INTERNATIONAL

BUSINESS LAW
Dr. Bui Le Thuc Linh
Chapter III- International sales contracts

1. Law governing the contract? What is CISG?

2. Overview of the content of the international commercial contract.
3. Signing the international commercial contract.
4. Obligations of the subjects.
5. Breach of the contract and remedies.
6. Time of transfer of ownership and time of transfer of risk.
7. INCOTERM.
3.1. General principles relating to the conclusion and
performance of contracts

1. Principle of freedom of contract

2. Principle of good faith
3. Principle of custom and practice
4. Principle of freedom in the form of contract
5. Principle of prohibition of self-contradiction
6. Principle of information
7. Principle of equality between parties
8. Favor contractus
3.1. General principles relating to the conclusion and
performance of contracts

9. Principles of explaining the parties' intentions when entering into a contract:

▪ Article 8.1 CISG explains that statements made by and other conduct of a
party are to be interpreted according to his intent, where the other party
knew or could not have been unaware of that intent.
▪ Article 8.2 CISG explains that statements made by and other conduct of a
party are to be interpreted according to the understanding that a reasonable
person of the same kind as the other party would have had in the same
circumstances.
▪ Article 8.3 CISG explains that any practices which the parties have
established between themselves, usages, and any subsequent conduct of
the parties.
3.2. General principle in the chosen of applicable law

- The applicable law governing international commercial

contracts is all the principles and regulations agreed upon
by the parties or the legal norms established and
promulgated by the State, recognized and selected by the
judicial authorities to apply and govern international
commercial contractual relations.
- Allows the parties to choose the applicable law.
- The clause “applicable law/law governing the contract” is in
the contract.
- If there is no choice of law, the International Judicial or
Private Judicial Agencies shall refer to.
5
3.2.1. The choice of municipal/national law

- - Parties have the right to choose the law of a country for

international commercial transactions
- - Vietnamese traders entering into international contracts
for the sale of goods have the right to choose foreign law
as the law governing the contract

6
3.2.2. The choice of international customs/practices

Judicial practice shows that the common ICC rules are

accepted by Vietnamese courts as international
commercial practices such as INCOTERMS, UCP, etc.

7
3.2.3. Restrictions on choice of law agreements

Foreign law:
- Agreement to apply foreign law does not contravene the
provisions of the Civil Code and other documents;
- Agreement to choose the law is not valid if mandatory norms
exist.
- Does not contravene the basic principles of Vietnamese law.

8
Note: Vietnamese law is the mandatory applicable law

- Vietnamese law is the law governing the contract, even if the

parties choose another source of law in case:
- The contract is concluded and performed entirely in Vietnam;
- The contract involves real estate in Vietnam.
- Vietnamese courts comply with the above principles as
follows:
- Do not apply other sources of law when adjudicating.
- Do not recognize judgments whose applicable law is not
Vietnamese law.

9
3.3. Introduction to CISG

▪ The United Nations Convention on Contracts for the

International Sale of Goods 1980 (CISG), drafted by
UNCITRAL, came into force on 1 January 1988;
▪ CISG is “a marriage between socialist, third world,
common, and civil law principles”;
▪ Is Vietnam a member of the Convention?
▪ Note: Preserving Article 96.
3.3.1. When does the CISG apply?

▪ Only when the International Sales Contract has an

Agreement?
▪ If the Contract Does Not have an Agreement?
3.3.2. Cases in which CISG does not apply

The parties have the right to agree not to apply the CISG
(Article 6 – CISG)

25
Note: The custom between the parties (Article 9 CISG)

▪ The parties are considered to have agreed to apply a custom

implicitly when the practice is widely recognized and both parties are
aware of this practice for a period, and the parties do not have
another agreement.
3.4 Overview of International sales contracts

3.4.1. Definition

1. According to the 1980 Vienna Convention

2. From Vietnam's point of view
3.4.1 Provisions of the 1980 Vienna Convention

(1) This Convention applies to contracts of sale of goods between parties

whose places of business are in different States:
(a) When the States are Contracting States, or
(b) When the rules of private international law lead to the application of
the law of a Contracting State.
(2) The fact that the parties have their places of business in different States
is to be disregarded whenever this fact does not appear either from the
contract or from any dealings between, or from information disclosed by, the
parties at any time before or after the contract.
(3) Neither the nationality of the parties nor the civil or commercial character
of the parties or the contract is to be taken into consideration in determining
the application of this Convention.
 Place of business????

