NGUYEN TRONG DAN
11(11 3
HONG TIMING MAI
QUtit TE
Xueit bcin
lein
this 6
International
Trade Contracts
6t
h
Edition
NHA XUAT
BAN LAO DONG
HA NOL 2007
Thu' tit g6p
y
xin
GS.TS. Nguygn Trong Dan
DTDD: 0904 055 077
Email: dhannte,fpt.vn
Tac
gi6 gilt
bgn
quye'n
© Copyright by the author
2
Preface
This book is intended to provide commerce students of international
trade and other readers with guidelines to the language of international
trade contracts as the name of the book suggests.

Despite the difficulty and complexity of the subject matter, the language
used in the book is straightforward and readily understood.
The book contains 11 parts. The first eights parts deal with legal aspects
and give examples of authentic language used to illustrate them. At the
end of each part, there are comprehension questions so that the students
can check their understanding. In the footnote from Part 1 to Part 8, four
or five words and/or expressions are listed with their context meanings
in Vietnamese.
Part 10 gives examples of authentic contracts from various Vietnamese
and foreign trading corporations. All of these contracts are bilingual:
English and Vietnamese. Part 11 includes the ICC Model Sale contract
and the remarks made on each individual provision in the light of the
civil code of the SRVN regarding civil contracts.
Although every effort has been made to ensure the reliability of the
information in the book, for readers of the book, the author is not
responsible for any losses resulting from using this book or specimen
contract clauses taken from therein. Before signing a contract, business
persons should take appropriate legal advice.
As mentioned the subject matter is very difficult and complicated, errors
and mistakes might have been made here and there in the book.
Constructive suggestions and corrections are, therefore, highly
appreciated.
Prof. Dr. Nguyin Trong Dan
Hanoi, 2007
3
Acknowledgements
I would like to express my many thanks for Directing Board of the
Foreign Trade University for their help and assistance during the
preparation and production of this book.
I also would like to express my sincere thanks for my colleagues at the

English Department of the Foreign Trade University for their long and
kind co-operation in the making of this book.
I am deeply indebted to my Australian Collegue, Mr. Timothy Maxwell
Clemons for his valuable suggestions, comments, criticism and
correction during the development of this book.
I am also deeply indebted to all Vietnamese and foreign import and
export organizations and commercial services to their assistance and
permission for reproduction of their contracts and documents.
As always I wish to express my special thanks to my wife and my
children for their understanding and encouragement throughout the
preparation of this book.
I would like to thank Mr. Nguyen Van Chau, BMA, Researcher, at the
Foreign Trade University for his deligence shown in proofreading of the
book and for all other things that he has done on my behalf so that the
book would have been made possible for the first edition.
Finally, I also would like to thank all of my friends and former students
for their assistance in providing the contracts and their translation.
Prof. Dr. Nguyin Trong Dan
4
Contents
Page
PREFACE

