Commercial contracts: a management guide from negotiation to termination

English translation of the Vietnamese article. The Vietnamese version prevails.

Reviewed by the FC Legal legal team2 October 202623 min read
Contract lifecycle
Strategy→Negotiate→Draft→Sign→Manage→Resolve→Renew / Exit

What will you find in this guide?

01

Building and negotiating the deal

Contract strategy, due diligence on the counterparty, good faith in negotiations and the risk of being bound by an NDA, MOU or LOI.

02

Drafting and allocating risk

Commercial architecture, limitation of liability, indemnity, force majeure and hardship, governing law and dispute resolution.

03

Managing the contract after signing

Handover, obligation register, KPIs and SLAs, change control and the escalation pathway.

04

Renewal and termination

Decision date, termination, exit plan, post-termination obligations and close-out.

The contract lifecycle (CLM) in 7 steps

  1. Strategy: start with the deal, not the template (section 3).
  2. Negotiation: good faith in negotiations; NDA, MOU and LOI (section 3).
  3. Drafting: contract architecture and risk allocation (section 4).
  4. Signing: signing is not the end point (section 11).
  5. Management: obligation register, KPIs, change control (section 12).
  6. Dispute management: issue, notice, cure, evidence, claim (section 17).
  7. Renewal / exit: decision date, exit plan and close-out (section 19).
Summary

A good commercial contract does more than answer the question “What happens if one party is in breach?”. It must also answer more important questions that come up throughout the business relationship: Who must do what? By when? What is the standard for completion? Who bears the risk? How are changes approved? How is performance measured? When a problem arises, who deals with it first? And finally, how does the business exit the contract?

This is the thinking behind contract lifecycle management (CLM).

In this approach, a contract is not just a “legal shield” brought out when a dispute arises. It should be treated as a strategic business asset. It links commercial goals, risk allocation, legal obligations, operational performance and management data.

World Commerce & Contracting (WorldCC) describes modern contract management across the whole lifecycle, from forming the deal to performance, change and close-out. WorldCC materials put particular weight on post-signing management, handover, obligations, performance, risk and governance, instead of treating signature as the end of the contracting process.

This article looks at commercial contracts in five stages:

Contract strategy & pre-contract→Drafting & risk allocation→Execution & contract governance→Breach & dispute management→Renewal, termination & exit
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1. Commercial contracts from a modern management perspective

1.1. From “legal document” to “business asset”

In the traditional approach, a contract is seen mainly as a tool that sets out rights and obligations and serves as the basis for resolving disputes.

That approach is right, but it is not enough.

In modern business, a contract can be seen as having four functions at the same time:

FunctionQuestion the contract must answer
Legal instrumentWhat are the parties’ legal rights and obligations?
Commercial frameworkHow are price, payment, volume, scope and economic benefits set?
Risk allocation mechanismWho bears which risk, and up to what limit?
Performance management toolHow are results, progress and quality measured and controlled?

Contract management framework

A contract can be legally watertight and still fail commercially.

Example

Business A signs a software supply contract with supplier B. The contract is 70 pages long, with very detailed clauses on confidentiality, intellectual property and liability. But the Scope of Work annex says only that the system must “meet the customer’s management needs”.

During implementation, A says a certain function is included in the contract price. B treats it as an additional request. The dispute does not come from a complex legal clause. It comes from the fact that the scope, deliverables and acceptance criteria were not designed clearly enough from the start.

This is why contract management must begin before the contract is signed.

2. First, decide which legal framework governs the contract

A common mistake by Vietnamese businesses is to put the Civil Code, the Commercial Law, the CISG, Incoterms® and international principles into one contract without distinguishing the legal role of each source.

They do not play the same role.

SourceMain function
Civil Code 2015The general legal framework for contracts and obligations in Vietnam
Commercial Law 2005Governs commercial activities within the scope of the Law
CISGA uniform legal regime for certain international contracts for the sale of goods within the scope of the Convention
UNIDROIT PrinciplesA set of principles that is not a national statute; can be used in different ways in international transactions
Incoterms® 2020Rules allocating certain obligations, costs and risks relating to the delivery of goods
Governing lawDetermines the legal system that governs the contract, under the rules on applicable law

Legal framework

The CISG governs the formation of international contracts for the sale of goods, the obligations of the seller and buyer, and the system of remedies. It does not govern every issue in the transaction. For example, the validity of the contract and the effect of the contract on ownership of the goods are outside the scope of the Convention. Vietnam acceded to the CISG in 2015, and the Convention has been in force for Vietnam since 1 January 2017.

The UNIDROIT Principles 2016 are a set of principles for international commercial contracts. UNIDROIT describes them as a form of codification or restatement that is not binding in itself like national law. The effect of choosing the Principles also depends on the context, in particular whether the forum is a court or an arbitral tribunal.

