieved party has the right to require the infringing party to deliver the goods in full, in the right quantity and quality, and to provide services as agreed upon in the contract; the aggrieved party has the right to require the infringing party to eliminate the defects of the goods, to deliver the goods in full or to deliver the goods instead.

The compulsory performance of a contract is specified in Clause 1, Article 358 of the Civil Code 2015, specifically: “Where an obligor fails to perform an act which it must perform, the obligee has the right to request the obligor to perform the act, or the obligee may perform the act or assign the performance of the act to another person and require the obligor pay reasonable expenses incurred and compensate for any damage".

>>> Read more: Note of signing a contract for the international sale of goods

Liability for compensation on late delivery

3. Liability when violating delivery time

In a commercial contract, the parties will agree with each other on the rights and obligations of the contract as well as when breaching the contract the responsibility between the parties. In case the parties do not stipulate the penalty for breach of contract, the penalty for this violation will be implemented by the provisions of law.

When violating the delivery time limit, delivering goods on time but not falling into one of the cases of liability exclusion mentioned above, the violating party will be responsible for fines for violations according to the provisions of Article 300 of the Commercial Law 2005. Penalty for breach is the fact that the aggrieved party requests the violating party to pay a fine for breach of contract if so agreed in the contract, except for the cases of liability exemption specified in Article 294 of this Law.

4. Penalties for violations and compensation for damage when one party violates the delivery time

According to the provisions of Article 301 of the Commercial Law 2005, the fine level for a breach of a contractual obligation or the aggregate fine level for more than one breach shall be agreed upon in the contract by the parties but must not exceed 8% of the value of the breached contractual obligation portion.

In addition to the penalty for breach, the breaching party also has to pay compensation for the damage caused by the breaching party to the breached party. Compensation value includes the value of the actual, direct loss suffered by the aggrieved party caused by the violating party and the direct benefits that the aggrieved party would have been entitled to if there were no acts of violation according to the provisions of Clause 2, Article 302 of the Commercial Law 2005.

>>> Read more: Difference between cancellation of contract and invalidation of contract

Liability for compensation on late delivery​

5. Consulting services for drafting contracts for lawyers

When consulting a contract, a lawyer not only considers the interests of the parties in the contract but also has to anticipate the risks that will occur in the future.

With a team of lawyers who are knowledgeable in business and commercial law and have a lot of practical experience in the business activities of enterprises, Apolo Lawyers will provide comprehensive support to clients in consulting and drafting contracts for clients in the process of negotiating, signing and performing business contracts. The scope of work of Apollo Lawyers includes:

• Consult the provisions of the law and the application in practice related to the terms in all kinds of contracts of enterprises;
• Drafting the contract based on the requirements of the enterprise and by the law, ensuring maximum benefits for the customer and balancing the interests of the parties in the contract;
• Appoint a lawyer to advise and join the business in the process of negotiating contracts with partners.
• Legal assessment of the contents of the draft contract of the enterprise with its partners according to the requirements of the enterprise and according to the provisions of law;
• Check the content, review and edit the contract offered by the partner;
• Drafting necessary contract terms, negotiating with partners to protect important terms and ensuring the legal rights of enterprises.

Thus, for the enterprise not to suffer disadvantages, as well as to limit the risks that may occur when performing the contract, especially the liability for compensation and fines for violations in the contract, the enterprise needs to be consulted by a lawyer before signing with partners. If you have any questions, please contact us via email at contact@apolo.com.vn or Hotline (+84) 903 419 479.

APOLO LAWYERS

Risks in entering a contract for the sale of goods

 When signing a contract for the sale of goods, both parties want to be the ones to gain the most benefits in the transaction. However, many entrepreneurs fall into the profit trap and forget about the outstanding risks in contracts for the sale of goods. In fact, there are many risks in entering into contracts for the sale of goods. This article below by Apolo Lawyers (Hotline: (+84) 903.419.479) will provide our clients with the above information.