3
ACKNOWLEDGEMENTS

4
CONTENTS

5

BIBLIOGRAPHY

7
HOW TO WORK WITH THE BOOK

9
THE RELATIONSHIP BETWEEN THE LAW AND THE CONTRACT

11
1.
BRIEF INTRODUCTION TO THE LAW AND THE CONTRACT

11
2.
THE RELATIONSHIP BETWEEN THE LAW AND THE CONTRACT

11
3.
EUROPEAN (CONTINENTAL) LAW AND ANGLO - AMERICAN
LAW

13
4.
THE APPLICABLE LAW

17
5.
SOME SPECIMEN CLAUSES

21

6.
COMPREHENSION QUESTION

22
THE LANGUAGE OF CONTRACT IN ENGLISH

25
1.
THE CONTRACT SENTENCE

25
2.
THE LANGUAGE OF ANGLO-AMERICAN CONTRACTS

31
3.
THE CLAUSES PATTERN IN CONTRACT ENGLISH

33
4.
THE PASSIVE FORM

37
5.
COMPREHENSION QUESTIONS

38
INTERPRETATION OF THE CONTRACT

43

1.
THE ENTIRE AGREEMENT AND THE CONTRACT DOCUMENTS

43
2.
THE WHEREAS - RECITAL

45
3.
DEFINITIONS

47
4.
SOME SPECIMEN DEFINITIONS

49
5.
COMPREHENSION QUESTIONS

50
Part 4 THE PARTIES TO A CONTRACT

54
I.
THE NAMES OF THE PARTIES TO A CONTRACT

54
2.
THE SIGNATURE


55
3.
THE ASSIGNMENT OF RIGHTS AND DUTIES

57
4.
COMPREHENSION QUESTIONS

58
Part 5 GOODS AND DELIVERY, PRICE AND PAYMENT

61
I.
SCOPE AND DELIVERY

61
2.
PRICE AND PAYMENT

69
3.
COMPREHENSION QUESTIONS

72
Part 6

THE DEFECT AND THE LIABILITY

75
I. WARRANTY AND GUARANTEE


75
2.
THE DEFECTS LIABILITY PERIOD

76
3.
REMEDY

77
4.
THE TIMING OF THE DEFECTS LIABILITY PERIOD

79
5.
WHO PAYS FOR CLAIMS UNDER WARRANTY?

80
6.
DEFECTS LIABILITY AND MAINTENANCE

81
Part 1
Part 2
Part 3
5
7
- COMPREHENSION QUESTIONS

82

Part 7 BREACH OF CONTRACT

87
I.
LIQUIDATED DAMAGES AND PENALTIES

87
2.
LIQUIDATED DAMAGE: PROBLEMS

88
3.
TERMINATION

91
4.
THE LIMITATION OF LIABILITY

93
5.
COMPREHENSION QUESTIONS

99
Part 8 FORMATION OF CONTRACTS

104
I.
SOME LEGAL ASPECTS

104

2.
THE OFFER

108
3.
THE PURCHASE ORDER

109
4.
ACCEPTANCE OF ORDERS

109
5.
GENERAL CONDITIONS

109
6.
ECE GENERAL CONDITIONS

110
7.
APPLICABILITY

110
8.
GENERAL NOTE ON NEGOTIATION

111
9.
COMPREHENSION QUESTIONS


111
Part 9 THE INDUSTRIAL PLANT CONSTRUCTION CONTRACT

114
1.
UNPACKAGING, TENDERING AND NEGOTIATION

114
2. THE PARTIES

117
4.
THE EMPLOYER'S DUTIES: PRICE AND PAYMENT

122
5.
VARIATION

123
6.
TEST AND INSPECTIONS

126
7.
AN EXAMPLE OF A SUPPLY CONTRACT TO DELIVER AND
INSTALL MACHINERY (BILINGUAL)

129
Part 10 EXAMPLES OF CONTRACT


231
I.
CONTRACT FOR RICE

231
2. CONTRACT FOR LUBRICANTS

241
3. ABC CORPORATION'S CONTRACT

249
4. CONTRACT FOR GARMENT PROCESSING

260
5. CONTRACT FOR DISTRIBUTORSHIP AGENCY

273
6. JOINT VENTURE CONTRACT

306
7. SALES AND PURCHASE CONTRACT 1

322
8. SALES AND PURCHASE CONTRACT 2

334
Part 11 ICC MODEL CONTRACT FOR THE SALE OF GOODS

340

I.
THE ENGLISH VERSION OF THE CONTRACT

340
2.
THE VIETNAMESE VERSION OF THE CONTRACT

354
3.
MODEL CONTRACT FOR THE SALE OF GOODS AND THE CIVIL
CODE OF VIETNAM

369
APPENDIX

385
- CONG 1.fric
VIEN 1980

385
2
HOP DOING MUA BAN TAI SAN THEO LUAT DAN SVCOA NUOC
CONG HOA XA HOI CHU NGHIA VIET NAM

428
6
BIBLIOGRAPHY
Anderson, Ronald A.
Business
Law. Cincinati: South Western 1980.

Black, H. C. Black's Law
Dictionary.
5
th
ed. St Pault: West. 1979.
Dy, Nguyen Duc, et al.
Tt? di en ngoai

Throng Dai hoc Ngoui
thtrong, Ha NOi. 1985.
Dy, Nguyen Dile.
Tit dien gidi nghia kinh to kinh doanh,
NXB Khoa
hoc va Ky thuat. 1996.
Dam, Nguyen H6ng.
Van tdi ngoai thumg.
Throng Dai hoc Ngoul
thtrang. 1987.
Dan, Nguyen Trong.
Ngorr ngi? hop dong thu'ung mai Anh My.
Sinh
hoat khoa hoc trubng Dal. hoc Ngoai thtrong. 1993.
Dan, Nguyen Trong.
Cau, menh
de
va ngi? trong hop eking thuzing
mai quae
re'. Ky
y6u HOi nghi Khoa hoc 1c'T ni4rn 30 nam Vien ngOn ngir
hoc V* Nam. 1993.