Incoterms® need to be understood correctly. The ICC states that these rules mainly answer three groups of questions: who does what, where and when the risk passes, and which party bears which costs. Incoterms® do not by themselves replace the sale contract.

Risk to note

Incoterms® are not a “mini contract”.

Writing “CIF Hai Phong Port – Incoterms® 2020” does not automatically resolve issues such as transfer of ownership, quality standards, payment, limitation of liability, hardship or the dispute resolution mechanism.

Legal note

Under Vietnamese law, the Civil Code 2015 is still in force. The National Database of Legal Documents records the Commercial Law 2005 as partly no longer in force. When applying it, check its history of validity and the relevant amendments, instead of assuming that the whole 2005 text is still unchanged.

3. Stage 1: contract strategy and the pre-contract phase

3.1. Do not start with a template: start with the deal

A common mistake: when the sales team asks for a contract, the legal team immediately opens the nearest template.

A better approach is to define the contract strategy first.

Before negotiating, the business should at least answer:

  • What is the business objective of the deal?
  • What are the expected value and profit margin?
  • What is the counterparty’s most important obligation?
  • Which risks can the business accept?
  • Which risks are absolutely unacceptable?
  • What is the BATNA, the alternative if the negotiation fails?
  • Which issues are deal-breakers?
  • On which issues can a fallback position be used?
  • Who has authority to approve exceptions?
  • When should Finance, Tax, Operations, IT Security, Compliance or Legal be involved?
Key point

A good contract must reflect the actual deal. It should not force the actual deal into an existing template.

3.2. Due diligence: check who you are about to deal with

Contract due diligence does not have to be a complex M&A project.

Even for an ordinary supply agreement, the business should check at least three layers.

  1. Legal layer: legal status, legal representative, authority to sign, required licences.
  2. Commercial layer: financial capacity, production or supply capacity, track record, resources.
  3. Risk layer: significant disputes, compliance, sanctions where an international transaction is involved, intellectual property, confidentiality and data.

A tight contract cannot fully make up for choosing a counterparty that is unable to perform.

3.3. Good faith in negotiations

Article 1.7 of the UNIDROIT Principles sets the principle of good faith and fair dealing in international trade. Article 2.1.15 goes further into the negotiation stage: parties are generally free to negotiate and are not liable merely for failing to reach agreement, but liability may arise when a party negotiates, or breaks off negotiations, in bad faith.

This has practical consequences.

A business should not treat the pre-signing stage as a “zone without liability”.

Risk to note

Take special care when you:

  • ask the counterparty to provide trade secrets;
  • drag out negotiations when you no longer intend to sign;
  • ask the counterparty to make significant investments before signing;
  • use information obtained in negotiations for other purposes.

3.4. NDA, MOU and LOI: the name does not decide everything

An NDA, a Memorandum of Understanding (MOU) or a Letter of Intent (LOI) often comes before the main contract.

The biggest risk is an accidental binding effect.

An LOI may state that it is “non-binding” but also contain clauses designed to take effect immediately, such as:

confidentialityexclusivityaccess to informationallocation of negotiation costsgoverning lawdispute resolution

So instead of just putting “NON-BINDING MOU” as the heading, define precisely:

which clauses are binding→which clauses are not binding→when the obligations end→what happens if the main contract is not signed

4. Stage 2: drafting and contract architecture

4.1. The “anatomy” of a commercial contract

A complex commercial contract can usually be organised along the following architecture:

Contract architecture
Parties→Background→Definitions→Commercial obligations→Performance→Risk allocation→Remedies→Governance→Exit→Boilerplate→Schedules

Recitals give context but should not be used in place of operative clauses.

Definitions should make the contract more precise, not turn it into a dictionary.

Schedules and annexes need careful version control, because many important operational obligations sit in the annexes.

Modern drafting, in line with Kenneth Adams’s approach, aims for language with a clear function, used consistently and with as little ambiguity as possible. It avoids legalese used only because “previous contracts were written that way”.

5. Commercial architecture: often more important than the boilerplate

A useful structure
Scope→Deliverables→Acceptance→Price→Payment→Performance→Change→Risk→Remedies→Exit

This is the “commercial backbone” of the contract.

Scope

State exactly what the supplier must do and, where needed, what it does not have to do.

Deliverables

Each deliverable should be linked to:

Owner+Specification+Deadline+Evidence+Acceptance

Acceptance

Do not just write “Party A accepts the work”.

Define:

  • who carries out acceptance;
  • the deadline for responding;
  • the pass criteria;
  • the rejection criteria;
  • the time allowed to fix defects;
  • whether there is deemed acceptance.

Price and payment

Payment milestones should be linked to verifiable results, rather than only to dates, where that suits the nature of the deal.

Practical tip

Before arguing over limitation of liability through 10 rounds of negotiation, check whether the Scope of Work is clear enough for both parties to agree what “complete” means.