- CISG does not define “place of business” but it can be interpreted

as follows:
+ Public operations
“The fact that the parties have their places of business in
different States is to be disregarded whenever this fact does not
appear either from the contract or from any dealings between,
or from information disclosed by, the parties at any time before
or at the conclusion of the contract. ”
CISG - Article 1.2
+ The place of business is that which has the closest
relationship to the contract and its performance (CISG – Article 10
(a))

18
 3.4.2. Article 1.1(b): When international justice refers to the
law of a member state

- Extending the scope of the convention to contracts where a party

has business in countries that are not parties to the Convention

- Article 1.1.b provides for the cases in which the CISG applies even
if one or both parties to the contract do not have a place of business
in the member states, whereby the CISG applies “when the rules of
private international law lead to the application of the law of a
Contracting State”.

- Note: There are cases where Article 1.1b is reserved under

Article 95
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3.4.3. Reservation of Article 1.1 (b) under Article 95

- Purpose of reservation: limit the scope of application of the CISG –

parties do not accept the CISG as the prevailing law applicable to
contracts for their international sale of goods contracts.
For example, does the purchase and sale contract between a party
with a business establishment in the US and the other party in
Vietnam apply to the CISG? If the U.S. conflict law refers to U.S.
law, the CISG does not apply because the U.S. reserves it.

- Some reserved countries: the US, the Czech Republic, Singapore,

China, etc.

24
3.5. Characteristics and forms of the Contract for International
Sale of Goods

❖ Contracts for the International sale of goods also have the common
characteristics of contracts for the purchase and sale of property in civil law
▪ It is an agreed contract
▪ Compensatory
▪ It is a synallagmatic contract/bare contract
❖ As a legal form of the goods purchase and sale relationship, the
International sale contract has certain characteristics, derived from the
commercial nature of the act of buying and selling goods
▪ About the subject
▪ About the form
▪ About object
3.6. Signing of the International Sales Contract

Two methods
▪ Face-to-face negotiations
▪ Indirect negotiation (Exchange of offers and acceptance)
3.6.1. Direct negotiation between the parties

▪ The parties meet to conduct negotiations directly, which is usually

initiated by an offer by one of the parties.
▪ The opinions of technical, legal, financial, and interpretation experts
are for advisory purposes only.
 3.6.1. Direct negotiation between the parties

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3.6.2. Indirect negotiation

Offer Acceptance
▪
a. Proposals and Offers

▪ What is a proposal for a contract?

▪ When does the offer to enter into a contract take effect?

a. Proposals and Offers
(Article 14, Article 15, Article 17 CISG)

A proposal for concluding a contract addressed to one or

more specific persons constitutes an offer if it is sufficiently
definite and indicates the intention of the offeror to be bound in
case of acceptance. A proposal is sufficiently definite if it
indicates the goods and expressly or implicitly fixes or makes
provision for determining the quantity and the price. (Article 14
of the 1980 Vienna Convention).
a1. The fundamental factors that define a proposal constitute
an offer

▪ Offer to send to the identified party (or to the public)

▪ Request to express the intention to enter into a contract
by the proposing party
▪ Demonstrate the commitment of the proposer and
goodwill in case the proposal to enter into HD is accepted

→ Forming an offer
a2. Offer becomes effective

▪ An offer becomes effective when it reaches the offeree.

(Article 15.1 of the 1980 Vienna Convention)
a.3. Offer does not take effect

▪ Until a contract is concluded, an offer may be revoked if

the revocation reaches the offeree before he has
dispatched an acceptance (Article 16.1 of the Vienna
Convention).
▪ Can an offer be withdrawn or not?
▪ What is the difference between withdrawing an offer and
revoking an offer?
a4. The basics of offers

▪ These are points related to the conditions of price,

quality, and quantity of goods, the location and time of
delivery, the scope of responsibility of the parties, or
dispute resolution.
b. Acceptance (Article 18, Article 19, Article 20, Article 22,
Article 24 CISG)
b1. A counter-offer ???
b2. Period for acceptance

• In case the proposed offer

does not stipulate a time limit
for replying, how must the
requested person reply within
the time limit?