Dan, Nguyen Trong.
The language of business correspondence in
English.
NXB Gido duc. Ha NO. 1992.
Groner, Sammel B.
Modern Business Law.
Reston. 1983
Mc (Draw Hill - 1992. Gifis, Steven H.
Law Dictionary,
Third Ed.
New York, 1992.
Nguyen Th6 et al.
Ter
dien Phap luat Anh Viet.
NXB KHXH.
1992.
Federation Internationale des Ingenieurs (FIDIC):
Conditions of
Contract
-
1987
International Chamber of Commerce:
+ Force Majeure and Hardship.
Paris. ICC. 1984.
7
+
Guide to Penalty and Liquidated Damages Clauses.
Paris
ICC. 1990.
+

Incoterms -
Paris ICC. 2000.
+
Model forms for Issuing Contract guarantees
Paris. ICC - 1992.
+
Rules of Concilliation and Arbitration.
Paris. ICC. 1988.
Ma, Nguyen Thi va Thiet, Hoang Van.
Phap ly dai cumig.
TriOng
Dai hoc Ngoai thuong.

NOi. 1991
Ma, Nguyen Thi va

Hoang Van:
Nhil'ng van
de
phap li trong
ngoai thumg.
TrtOng Dai hoc Ngoai diming. 1996.
Pinnels, James.
International Procurement Contracts.
Prodec.
Helsinki. 1991.
Sanderson, Steve. Ed.
Standard Legal Forms and Agreements for
Canadian business.
Canada 1989.

Staple, James G. et al.
"Know - how in the united States" in the know
- how contract in Germany, Japan and the United States
Ed. Herbert Stumpf Deventer:
Kluwer. 1984.
Tixu, Vu Hiru.
Tdchdc ky thugt Ngoai thurnig.
Trtthng Dai hoc Ngoai
thuang. Ha NOi, 1991.
White, James, et al -
Uniform Commercial Code.
St Paul West. 1980.
Trinh, Dinh Xuan.

tay thank loan Quo
.
c
Trubng Dai hoc Ngoai
thtrong
Ha
NO. 1991
Bo
lugt Dan su' dia nu& Cong hoa xar 110i chi nghig Viet Nam.
Vietnam Law & Legal Forum.
1996.
Ludt thumig mai cua niffrc COng hoa xd hgi chi nghra Viet Nam.
1996.
Legal writings on Foreign Investment in Vietnam.
SCCI. 1992.
COng uOc Vien 1980

ye
Hop (long mua ban QuCic to Paris. 1980.
8
HOW TO WORK WITH THE BOOK
This book is, as mentioned, meant to be used, firstly by commerce
students at the Hanoi Foreign Trade University and otber business
persons. The focus of the book is on both the language and other legal
aspects of contracts.
Anyone who wishes to use the book effeciently should, first of all, attain
a fairly advanced level of English and then have a good understanding of
such key subjects as:
-
Laws applied to international business operations
-
Foreign Trade Organizations and Techniques
-
International Payment
-
Shipping, Transport and Insurance.
In order to understand, at the beginning, and be able to apply the contract
terms and conditions, the students, readers and users are required to work
through the book starting from Part I.
The working phases are recommended as follows:
Phase 1:
-
Understanding technical terms
-
Being able to analyze clause structure
-
Understanding every single grammatical unit.

Phase 2:
-
Understanding legal and technical aspects as explained in each
part
-
Reading sample provisions
-
Reading and understanding short contracts, and then long ones
Phase 3:
- Translating some simple short contracts into Vietnamese, and
comparing them with the ones provided in the book
-
Drafting short provisions, and then long ones
- Drafting a contract
- Discussing it with someone who is an authority on the subject
matter.
In the course of using this book, it should be kept in mind that laws are
constantly changing and it is the drafter, not the author of this book, who is
responsible for the effectiveness of the drafted contract clauses or the
contract itself. It is, therefore, essential and vital that the students, users
and readers should have a good command of English and a comprehensive
knowledege and experience in international business.
Prof. Dr. NGUYEN TRONG DAN
2007
10
Part 1
THE RELATIONSHIP BETWEEN
THE LAW AND THE CONTRACT
1.
BRIEF INTRODUCTION TO THE LAW AND THE CONTRACT