6. Representations, warranties and covenants

In international contracts, these three groups have different functions.

R

Representation

Usually a statement about a state of affairs or a fact.

W

Warranty

Usually a promise that a certain fact, quality or condition is true, and may be linked to matching remedies.

C

Covenant

Concerns conduct that a party must or must not carry out.

Legal note

When you bring terms that come from the common law into a contract governed by Vietnamese law, do not assume the legal consequences will be the same as in England or the United States.

The question to ask is not:

“Does the international template call this a warranty or a representation?”

but:

“Which specific obligation do we want to create, and which specific consequence should follow if the statement is untrue?”

7. Limitation of liability

This is often one of the most heavily negotiated clauses.

A limitation of liability structure may include:

Liability cap→Exclusions→Carve-outs→Super-cap→Uncapped liabilities
Example

Total ordinary liability is capped at 100% of the fees for 12 months. Certain data or IP breaches may be subject to a higher super-cap. Some special liabilities may not be capped at all, if the governing law and the risk strategy allow.

The key point is not “the lower the cap, the better”.

The cap must be proportionate to
Contract value+Probability of loss+Potential severity+Insurance+Bargaining position
Risk to note

If the contract sets a liability cap but the indemnity clause sits outside the cap without saying whether this is intended, the risk allocation may be completely different from what the negotiators think they agreed.

8. Indemnification: contractual indemnity and compensation

An indemnity should answer at least
Trigger→Loss→Claim→Notice→Defence→Settlement→Payment→Liability cap

For a third-party claim, define:

  • who controls the defence;
  • when the indemnified party must give notice;
  • whether the indemnifying party may settle on its own;
  • whether a settlement may admit liability on behalf of the other party.
Legal note

For a contract governed by Vietnamese law, assess the validity and effect of the indemnity mechanism under that governing law, rather than simply copying an indemnity clause from a contract governed by English or US law.

9. Force majeure is not hardship

These two mechanisms must be kept separate.

In 2020 the ICC issued separate model clauses for force majeure and for hardship. The Force Majeure Clause combines a general formula with a list of events. The Hardship Clause offers options for adaptation or termination when performance becomes excessively onerous.

IssueForce majeureHardship
NatureAn impediment to performanceA serious change in the economic balance of the contract
FocusAbility to performBurden of performance
ResponseExemption from or suspension of obligations, depending on the mechanismRenegotiation, adaptation or termination, depending on the mechanism
Management questionCan performance continue?Can performance continue on the current economic terms?
Legal note

The UNIDROIT Principles also provide a hardship mechanism in Articles 6.2.1 to 6.2.3. Under it, hardship may give a right to request renegotiation, but the request does not in itself entitle the disadvantaged party to withhold performance.

Under Vietnamese law, Article 420 of the Civil Code 2015 sets out a mechanism for performing a contract when there is a fundamental change of circumstances, with its own statutory conditions. So do not automatically treat “hardship under UNIDROIT” as the same as Article 420 of the Civil Code.

For international sales governed by the CISG, Article 79 provides an exemption where non-performance is due to an impediment beyond the party’s control and the conditions of the Convention are met.

A good clause should set out the sequence
Event→Notice→Evidence→Mitigation→Suspension / continued performance→Renegotiation→Long-stop date→Termination

10. Governing law and dispute resolution

These two clauses are related but not the same.

  • Which law governs the rights and obligations?
  • Where, and through which mechanism, are disputes resolved?

For international arbitration, the clause must also consider:

  • the institution;
  • the seat;
  • the number of arbitrators;
  • the language;
  • the law governing the contract;
  • where needed, the law governing the arbitration agreement.

The ICC also warns that unclear wording in an arbitration clause can cause uncertainty and delay and affect the dispute resolution process. The 2026 ICC Arbitration Rules took effect on 1 June 2026.

Arbitration or court?

No option is best for every contract.

CriterionArbitrationCourt
PrivacyUsually more favourableDepends on the procedural system
ExpertiseArbitrators can be chosenJudges assigned by the court system
Cross-border enforcementMay have an advantage in many international transactionsDepends on the mechanism for recognising judgments
CostCan be highDepends on the system and the case
ProcedureConsiderable flexibilityFollows procedural law
AppealUsually limitedSeveral levels of review, depending on the system
Risk to note

Do not choose the ICC or SIAC only because “international contracts usually do”.

The choice should be based on the contract value, the location of assets, the country of performance, enforceability, cost, language and the type of dispute expected.

Preparing to sign an important contract?

An unclear clause on scope of work, acceptance, payment, liability or termination can create risk throughout performance. FC Legal helps businesses review contracts and identify risks before signing.

Request a contract review

11. Stage 3: execution and contract governance

Signing the contract is not the end point.

