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"Ebook Hợp đồng thương mại quốc tế" được biên soạn nhằm cung cấp đến các bạn bạn về quan hệ giữa luật với hợp đồng; ngôn ngữ hợp đồng bằng tiếng Anh; diễn giải các điều khoản của hợp đồng và các bên tham gia hợp đồng; giá cả trong hợp đồng và phương pháp thanh toán; vi phạm hợp đồng và cách xử lý.

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Nội dung Text: Những điều cần biết về hợp đồng thương mại quốc tế

NGUYEN TRONG DAN 11(113 HONG TIMING MAI QUtit TE Xueit bcin lein this 6 International Trade Contracts 6th 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 Part 1 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 Part 2 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 Part 3 INTERPRETATION OF THE CONTRACT 43 1. THE ENTIRE AGREEMENT AND THE CONTRACT DOCUMENTS 43 2. THE WHEREAS - RECITAL 45 47 3. DEFINITIONS 49 4. SOME SPECIMEN DEFINITIONS 50 5. COMPREHENSION QUESTIONS Part 4 THE PARTIES TO A CONTRACT 54 THE NAMES OF THE PARTIES TO A CONTRACT 54 I. 55 2. THE SIGNATURE 57 3. THE ASSIGNMENT OF RIGHTS AND DUTIES 58 4. COMPREHENSION QUESTIONS 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 77 3. REMEDY 79 4. THE TIMING OF THE DEFECTS LIABILITY PERIOD 80 5. WHO PAYS FOR CLAIMS UNDER WARRANTY? 81 6. DEFECTS LIABILITY AND MAINTENANCE 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. 5th 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 provided: vdi diau kian la criminal law: luat hinh public law: cong phap legal instrument: cOng cu phap ly stringent provisions: nhCing quy dinh nghiem ngat private law: tv phap 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 waive: khutc tit disposive: co the khutc ter waivable rights: quyen co the khuUc tir oblige: bat buiic 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 insulation: cach diOn, nhiOt beneath one's dinity: kh6ng xerng vol pha'm cach cua... Justice: c6ng ly chastising: trerng trq morality: dao dim conduct: qui t6c ung xer norm: tiou chugn, nguyen thc depraved: suy doi, sa doe sanction: trirng phat forbid: cam 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 oak tree: cay soi case law: luOt an 10 precedent: tin la, an la codify: soap thanh luat UCC: bQ luOt thu'ang mai th6ng nhat barbariaus: ke man rq philosophical: trial hoc, triet ly code: bq luOt psychological: tam ly Continental law: luOt chau Au 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. plaintiff: nguyOn dan approach: phtrang phap tigp can exception: ngoai le take st into account: tinh den... incure: phat sinh tend: cO xu fluting. 15
CONTINENTAL ANGLO-AMERICAN Start with a clear legal code Start with a case decided on its merits. When a case occurs, the judge simple When a similar case occurs, the judge applies the code. Sometimes the decides the case on its merits and in line judge must interpret the code to see with the precedent set by the first case. how it applies in a particular case Very difficult cases go to a higher A huge body of case law develops with court. The higher court interprets the many precedents in slightly different code and decides how it applies in cases. the difficult case. 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 merits: tinh fiat (cue vu kien) interpret: then giai occur: phat sinh, xay ra legislature: co quan lap phap 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 govern: chi ph6i defined: dich danh oversimplify: don gian h6a qua mut formation: hinh thanh 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 dispute: tranh chap construe: didn clich neutral: trung lap consultation: hip thtrang ratify: phO chudn convention: cong vac 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 foresee: luring trutt clause: diet., khoan ICC Rules of Conciliation and arbitration 1 986: compromise: nhuvng b6 quy Mc h6a giai va trong tai 1988 conflict: xung d6t unpredictable: khOng luring trutc duce equitable: cOng bang 20