When negotiators from different countries contract, they create a legal
instrument. What is the relationship between this legal instrument and the law
of the two countries?
Two parties may agree to bind themselves in any way they choose, provided
their agreement does not come into conflict with the public law (including the
constitution) of their countries or with stringent provisions of the private law.
The constitution of a country embodies the generally accepted principles that
govern the country. In addition to a constitution, each country has laws. In
general, laws establish two kinds of rights and duties: (a) the rights and duties
that each citizen owes to and receives from the state, and (b) the rights to and
duties that citizens owe each other. The law that regulates the relationship
between state and citizen is called public law. Private law regulates the
relationship between citizens.
The public law of a country controls, for example, taxation, immigration, the
formation of companies and similar matters. Criminal law is also public law.
The private law looks at the behaviour of citizens (and companies) toward each
other. One branch of private law looks at agreements which citizens or
companies make with each other - this is the Contract Law.
2.
THE RELATIONSHIP BETWEEN THE LAW AND CONTRACT
Business is based on agreements or
Contracts.
During the performance of a
contract, the parties may disagree on a particular matter and then the two parties
will study their contract and ask what it provides in such a situation. If there is
bind: rang buac
criminal law: luat hinh
legal instrument: cOng
cu
phap ly

private law: tv phap
provided: vdi diau kian la
public law: cong phap
stringent provisions: nhCing quy dinh nghiem ngat
11
no such provision, they must ask what, if anything, the law obliges them to do.
This raises the most basic question about contracts.
What is the relationship betweenc the contract and the law?
Example
BEC (British Export Co.) is an English company. It makes an offer to supply
the Power Co, (PC) of Vietnam with relays for 2 pounds each.
Under the English Contract Law, the English company has the right to cancel
its offer at any time before PC accepts it. Although BEC has this right, it may
agree with PC not to cancel its offer, say, before Sept. 30. In other words, BEC
can, if it wishes, give up or waive one of its rights under the Law of Contract.
The waivable rights are said to be disposive. Of course, BEC's waiver applies
to the offer it is making to PC only. It keeps its right to cancel offers made to
others.
Reinarks
-
This example shows exactly the relationship between the contract and the
law:
a contract sets out the rights and duties that apply between the two
parties.
A contract sets aside rights and duties that exist under private law
(e.g. BEC's right to cancel its offer) and creates new rights and duties (e.g.
the duty to deliver goods or the right to payment).
-
And the public law? The provisions of the public law are never disposive.
For example, public law in Vietnam forbids the use of certain plastics in

the manufature of insulation for cable. Can BEC agree with PC that this
law does not apply to their contracts? Obviously not. Public law is not
disposive - the parties to a contract cannot set it aside.
-
The idea of "law" that we have discussed so far is, of course, the traditional
western view. This view stresses that law and morality are close partners:
The purpose of law is to provide order, stability and justice. Thus viewed,
the law consists of relatively fixed rules which regulate conduct according
to the morality of the community. Proper conduct, as determined by the
community, should be allowed or required. Improper conduct should be
prohibited. Law then is a social institution, it is not an end in itself but is an
instrumentality for obtaining social justice (Anderson, 1980 p.17).
contract law: luOt help clong
disposive: co the khutc ter
oblige: bat buiic
waive: khutc tit
waivable rights: quyen co the khuUc
tir
waiver: nguti khutc to quygn cluvc hutng
12
- Nothing could be further from the traditional eastern view. In the extract
below, the long-standing Korean view of "Law" is presented:
The idea that law is an accumulation of collective experience never had an
existence in the Korean political tradition. Law was an instrument for
chastising the vicious and the depraved. It was sharply distinguished from
custom. It always signified a norm with physical force as a sanction behind
it. It was therefore synonymous with punishment, no more or less. It is little
wonder that the ruling elite considered law beneath its dignity. Indeed, the
concept that law applies only to the barbarians or to the ignorant masses
and never to the proper Chinese or to the rulers is strongly rooted in