• What is Late Acceptance? How

does the CISG regulate late
acceptance?

• Can acceptance be revoked?

3.6.3. When was the contract signed?
3.7. Obligations of the seller

▪ Delivery obligations
▪ Obligation to hand over documents
▪ Make sure the goods are compliant with the contract
 3.7.1. Delivery obligations

The obligation to deliver goods includes the following:

▪ Delivery of goods with the right object and quality: The seller must
deliver the goods to the right object and quality as agreed in the
contract and per the provisions of law
▪ In addition to delivering the right objects and quality as agreed in the
contract, the buyer is also obliged to deliver the right quantity of goods
agreed upon in the contract. In the case of delivery of a smaller
quantity, the buyer has the right or to accept the lesser quantity, or to
request the delivery of the remainder (which may be accompanied by a
claim for damages), or to request the cancellation of the contract (which
may be accompanied by a claim for damages).
3.7.1. Delivery obligations

▪ Delivery period: Article 33 CISG

▪ Place of delivery: Article 31 CISG
 3.7.2. Obligation to deliver documents enclosed with goods

▪ Under the light of Article 30 of the CISG, the seller must hand over
documents related to the goods (such as quality certification,
certificate of origin, bill of lading, Commercial Invoice, Packing List) to
the buyer within the time limit, at the place, and by the agreed method
in the contract.
3.7.3. Ensure that the goods are in accordance with the
contract

▪ Goods Inspection Before Shipment

In case the parties have an agreement on the inspection of goods before
delivery, the seller must create conditions for the buyer to carry out its
inspection. The buyer must inspect the goods within the shortest time that the
actual circumstances allow. If the buyer fails to inspect the goods as agreed,
the seller has the right to deliver the goods according to the contract when
the delivery deadline comes.
▪ Inspection of goods: Article 38
3.7.3. Ensure that the goods are in accordance with the
contract

▪ Guarantee of the legality of ownership.

▪ The seller must deliver goods that are free from any right
or claim of a third party, unless the buyer agreed to take
the goods subject to that right or claim. (Article 41 CISG)
▪ In case the goods are disputed by a third party, the seller
must stand on the buyer's side to protect the buyer's
interests. (Article 42 CISG)
▪ According to the provisions of CISG, the seller is not
allowed to sell goods infringing on intellectual property
rights
3.7.3. Ensure that the goods are in accordance with the
contract

▪ How will the delivery of goods be handled with extra

goods?
▪ If the seller delivers goods that are not per the contract,
can the buyer get a discount on the price of the goods?
3.8. Obligations of the buyer

▪ Obligation to take delivery

▪ Payment obligations
3.8.1. Obligation to take delivery

The buyer must perform reasonable tasks for the seller to

deliver the goods, depending on each specific case, such
reasonable work, for example supporting the seller with
delivery procedures, instructions on transportation methods,
conditions for loading and unloading goods, etc. (Article 60
CISG)
3.8.2. Payment obligations

Based on the 1980 Vienna Convention (paragraph 3, article 58), it is

stipulated that the buyer is not obliged to pay for the goods before they
can inspect the goods, unless the delivery or payment method agreed
by the parties does not allow the buyer to inspect the goods before
payment.
3.8.2. Payment obligations

▪ In case the parties do not have an agreement:

- Payment location: If not agreed in the contract, the payment
location will be determined according to the provisions of Article
57 CISG.
- Payment period: Determined under the provisions of Article 58
CISG.
- Pricing determination: Article 55 CISG
 3.9. Notice of claim

▪ When a seller breaches an international contract for the sale of

goods, according to CISG, the buyer can file a complaint
against the seller.
▪ In accordance with Article 39.2 CISG, in any case, e buyer
loses the right to rely on a lack of conformity of the goods if he
does not give the seller notice thereof at the latest within a
period of two years from the date on which the goods were
actually handed over to the buyer, unless this time limit is
inconsistent with a contractual period of guarantee.
3.10. Contractual remedies