When entering a contract for the sale of goods, there are some common contract risks as follows:

1. The subject of the contract

In fact, two contract risks about the subject when signing a contract are often mentioned:

• The signer does not have the authority to sign. That is, that person is not a legal representative or a legal representative but does not have the authority to sign.
• A person who is not the legal representative of the company, has legal authorization but signs contracts beyond the scope of authorization.

Contracts signed by unauthorized persons in principle will be void. Depending on the specific case, it will be completely or partially disabled. Therefore, in order to avoid unexpected situations that may occur, when signing a contract, it is necessary to check the Business Registration Certificate to see who is the legal representative, whether or not has the authority to sign the contract for the sale of goods; request to provide the Authorization Letter to the employee when transacting or checking the scope of authorization of the person preparing to sign.

2. The object of the contract

The parties to the contract often dispute about the goods are not the right object as agreed, the quality of the goods is not right or the quantity is not enough as in the agreed contract for the sale of goods. There are also many cases where the parties take advantage of loopholes in non-specific and easily misunderstood details in the contract to evade the performance of obligations. Therefore, when signing a contract for the sale of goods, it is necessary to study the terms of the contract carefully, detailing the subject matter of the contract, the quality of the goods, the quantity, and weight; at the same time, agree on how to understand the terms of the contract to avoid talking at cross purposes when concluding the contract.

3. The price and payment method

Although it has been agreed, there are some risks such as price when the market fluctuates, currency as a payment method, disputes over loading and unloading costs, transportation and storage, money delivery and delivery methods, and security methods. Contracts by the method of guarantee still frequently occur when concluding a contract for the sale of goods. Therefore, the parties need to come up with detailed, specific, and flexible terms to suit each transaction.

4. Risk of penalties for violation

A penalty for a violation is an agreement of the parties, so one party cannot ask the other party to pay a penalty for a violation if the parties do not agree to the contract. Although it is an agreement between the parties, the Commercial Law 2005 limits the maximum penalty for breach of contractual obligations or the total fine for multiple violations as agreed by the parties in the contract to no more than 8% value of the breached contractual obligation. Any excess in the penalty agreement will be considered a violation of the law and will be void.

5. The compensation in the contract

There is a difference between penalty and compensation, the liability for compensation arises in case there is no agreement about it in the contract. There are three conditions for the arising of compensation:

• There is a breach of contract
• Has actual damage occurred
• There is a cause-and-effect relationship between the breach of contract and the damage caused

6. About the Force Majeure Clause

A force majeure clause is an event that occurs objectively, cannot be foreseen, and cannot be remedied even though all necessary and permissible measures have been applied. In some cases, because of force majeure clauses, if the obligor is unable to perform a civil obligation, he or she is not liable for civil liability, unless otherwise agreed upon or otherwise provided for by law. However, according to the provisions of the Commercial Law 2005, the violating party must prove the force majeure event in order to be exempted.

>>> Read more: Drafting a contract for the sale of goods

>>> Read more: Procedure for signing contracts for the international sale of goods

There is an overview of the risks in entering a contract for the sale of goods. Apolo Lawyers is proud to be a law firm with many years of experience in business consulting that will support clients with commercial contracts in general and contracts for the sale of goods in particular. In case you need advice related to commercial contracts, please contact us via email at contact@apolo.com.vn or Hotline - +84 903 419 479 for the best advice and support.

APOLO LAWYERS

Procedure for signing contracts for the international sale of goods

As a result of the development of the economy, the purchase and sale activities are not only developed in Vietnam but also develop in the world. International transactions are increasing day by day in the form of contracts for the international sale of goods. So, what is a contract for the international sale of goods, and what is the procedure for signing contracts for the international sale of goods? The below article by Apolo Lawyers (Hotline: +84.903.419.479) will help our clients answer these questions.