Korean thought. When the present- day Koreans try to follow the Anglo-
American example, they have to depart so far from their traditional ways
of thinking that one cannot help wondering whether it is feasible, let alone
advisable to do so (Pyon-choon 1982 pp. 19 and 30).
If we accept this view as typically eastern, then clearly the gap between
easterner and westerner is wide. For a westerner, a contract is of the highest
significance. It put into words powerful moral forces as they apply to the case
in hand. Behind the contract stands a huge body of law and 3,000 years of
religious and moral tradition. For the easterner, the contract is a simple
agreement without such psychological and philosophical roots. Both sides
should be aware of this gap during contract negotiations. It is the source of
much misunderstanding.
3. EUROPEAN (CONTINENTAL) LAW AND ANGLO
-
AMERICAN LAW
"Continental" law
The so-called "continental" law prevails in most of continental Europe, in
France and Germany for example. This law derives from a code which the
Roman Emperor Justinian developed 1,50Q years ago. For this reason, lawyers
often call it "Roman law". The Code Napoleon of 1803 developed and updated
Justinian's code and influenced many legal systems around the world including
those of Japan and most South American countries. The essence of
"continental" law is
Codification.
A clear code expresses what is legal and what
is not. The German BGC (Civil code) is an excellent example. The continental
accumulation: tich luy
beneath one's dinity: kh6ng xerng vol pha'm cach
cua
chastising: trerng trq

conduct: qui t6c ung xer
depraved: suy doi, sa doe
forbid: cam
insulation: cach diOn, nhiOt
Justice: c6ng ly
morality: dao dim
norm: tiou chugn, nguyen thc
sanction: trirng phat
set aside: b6 qua, b6 ra ngoai
vicious: xali xa,
deic
ác
13
family of law has well developed private law, especially the contract and the
commercial branches.
"Anglo
-
American" law
Unlike Continental law, the Law of England, the United States (and many other
English - speaking countries) is not completely codified. The tradition of
uncodified law goes back to ancient kings who sat under oak trees and made
legal decisions case by case.
To achieve fairness, the king decided each case in line with earlier decisions in
similar cases, the so-called
precedents.
For this reason, lawyers often call
Anglo - American Law "case law".
Today, public law is generally codified, while private law remains largely case
law. The case - law system prevails in England, in the United States, and in
many ex - colonies of Britain such as Australia.

It is important to note that the USA has codified its commercial law - tidying up
the chaotic situation in which some fifty states followed often widely different
legal practices. The Uniform Commercial Code (UCC) was written between
1941 and 1952. A 1962 revision was adopted by 49 states. A 1972 revision was
also widely adapted, although different states and courts interpret the UCC
differently, it offers a vital guide to current American thinking.
Because England and the United States were predominant in world trade until
recently, Anglo - American legal thinking strongly influences international
practice. The Anglo - American family has a fully developed private law. In
particular, the big trading countries have developed a strong commercial and
contract law.
Anglo
-
American and Continental Law: the Differences
Anglo - American contract law is largely case - law. Each decision on a new set
of facts or on the construction of a previously undisputed law by a judge creates
a
precedent.
This precedent may be binding, if so future judges will follow it.
The chart below compares how Continental and the Anglo - American law treat
the relationship between a
case
and the
law.
Anglo-American law: luat Anh-M2
case law: luOt an
10
codify: soap thanh luat
barbariaus: ke man rq
code: bq luOt

Continental law: luOt chau Au
oak tree: cay soi
precedent: tin la, an la
UCC: bQ
luOt
thu'ang mai th6ng nhat
philosophical: trial hoc, triet ly
psychological: tam ly
elite: tinh nhua, qui ph&
14
The Anglo - American and the Continental approaches to law produce different
styles of legal argument, and very different contract language. Much of the
material in the following chapter explores these differences. Let's take a single
example for now: the length and complexity of Anglo - American contracts.
You have probably noticed that English and American lawyers draft long
contracts in difficult language. Why is it? Perhaps lawyers are paid by the
word, and a long contract makes more money than a short one! Although it was
true in the past, it is not the heart of the problem at present.
In the Anglo - American legal world, as we have seen, nobody knows the result
in any given case until the judge reaches a decision. If the parties want to avoid
surprises, they must draft a detailed contract covering all future possibilities.
This makes contracts long and full of exceptions and conditions. Further,
judges must take binding precedents into account when making their decisions.
Each case may have dozens (even hundreds) of precedents. 'Contract language
has developed over the centuries to "force" the judge to arrive at the same result
whatever precedent(s) he or she uses. One example, if a judge once refused
damages because the plaintiff had incurred "costs" while the contract spoke
only of "expenses". Future contracts will tend to speak of "costs and expenses",
and thus avoiding the problem.
approach: phtrang phap tigp can