International commercial law applies the principle of

“responsibility can exist even in the absence of fault ". This
principle is completely grounded and shows objectivity when
determining responsibilities
3.10.1. Fundamental breach of contract

❖ Definition: Article 25 of the Vienna Convention 1980→ Determined

based on the following factors:
(1) There must be a breach of contractual obligations.
(2) The breach of such contractual obligation must result in a party
losing what it has been waiting for (wishing to obtain) from the
contract.
(3) The breaching party foresees the consequences of such a breach
in advance.
Does the seller's delay in delivering goods constitute a
fundamental breach of contract? What is the significant
damage?
3.10.2. Require performance in the contract

Article 46 of the CISG stipulates the performance of contracts as

follows:
(1) The buyer may require performance by the seller of his
obligations unless the buyer has resorted to a remedy which is
inconsistent with this requirement.
(2) If the goods do not conform to the contract, the buyer may
require delivery of substitute goods only if the lack of conformity
constitutes a fundamental breach of contract and a request for
substitute goods is made either in conjunction with notice given
under Article 39 or within a reasonable time thereafter.
3.10.3. Penalties for violations and compensation for damage

▪ Compensation for damage for breach of contract is the main form of

liability due to the failure or improper performance of the International
Sales Contract.
▪ Article 74 CISG: “Damages for breach of contract by one party consist
of a sum equal to the loss, including loss of profit, suffered by the other
party as a consequence of the breach. Such damages may not exceed
the loss which the party in breach foresaw or ought to have foreseen at
the time of the conclusion of the contract, in the light of the facts and
matters of which he then knew or ought to have known, as a possible
consequence of the breach of contract.”
a. Compensation for damage

▪ When claiming compensation for damages, the damaged

party must be obliged to prove that there is a loss and the
extent of the loss caused by the breach of contractual
obligations.
▪ When there is a breach of contract, the damaged party is
obliged to apply measures to limit possible damages.
▪ No mention of compensation for damages for losses with
non-monetary factors, such as losses of reputation
a. Compensation for damage

Obligation to prevent damage

When there is a breach of contract, the laws of most countries
stipulate that the damaged party is obliged to take such measures
as are reasonable in the circumstances to mitigate the loss,
including loss of profit, resulting from the breach (Article 77
CISG).
b. Penalties for violations

• Penalties for violations must perform two functions:

▪ Firstly, it is a measure to ensure the performance of
contractual obligations.
▪ Secondly, it is a form of liability due to breach of contract.
• A penalty for violation takes place when the party whose
interests are infringed upon requests the breaching party to pay
a certain fine for breach of contract, if there is an agreement in
the contract or prescribed by law.
3.10.4. Suspend the performance

A party may suspend the performance of its obligations if, after

the conclusion of the contract, it becomes apparent that the
other party will not perform a substantial part of its obligations
(Article 71 CISG)
3.10.5. Declare the contract avoided

The regulations are integrated in the regulations on the rights

of buyers and sellers in the CISG (Article 49 and Article 64, and
Article 72 CISG).
3.10.5. Declare the contract avoided

The damaged party may declare the contract avoided:

(a) if the failure by the other party to perform any of his
obligations under the contract or this Convention amounts
to a fundamental breach of contract; or
(b) If the other party does not, within the additional period
fixed, perform his obligation to pay the price or take
delivery of the goods, or if he declares that he will not do
so within the period so fixed.
3.10.5. Declare the contract avoided

1. In what cases does the buyer lose the right to declare

cancellation of the contract?
2. How is a reasonable time limit understood?
3. Legal consequences?
3.11. Transfer of ownership rights by owner

▪ Legal implications :
After the transfer of ownership, the seller loses the right to dispose of
the goods, and the buyer has the owner's authority over the goods that
are the subject of the contract. In many cases, although the goods may
not have been received, the buyer has the right to dispose of them,
that is, resell them to a third party, mortgage, etc.
3.12. Transfer of risks

Specific risk transfer cases:

▪ Firstly, risk transfer in case there is a specified delivery location(Article 67
CISG)
▪ Secondly, transfer the risk in case there is no specified delivery location
Article 67 CISG)
▪ When there is a provision for the transportation of goods in the sales contract, another
contract will arise from such contract: the contract of carriage. Depending on the
agreement of the parties to the contract, this contract of carriage may be signed by the
seller or the buyer. Regardless of which party enters into the contract of carriage of the
goods, and through how many carriers, the risk of loss and damage to the goods
passes to the buyer when the goods have been delivered to the first carrier.
3.12. Transfer of risks

▪ Thirdly, risk transfer in case of buying and selling goods on the way
of transportation: if the circumstances so indicate, the risk is
assumed by the buyer from the time the goods are handed
over to the carrier who issued the documents embodying the
contract of carriage. (Article 68 CISG)
This is a case where there may be confusion in the interpretation and
application. “Goods on the way of transportation” means the object of
the contract signed by the two parties; instead of having a fixed
position, the goods are on their way to their destination port when the
parties conclude the contract.
3.12. Transfer of risks

▪ Fourth, transfer risks in other cases: In cases not within articles 67

and 68, the risk passes to the buyer when he takes over the goods
or, if he does not do so in due time, from the time when the goods
are placed at his disposal, and he commits a breach of contract by
failing to take delivery. (Article 69 CISG).
▪ In case the goods are not identified by symbols or transport
documents, are not notified to the buyer, or are not identified by any
other means, the risk of loss or damage of the goods shall not be
transferred to the buyer.
3.13. Immunity

A party is not liable for a failure to perform any of its

obligations based on
(1) If he proves that the failure was due to an impediment
beyond his control and that he could not reasonably
be expected to have taken the impediment into account
at the time of the conclusion of the contract or to have
avoided or overcome it or its consequences (Article 79);
or
(2) Such failure was caused by the first party's act or
omission (Article 80).
3.13. Immunity

1. “Impediment” in the provisions of Article 79 CISG is

the same as "force majeure"?
2. Whether the fault of a third party count towards the
exclusion of liability?
3.14. INCOTERMS

Incoterms (International Commerce Terms – Các điều khoản thương mại

quốc tế) is a set of international trade practices that are widely recognized and
used worldwide. The Incoterms sets out the rules related to prices and the
responsibilities of the parties (sellers and buyers) in an international trade
activity.
3.14.1. Characteristics of Incoterms

▪ Incoterms are commercial practices, not law

▪ Later versions do not negate the validity of previous versions
▪ Incoterms only explain the most general issues related to delivery, such as which party is
obliged to hire a means of transport or purchase insurance, when the seller delivers the goods
to the buyer, and how the costs are divided among the parties
▪ The two parties to the transaction may increase or decrease their responsibilities and
obligations to each other, depending on their position in the transaction, but must not change
the nature of the conditions of the delivery facility
▪ Incoterms only determine the transfer of risk from buyer to seller, not the consequences of
breach of contract.
▪ Depending on which means the goods are transported (air, sea, road, etc.), and what type
(bulk cargo, containers, barges, etc.), there are corresponding groups of conditions for each
type of transportation.
 3.14.2. Groups in Incoterm
▪ General terms for any type of carriage:

▪ EXW - Ex Works – Giao tại xưởng

▪ FCA - Free Carrier – Giao cho nhà chuyên chở

▪ CPT - Carriage Paid To - Cước phí trả tới

▪ CIP - Carriage and Insurance Paid – Cước phí và bảo hiểm trả tới

▪ DAP - Delivered At Place – Giao tại nơi đến

▪ DPU- Delivered at Place Unloaded- Giao hang tại nơi đến và dỡ hàng

▪ DDP - Delivered Duty Paid – Giao hàng đã trả thuế

▪ Terms for sea or inland water transport only:

▪ FAS - Free Alongside Ship – Giao tại mạn tàu

▪ FOB - Free On Board – Giao lên tàu

▪ CFR - Cost and Freight – Trả cước đến bến

▪ CIF - Cost, Insurance and Freight – Trả cước, bảo hiểm tới bến
EXW
FCA
FAS
FOB
CFR
CIF
CPT
CIP
DAT
DAP
DDP