Besides the national law such as Commercial law 2005, CISG is the rule that usually is used to stipulate the contracts for the international sale of goods in Vietnam.

1. What is a contract for the international sale of goods?

Article 3, Commercial law 2005 stipulates that a contract for the sale of goods is commercial activity whereby the seller is obliged to deliver goods, transfer ownership of goods to the purchaser and receive payment; the purchaser is obliged to pay the seller and receive goods and the ownership thereof as agreed.

However, different from a contract for the sale of goods, contracts for the international sale of goods have an international element. According to CISG, an international element refers to the address of the head office of the parties in the international contract. The head office of parties must be in different countries. Therefore, we can understand that contracts for the international sale of goods mean the agreement has international elements, in this, the seller has obligations to deliver goods and the ownership of the goods to the buyer, and the buyer has the obligation to make payments and receive goods.

2. The features of contracts for the international sale of goods

The international element is the key point that builds the features of contracts for the international sale of goods. In general, contracts for the international sale of goods have the following features:

• The subject of contracts for the international sale of goods is the parties whose place of business is located in different countries.
• Goods that are the subject of contracts for the international sale of goods are goods that can be transported across the border of a country, that is, can be moved from one country to another, or can be moved from an export processing zone….
• The currency used for payment between two parties, the buyer and the seller, can be a foreign currency for either party.
• Disputes arising between the parties surrounding the conclusion and performance of the contract may be adjudicated by a court of a country or by a competent arbitration institution.
• The law governing contracts (law applicable to contracts) is complex and diverse: if it is a domestic contract, it is only governed by the law of that country, and if it is a contract for the international sale of goods, it may be necessary to apply foreign laws, international custom or treaties and even case precedents.

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3. Procedure for signing contracts for the international sale of goods

Because this is a contract for the international sale of goods, not in every case the parties in the contract can meet directly and discuss the contract.

• For contracts for the international sale of goods signed between people who can meet directly, the signing of the contract usually takes place simply, based on direct negotiations between the parties. If the parties fully agree on the issues raised during direct negotiation and jointly sign the draft contract, the contract is considered signed from the time the parties sign the contract. At this time, the date and place of signing the contract are determined by the date and place of the signing of the contract by the parties.
• For contracts for the international sale of goods signed between people who are far away from each other, without direct negotiation conditions, the contract is signed by sending or exchanging proposals for contract signing (sending offers or placing orders); and accepting the conclusion of the contract (accepting an offer or accepting an order). These contracts typically go through two stages:

• The stage of requesting the conclusion of a contract, at this stage, the person requesting to sign the contract must be in compliance with a number of provisions of the law such as the validity conditions of the application for contract signing; the validity period of the offer to sign the contract and the conditions for unilaterally declaring the cancellation of the offer to sign the contract take effect.
• The stage of accepting the proposal to sign the contract also has several provisions to note. For example, under the laws of most countries, if the offeree unconditionally accepts the offer to enter a contract, the contract is considered concluded. On the contrary, if this person adds or amends some points to the proposal to sign the contract, then legally, they have refused to sign the contract. This refusal to sign has certain legal consequences: a contract is considered concluded only if the offeror accepts any amendments made by the offeree.

​>>> Read more: Drafting a contract for the sale of goods

>>> Read more: How to determine the compensation for damages for the breach of contract?

4. How can Apolo Lawyers help our client in signing contracts for the international sale of goods? 

In addition to the information analyzed above, there are some challenges to preparing to sign contracts for the international sale of goods. If you have any problem with the procedure for the international sale of goods or anything else, feel free to contact Apolo Lawyers at our website APOLO LAWYERS, or by Hotline: +84.903.419.479. With a high - professional, long–term practice experienced team of solicitors, Apolo Lawyers claim to give you accurate legal advice fastly and effectively. Besides that, we also provide consultation about legal issues related to the procedure for signing contracts for the international sale of goods, such as:

• Consulting about the provisions of the procedure for signing contracts for the international sale of goods;
• Draft international contracts and other related documents;
• Review international contracts;
• Anticipate ideas and agreements that partners can use, thereby proposing appropriate countermeasures.