plaintiff: nguyOn dan
exception: ngoai le

take st into account: tinh den
incure: phat sinh

tend: cO xu fluting.
15
CONTINENTAL
Start with a clear legal code
When a case occurs, the judge simple
applies the code. Sometimes the
judge must
interpret the code
to see
how it applies in a particular case
Very difficult cases go to a higher
court. The higher court
interprets
the
code and decides how it applies in
the difficult case.
ANGLO-AMERICAN
Start with a case decided on its merits.
When a similar case occurs, the judge
decides the case on its merits and in line
with the precedent set by the first case.
A huge body of case law
develops with

many precedents in slightly different
cases.
PERHAPS
The legislature passes a statute (= law)
that tidies up a complicated situation, or
it may pass completely new laws.
Before applying a statute, a court may
evaluate its
constitutionality .
This
means that the courts may
reject
a
statute and refuse to apply it, if it is
found to be unconstitutional. Judges
also have wide powers to interpret
statutes; the court must decide what the
statute means. "The courrt's
interpretation is the law" (Groner, p.8)
constituonality: tinh, khth nang lap hian
interpret: then giai
legislature: co quan lap phap
merits: tinh fiat (cue vu kien)
occur: phat sinh, xay ra
statute: hanh vi lap phap, luat thanh van
16
4. THE APPLICABLE LAW
No contract is complete. When the contract does not answer a question, the
answer lies in the applicable law, the law of a particular state or country. In
principle the parties are free to choose the law which applies to the contract.

What is important in choosing an applicable law? What happens if the parties
cannot agree on an applicable law?
The parties should agree on the applicable law before drafting a contract.
Without a defined applicable law, the parties may write unenforceable
provisions. Further, some applicable laws require a more detailed contract than
others. If the parties simply cannot agree on a law, then they must write a very
long contract.
If a contract is a fish, it swims in water. In principle the parties are free to
decide which water their fish will swim in. A Chinese - German contract could
choose German, Chinese, English, or, to oversimplify a little, any other national
law.
You often find the Applicable Law clause at the end of a contract. Even so, you
should turn to it
first
before reading the rest of the contract. Some provisions of
a contract change their meaning radically under different legal systems.
An example of a carefully worded applicable law provision:
This contract, and all questions concerning its formation, validity, interpretation
and application shall be governed by the laws of the State of New York
Study this wording. It says that the laws of the State of New York govern the
contract. That is clear enough. The clause also mentions four
questions
governed by these laws:
4.1. Formation
Was the contract correctly
formed?
That depends on the applicable law. But if
the contract was not correctly formed, it does not exist, and so there is no
applicable law. And if there is no applicable law, it is impossible to decide if
the contract is correctly formed or not! This legal knot is easy to untie if the

applicable law: luat ap dung
defined: dich danh
formation: hinh thanh
govern: chi ph6i
oversimplify: don gian h6a qua mut
unforceable: khOng c6 hie‘u lut
validity: thdi han hiau
luc
17
parties agree that not only the contract itself but also the question of its
formation is subject to the laws of the State of New York.
4.2. Validity
Is the contract valid? If not, the same problem (and the same solution) arise as
with Question 1, Formation.
4.3. Interpretation
How is the contract to be
interpreted?
To understand this point we must
distinguish between
substantive
law and
rules of procedure.
Substantive law is
the law as it applies to the behavior of the parties. What does the law require
them to do? Rules of Procedure apply to the court and its way of conducting its
business. The rules of interpretation are procedural rules, not substantive laws.
This wording makes it clear that both the substantive laws and the rules of
interpretation are those of the State of New York.
4.4. Application
How will the parties carry out their duties? What rules apply to the performance

of the contract? As with interpretation, a dispute might arise about a substantive
law and procedural rules. Again the wording makes the situation absolutely
clear.
An applicable law clause not only states the law applicable to the contract, it
sometimes states what law is not applicable. This clause is from a subcontract
for space technology. The main contractor is American; the subcontractor is
German.
The contract shall be governed by, subject to, and construed in accordance
with the laws of the State of Florida; This Contract shall not include or
incorporate the provisions of the "United Nations Convention on Contracts
for the International Sale of Goods"
be subject to: re thu'ec vao

substantive law: lust flux tai
legal knot: chot phap ly

untie: gO cal
rules for procedure: quy tac ye thu tyc
18
This contract was written at a time when both the United States and Germany
were in the process of ratifying the United Nations Convention (the so-called
Vienna Sales Convention). The parties wished to exclude its provisions from
their agreement. Since the matter is disposive, they had every right to do so.
What happens if during negotiations the two parties cannot agree on an
applicable law? If a French company, for example, will not accept Chinese law,
and its Chinese counterpart will not accept French law? First, the parties could
decide on a neutral law, for example, English law, or Swiss law as applied in
their respective countries. Second, the parties might agree to the law of one
side, but write a very detailed and extensive contract leaving almost nothing for
the applicable law to decide. Accepting the law of "the other side" is not

