A contract that is drafted logically and closely with clear content will help ensure practical implementation and easily resolve conflicts if there is a dispute.

Legal grounds:

• Civil Code 2015;
• Commercial Law 2005.

The parties to the contract must respect and comply with the concluded agreement. A well-drafted contract is the basis for the parties to feel secure in implementing the contract, limiting the occurrence of disputes. Moreover, if there is a risk of dispute, resolution is also more convenient.

We have compiled 5 things that parties should pay attention to when negotiating and drafting contracts before officially signing.

1. Wording in the contract must be simple and easy to understand

A contract is a legal document, establishing the rights and obligations of each party in the contract. The contract is not a literary work containing many metaphors and comparisons.

Therefore, the vocabulary and grammar in the contract need to be clear, concise, and easy to understand so that anyone who reads it will understand one meaning, not multiple meanings.

In addition, each party to a contract should not assume that the other party will correctly understand its rights and obligations if the content is not clearly stipulated.

For example, a school that signs a contract with a milk dealer to provide drinking milk to students should not generically state liquid milk but should clearly state in the contract: sterilized fresh milk or pasteurized fresh milk, brand, milk box volume, minimum expiration date, …

2. Understand the general legal provisions of the contract expected to be signed

There are a number of common types of contracts such as: goods purchase and sale contracts, service contracts, leasing contracts, construction contracts, etc. In addition, depending on actual needs, the parties can combine the content of different types of contracts to build a specific contract that closely matches the purpose of the transaction. Therefore, in principle, the parties are free to agree to build a contract.

However, civil law as well as commercial law still have general regulations that the parties must comply with, as well as default regulations that apply if the parties do not agree in the contract.

For example:

• In commercial contracts, the parties must comply with the rate of penalty for breach of contract;
• Obligation to notify when canceling the contract;
• The seller’s obligation to deliver goods if there is no agreement on the delivery location.

3. Comply with contract form

There are certain cases where a contract must comply with its formality in order to be recognized as legally valid.

For example:

• Some types of contracts must be made in writing and notarized/authenticated.
• Some transactions must be registered with a competent State agency.

Failure to comply with the contract form may result in the contract being declared void (without legal value).

According to civil law regulations, a civil transaction can be concluded verbally, in writing or by specific conduct. However, to ensure the rights of each party, as well as have a clear basis when resolving disputes, it is best that the contract be drawn up in writing.

4. Subjects participating in the contract

Subjects entering into contracts include individuals and organizations.

• Individuals who want to sign a contract must ensure they have behavioral capacity and reach a certain age to sign a contract appropriate to their age.
• Organizations that want to sign a contract must go through their legal representative. It can be a legal representative or an authorized representative. The individual representing the organization must have behavioral capacity and the representation must be legal.

In addition, there are some special cases such as:

• In a business with many legal representatives, it is necessary to clearly define the authority of each representative, because it is possible that a representative only has the authority to sign certain types of contracts. Therefore, before signing a contract, the parties need to make public and transparent the scope of authority of their representative signing the contract.
• With high value contracts, businesses can only sign if the contract content has been approved by the General Meeting of Shareholders or the Board of Directors or Council of Members. Therefore, before signing a contract, the parties should carefully study the provisions of enterprise law, as well as the charter and regulations of the enterprise to verify their authority to sign the contract.

5. Determine the strength position of each party in the contract

Before negotiating and drafting a contract, each party should determine its own position in the business transaction.

Position can be determined by issues such as:

• What is the purpose of each party when signing the contract?
• How urgent is it to sign a contract?
• Is there a replacement partner for the current partner?
• The level of goodwill of the partner in the relationship
• What are the advantages and weaknesses of each party in the contract?

From determining the position in the contract, each party can make a contract negotiation plan:

• What content is required?
• What content is not negotiable?
• What content is negotiable? Scope of negotiation?
• What risks can be accepted when signing a contract?

In fact, in a contract there may be one party that will suffer more disadvantages than the other party (because of its weaker position), but they still accept the risk to sign the contract for economic purposes. However, learning and carefully researching the contract will also bring better preparation and more initiative during the contract implementation process.