Apolo Lawyers is proud to be a law firm with many years of experience in business consulting that will support clients in the field of commercial contracts. In case you need advice related to a commercial contract, please contact us via email at contact@apolo.com.vn or Hotline – (+84) 903 419 479 for the best advice and support.

APOLO LAWYERS 

Procedure for barcode registration in Vietnam

 For a long time, consumers are used to the image of barcodes or the black and white lines or square matrix codes on products. These images, though simple, contain a great amount of information as well as contribution to helping many retailers easily arrange, store and search for product information. Because of its great benefits, barcode registration for goods is received a lot of attention from business subjects. Therefore to meet the needs of our clients, Apolo Lawyers (Tel: (+84) 903.419.479) provides the legal consultation service on barcode registration in Vietnam, which helps you to complete the procedure for barcode registration for goods fastly and efficiently.

What are barcodes and barcode registration? How to register a barcode? Where can you put your trust when you want to be consulted about barcode registration? Each issue will be presented in this article.

1. What are barcodes and barcode registration?

Barcode is the combination of white spaces and white bars arranged according to the rules and parameters, which can only be read by specialized devices such as scanners. Barcode is a method to store and transport the information, data of products, goods,… encoded using a combination of spaces and dashes to represent letters, symbols, and numbers.

Barcode registration is when organizations or individuals prepare dossiers and register at the Ministry of science and technology of the Socialist Republic of Vietnam to be granted the certificate of barcode registration. Therefore, organizations and individuals can bring barcodes to print on their products to use.

2. How to register a barcode?

Vietnamese Law does not require business entities to conduct the procedure for barcode registration, but it encourages them to do this to expand markets and develop businesses and the economy of the country. The procedure for barcode registration will be implemented according to these steps:

Step 1: Determine the number of products needed to be registered with barcodes

There are three types of barcodes:

• Less than 100 products;
• Less than 1000 products;
• Less than 10.000 products.

Depending on the number of products that clients want to register barcode, client could choose a suitable barcode package.

Step 2: Prepare barcode registration dossier

The application for barcode registration includes:

• Registration form of use of codes and barcodes;
• A copy of the business registration certificate or establishment decision;
• Registration form of the product catalog using the GTIN code;
• Registration form for GS1 Vietnam database.

Step 3: Register the dossier to the Ministry of science and technology of the Socialist Republic of Vietnam.

Step 4: The registry examines the application for registration of barcode

After submission, the dossier of barcode registration will be appraised at the Registra from 5 – 7 working – days.

Step 5: Granting a barcode and certificate of registration for the enterprises

After verifying the registration documents and confirming the complete and valid documents, the registration agency will issue the barcode to the enterprise for use first, and the barcode registration certificate will be issued to the registrar. Signed then about 30 days.

>>> Read more: Conditions for the protection of industrial designs

>>> Read more: Registration for the Copyright Certificates

3. Legal service for barcode registration for goods in Vietnam at Apolo Lawyers

Proud to be a law firm with many years of experience, Apolo Lawyers committees to provide our clients no limitations, but this support:

• Consulting on choosing the type of barcodes that are suitable to the size and intentions of the Enterprise.
• Consulting on the selection of barcodes film master in accordance with the product characteristics of the enterprise.
• Consulting and completing the application for barcode registration.
• Support Enterprises to implement the Ministry of science and technology of the Socialist Republic of Vietnam used to register barcodes.
• Submit an application for a barcode certificate at the General Department of Standards, Metrology, and Quality. Monitor the progress of case processing. Receive MSMV film master and transfer to Enterprise for printing and use.
• Consulting and supporting businesses in the entire process of using barcodes.​

For further information, please contact us: Apolo Lawyers

APOLO LAWYERS

Procedure for granting a business license for domestic travel

 In recent years, Vietnam has attracted more and more foreign tourists and domestic tourists. Tourism is receiving more and more attention from society. Many businesses want to develop in this field. However, the establishment of domestic travel as well as granting a business license for domestic travel need to meet certain standards that not everyone can know. Therefore, Apolo Lawyers (Tel: (+8428) 66.701.709) provides our clients with information about the establishment of domestic travel as well as the consulting service for the procedure for granting a business license for domestic travel fastly and efficiently.