particularly dangerous if you research carefully and write a clear, detailed and
fair contract. There is a third possibility. If two sides reach no agreement, you
sometimes see a provision such as this:
13.1 During the performance of the Contract, any dispute in connection
with the Contract shall be settled by both parties through consultation
in the spirit of friendliness; If no agreement can be reached after such
consultation, the dispute shall be submitted to arbitration
13.2 The arbitration shall be conducted in the Arbitration Institute of the
Stockholm Chamber of Commerce, Sweden
13.3 The law applicable to the arbitration shall be neutral and be decided by
the arbitration committee
arbitration: trong tai
construe: didn clich
consultation: hip thtrang
convention: cong
vac
dispute: tranh chap
neutral: trung lap
ratify: phO chudn
respective: mOi, ttrng, rieng
19
Allowing the arbitration committee to decide the applicable law is dangerous.
Neither party knows what law to apply to the contract. The results of fairly
common actions become unpredictable, and the chances of an expensive
dispute increase.
The next clause, taken from a contract to supply German equipment to the
United States, illustrates a fourth possibility:
This Agreement shall be interpreted in accordance with the laws of the Federal
Republic of German. If, however, the German law conflicts with Texas or U.S.
federal laws regarding any dispute between the parties, then the parties agree to

use their best efforts to negotiate an equitable compromise acceptable to both
sides hereto; In the event that such a compromise cannot be reached in a timely
manner, then the dispute shall be settled in accordance with the separate
"Arbitration Agreement" between the parties
The parties were (apparently) unable to agree on one applicable law, so they
named
three.
The clause foresees trouble, disputes and arbitration ahead
because of this awkward arrangement. In the end, the arbitrator will decide
what law really applies.
A surprising number of international contracts use the weaker options, in effect
allowing the court or arbitration to decide the applicable law. How does the
court, if required, make its decision? What does it take into account? The ICC
Rules of Conciliation and Arbitration
1988, says:
In the absence of any indication by the parties as to the applicable law, the
arbitrator shall apply the law designated as the proper law by the rule of
conflict which he deems appropriate (Article 13.3)
This doesn't help much: the rules governing conflict of law are a study in
themselves, and so, for the parties to the contract, the arbitrator's decision is
unpredictable. As a rule of thumb, however, the court usually weighs four
factors, whatever conflict - of - law rules it is applying.
awkward: vung ve
clause: diet., khoan
compromise: nhuvng b6
conflict: xung d6t
equitable: cOng bang
foresee: luring trutt
ICC Rules of Conciliation and arbitration 1 986:
quy Mc h6a

giai
va trong tai 1988
unpredictable: khOng luring trutc duce
20
a.
The place of performance of the contract (i.e. the place where most of
the work is actually done);
b.
The place of execution (= signature) of the contract;
c.
The language of the contract;
d.
The currency or the weights and measures prescribed.
Taken together, these points show the gravity of a contract - it's "natural
weight". It practice, the place of performance, is often decisive. In an FOB
sales contract, this is the country of the seller. In a construction contract, that of
the buyer.
5. SOME SPECIMEN CLAUSES
Applicable law
This contract shall in all respects be construed and interpreted
in accordance with the law of the People's Republic of Bangladesh including
any such Laws passed or made or coming into force during the period of the
Contract
Governing Law
These General Conditions and the Contract are governed by
Italian Law
Applicable Law
Regardless of the place of agreement, the place of
performance, or otherwise, this agreement and all amendments, modifications,
or supplements hereto, shall be construed under, governed by, and the legal

relations between the Parties hereto determined in accordance with, the laws of
the Republic of the Philippines
conflict - of - law rules: qui pham luat có xung dOt or otherwise: hoac khac di
designated: chi dinh

regardless of: bat
ke
gravity: trong diem

rule of thumb: qui
tbc
thvc nghiem
specimen: mau
21
In each case, the water round the fish is labeled: Bangladeshi law, Italian law
the law of the Philippines. Even so, the third formulation is clearly better than
the other two: it takes into account most of the legal problems that arise in
disputes about the applicable law.
IMPORTANT REMINDER: The applicable law governs the disposive
provisions (or traditions) of the
private law:
things that the parties could decide
themselves but - for whatever reason - left unregulated.
Public law
always
applies, whatever the parties agree.
6. COMPREHENSION QUESTIONS
6.1. A Tax - Free Contract
BEC, an English company, is selling switchgear for power stations in Vietnam.
The parties agree that "English law applies". BEC, however, wants to ensure