The establishment of a domestic travel business must satisfy the following legal terms:

1. Conditions for domestic travel business

According to the Article 31, Law on Tourism, to be granted a business license for domestic travel, businesses shall meet the following conditions:

• The enterprise is established as prescribed by the law on enterprises and has registered a business line that is travel.
• The enterprise must make has paid a deposit to a bank. The deposit to the domestic travel business is 20.000.000 dong.
• The person in charge of the provision of travel services holds an associate degree or higher in travel; in case he/she holds an associate degree or higher in another major, a certificate of training in domestic tour operation is required.

2. The procedure for granting a business license for domestic travel

Step 1: Prepare and apply the dossier requesting to grant a business license  for domestic travel

The enterprise applying for the license for the provision of domestic travel shall submit 01 application to the tourism authority of the province where the enterprise is located;

The dossier consists of:

• An application form for issuance of the license for the provision of domestic tours according to the form prescribed by the Minister of Culture, Sports and Tourism;
• A certified true copy of the business registration certificate;
• A certificate of deposit payment;
• A certified true copy of the decision on appointment or employment contract between the travel service provider and the person in charge of provision of travel services;
• Certified true copy of qualifications of the person in charge of provision of travel services prescribed in Point c, Clause 1, Article 31 of this Law.

Step 2: Processing files

Within 10 days from the day on which a valid application is received, the tourism authority of the province shall assess and issue the license for provision of domestic tours to enterprise; in case of refusal, a written response stating reasons thereof must be given.

3. Rights and obligations of a domestic travel business

A domestic travel service provider has the following rights and obligations:

• Develop, advertise, sell and provide tourism services and tour programs for tourists within the scope of business specified in the license;
• Maintain the fulfillment of conditions for provision of tour specified in Clause 1, Article 31 of this Law; publish the name of provider and tour provision license number on the signboard of the provider, its branches, transaction offices, in travel contracts, on print advertisement and in electronic transactions;
• Notify the change of the person in charge of provision of travel services, submit the profile on the new person in charge of provision of travel services to the licensing authority within 15 days since the change;
• Provide information on the tour, tourism services and destinations for tourists;
• Buy insurance for tourists during their tours, except for those who have had insurance for the whole tour.
• Employ tour guides to guide tourists under the travel contract; be responsible for tour guides’ performance during the tour under the contract;
• Observe, disseminate and guide tourists to observe local law and regulations; behave in a civilized manner, respect Vietnamese and local cultural identity, customs and practices; cooperate with a competent authority in promptly imposing penalties for the illegal acts committed by tourists during the tour;
• Comply with regulations on reporting, statistics, accounting and keep documents in accordance with law.
• Take measures to ensure safety of tourists’ lives, health and property; promptly inform competent authorities of accidents and risks which may happen tourists and take remedial measures.
• Manage tourists in accordance with the tour program signed with them.