that it is not liable for tax under Vietnam tax law. Therefore the lawyer drafts
this clause:
All
income taxes or
other tax obligations created as a result of this contract
shall be assessed and regulated exclusively according to the English tax law in
force at the time of assessment
I. Is BEC now free of Vietnam income taxes? (Choose one answer)
q
YES
q
NO - because tax law is public law and the parties cannot set it aside.
q
NO - because the clause is worded too weakly.
ensure: bac
,
dam

liable for: clip trach nhiOni
hereto: 1. doi vUi hop clang nay

tax-free: mien thue
2. tham gia hop dong nay
22
2. Does the clause below create a "tax - free contract" for BEC?
The buyer shall compensate and save harmless the Seller from all taxes assessed
against the Seller by the government of the Buyer's country
q
YES


q
NO

q
YES, UNLESS
6.2. Restatement
The clause below is from a contract for the sale of mining equipment to South
Africa:
Before and during the execution of the work, the Contractor shall collaborate
with the Representative authorized by him to ensure that all work is being
carried out in accordance with the requirements of the Mine and Works Act,
1956, the Factories, Machinery and Building Works Act No. 22. of 1941 as
amended applicable, as well as all regulations made in pursuance thereof
1. Are the Mine and Works Act, 1956, and the Factories, Machinery and
Building Works Act No.22. of 1941 Public law or private law?
q
PUBLIC

q
PRIVATE
2. Are "as amended applicable" and "all regulations made in pursuance
thereof" public law or private law?
q
PUBLIC

q
PRIVATE
3. If the Contractor agrees to this clause, is he taking on any additional
duties or giving up any rights that would normally be his?
q

YES

q
NO
4. What do you think the purpose of such lause is?
act: luat, dao
collaborate: hop tac
in pursuance: theo, theo ducli
save harmless: mien trach
23
6.3. A Law without a Family
These presents shall be governed by and constructed in accordance with British
Common Law
An
international bank included this clause in a Performance Guarantee.
Unfortunately:
a.
There is no "British Law", only English or Scottish Law. (Scottish law
is a member of the continental law family.)
b.
Specifying "Common Law" seems to exclude Equity and Statute Law.
Questions:
If a contract is a fish swimming in water, in what water does this
fish swim?
q
ENGLISH COMMON LAW
q
ENGLISH LAW IN GENERAL
q
SCOTTISH LAW

q
NO LAW
common law: th6ng phap (luat tuc le va an le)

presents: hop Jong
equity law: luet tong bring, c6ng chinh

statute law: luet thanh van hay an le
24
Part 2
THE LANGUAGE OF CONTRACT IN ENGLISH
1. THE CONTRACT SENTENCE
The opening sections of an Anglo- American contracts are often puzzling: it is
hard to see how the
whereas,
the
witnesseth,
and the rest fit together. Sadly,
many international contracts are poorly drafted: the wording is often
ungrammatical and sometimes nonsense. What is the key to contract language?
Traditional English-language contracts are drafted as a single sentence: the
"contract sentence". In principle, all the parts of a contract fit into a single
grammatical unit .
Lawyers are conservative. Lawyers working in English today may still draft
contracts in the ancient style, even though these old forms internationally may
be a source of confusion. One tradition is the drafting of contracts as a single
sentence. This sentence pattern has three main variations.
1.1. "This Contract Witnesseth " (Variation 1)
The lease on the next page illustrates the most common contract pattern. No
matter how long a contract is, it can still follow this one sentence pattern. Let's

look at the grammar of the sentence:
THIS
LEASE
This lease
is the subject of the contract sentence. Many contracts begin
with a similar subject:
This Licensing Agreement, This Technical
Assistance Agreement,
and so on.
BETWEEN
The. word
between
introduces the names of the two parties. Each party is
usually given a " hereinafter referred to" title: the
buyer
or the
seller;
Employer
or
Contractor
or whatever.
conservative: beo thu
lease: hop dung
cho
thud va thud
puzzling: rec roi, khO hieu
whereas: xet, vi
rang
witnesseth: lam bang charg
25