​>>> Read more: Application for construction permit for foreign contractor

>>> Read more: Legal service for the APEC business travel card

4. Legal consultation service on granting a business license for domestic travel at Apolo Lawyers

Here is the overview of the procedure for granting a business license for domestic travel. If you still have any problems with it, do not hesitate to contact us. With a team of high-professional and experienced lawyers in many fields, Apolo Lawyers is committed to providing you with the most optimal service fastly and efficiently. We will perform the following tasks for you:

• Consulting on conditions for registration of domestic travel business licenses;
• Guide customers to provide information to complete the application for a domestic travel business license;
• Drafting application for a license for domestic travel business;
• On behalf of the enterprise, carry out the procedures for applying for a license for domestic travel business;
• Exchange and provide information to customers in the process of granting domestic travel business licenses
• Receive and hand over the domestic travel business license to customers.​

For further information, please contact us: Apolo Lawyers

APOLO LAWYERS

Noteworthy points when signing an M&A contract

Because of the significant influence of each M&A deal, investors must always be cautious when researching and performing the signing of M&A contracts. However, the risks from the terms of the contract are not easy to recognize. In this article, Apolo Lawyers will highlight noteworthy points when signing an M&A contract. Our clients, who have a problem with legal due diligence issues, do not hesitate to contact us via email at contact@apolo.com.vn or Hotline - (+84) 903419479.

Before you can perform any activities related to an M&A transaction, it is necessary to understand the nature of an M&A transaction.

1. What is an M&A transaction?

Mergers and Acquisitions (M&A) refers to transactions between two companies combining in some form. Although mergers and acquisitions (M&A) are used interchangeably, they come with different legal meanings. In a merger, two companies of similar size combine to form a new single entity.

On the other hand, an acquisition is when a larger company acquires a smaller company, thereby absorbing the business of the smaller company. M&A deals can be friendly or hostile, depending on the approval of board of the target company.

2. Noteworthy points when signing M&A contracts

Investors typically conduct the signing and closing process and take on the responsibility for organizing the process, obtaining signatures, and drafting and negotiating all closing documents. Investors must:

First, pay attention to the assurance and assurance measures. This is a form of forcing the participating parties to ensure that the information provided is entirely accurate at the time of signing. When drafting a contract, the parties to the contract must agree to this guarantee and this guarantee is a contractual obligation for which the two parties will be responsible for what they have declared and committed.

if this clause is just a declaration of the parties when entering into an M&A contract, then basically according to the provisions of law, this will not be a legal basis to have the right to claim compensation. Usually damages if one of the parties provides untruthful and causes damage.

Second, the mechanism for determining and adjusting prices. One of the important activities that can determine the future of deal is the valuation of business. The two parties involved need to clearly stipulate the relevant terms, because this valuation result depends on many different factors.

More attention should be paid to disputes that may occur in practice such as: Extra payment based on business performance; one party breaching a contractual obligation; Prerequisites; Reimbursement; or Other disputes (usually labor and shareholder disputes).

>>> Read more: Legal advice on Mergers and Acquisitions (M&A) in Vietnam

>>> Read more: Legal advice on tranfer of investment project in Vietnam

3. Disputes often occur when the parties signed M&A contract

First, breach of warranties and guarantees.

As mentioned above, warranties and guarantees involves the provisions as well as the information, have been indentified as the basis for entering into contract, so this dispute is quite complicated.

Second, the mechanism of price determination and adjustment.

This problem often arises when the parties have fully paid one or all and have other price adjustment mechanisms right after the conclusion of the contract. However, the parties when signing a contract will be based on a certain pricing method as well as a certain price adjustment that has been agreed in advance.

Third, contractual obligations are breached.

This kind of dispute often arise when the parties do not follow the management and operation of the company, which was agreed upon after the completion of the transaction. Disputes often arise immediately after the completion of the contract.

Fourth, claim for damages, fines for violations and late payment of interest.

According to Vietnamese law, when violating, they will have to pay compensation according to reality. Parties often seek monetary damages because it feels easier and quicker than demanding performance.

Preparing and drafting an M&A contract before signing is a complicated process. To reduce the potential risks for the parties, this process should be conducted by attorneys. Apolo Lawyers is a law firm providing legal service relating to consulting and drafting business contracts. If you want to know more detail about our service, please contact Apolo Lawyers via email at contact@apolo.com.vn or Hotline - (+84) 903419479 for the best legal advice and support.

APOLO LAWYERS.