It is the moment the contract moves from:

Legal document→Operational management system

WorldCC puts particular weight on post-award management, handover, performance oversight, governance, risk mitigation and value realisation.

11.1. Operational handover

Right after signing, the negotiation team must hand over to the people who will perform the contract.

A good contract brief should summarise
contract objectivescontract ownerdeliverablesmilestonespaymentSLAs / KPIsreportingnoticeschange processescalationrenewaltermination
Risk to note

If Legal knows the payment terms but Finance does not, or Procurement knows the SLA but Operations does not, then in reality the business is not managing the contract.

12. Obligation register: turning the contract into an action list

Each important obligation should be turned into management data:

ObligationOwnerDeadlineEvidenceStatus
Deliver prototypeSupplier30 JuneDelivery recordOpen
AcceptanceProject manager+10 daysAcceptance reportPending
PaymentFinance+30 daysPayment recordPending
SLA reportSupplierMonthlySLA reportRecurring

This is the key shift from “reading the contract” to “managing the contract”.

13. Performance and compliance management

Performance must be measured against verifiable criteria.

A good KPI should be linked to
Metric→Target→Data source→Measurement period→Owner→Consequence
Example

An SLA of 99.9% uptime is incomplete if it does not define:

  • where uptime is measured;
  • whether maintenance is excluded;
  • who provides the data;
  • how downtime is calculated;
  • whether service credits are the only remedy.

The more important the contract, the more governance meetings should rely on a dashboard rather than on impressions.

14. Change control: where contract value often leaks

During performance, change is normal.

Uncontrolled change is the problem.

The process should be
  1. Change request
  2. Impact assessment
  3. Commercial / legal approval
  4. Change order
  5. Implementation
  6. Baseline update
The impact assessment must consider together
Scope+Price+Schedule+Resources+SLA+Risk+Liability

WorldCC also treats change management as a core post-award function of CLM.

Risk to note: scope creep

Sales agrees by email to add a function. Operations implements it. Finance does not adjust the price, and Legal does not amend the annex. Six months later, “helping out once” has become a regular obligation with no matching revenue.

15. Risk, issue, claim and dispute are not the same thing

Distinguish between:

  1. Risk: an event that has not yet happened.
  2. Issue: a problem that has happened and needs to be dealt with.
  3. Claim: a party formally asserts a right or remedy.
  4. Dispute: the parties disagree about rights, obligations or a claim.

A good management system should try to resolve problems while they are still a risk or an issue, instead of waiting until they become a dispute.

16. Relational contracting: managing the relationship, not just the wording

For a long-term contract, it is impossible to foresee every situation on the day of signing.

So the contract needs a governance architecture.

WorldCC highlights relational contracting and governance as ways to increase collaboration and accountability, deal with tension and protect value in relationships that depend on long-term cooperation.

An escalation pathway might be
  1. Operational team
  2. Contract managers
  3. Steering committee
  4. Senior executives
  5. Mediation
  6. Arbitration / litigation

The aim is not to remove legal rights.

The aim is not to use litigation as a tool for managing day-to-day problems.

17. Stage 4: managing breach, claims and disputes

A good dispute management framework starts before there is a dispute
Issue→Notice→Cure→Evidence→Claim→Negotiation→Escalation→Mediation→Arbitration / litigation

17.1. Notice

Many contractual rights depend on giving notice correctly:

recipientaddressmethoddeadlinecontent
Risk to note

An email to the project manager is not necessarily a contractual notice if the contract says otherwise.

17.2. Cure period

Not every breach should lead straight to termination.

A cure period allows the parties to
Identify→Notify→Correct→Verify

17.3. Evidence

Practical tip

Businesses should keep evidence when events happen, not when the lawyers are preparing the claim.

Preserve
emailsmeeting minutesdelivery recordsacceptance recordschange requeststechnical logsinvoicesnoticescontemporaneous records

18. “Material breach”, “fundamental breach” and “vi phạm cơ bản” should not be used interchangeably

This point is especially important when drafting international contracts.

Legal note

The CISG uses the concept of fundamental breach in Article 25.

The Vietnamese Commercial Law uses the term “fundamental breach” (vi phạm cơ bản) and links it to certain remedies. Article 312 provides that rescission of the contract may apply when an event occurs that the parties agreed is a condition for rescission, or when a party commits a fundamental breach of its contractual obligations, except in the cases of exemption from liability under the relevant provisions.

The Civil Code, in turn, has a mechanism for unilateral termination of performance of a contract and other mechanisms with their own structure.

Risk to note

So do not translate the terms and then assume that material breach = fundamental breach = vi phạm cơ bản = a ground for unilateral termination.

Before using a term, decide the governing law and the legal consequence the parties want to create.

19. Stage 5: renewal, termination and exit

Not every contract ends with termination.

The lifecycle may run through
Completion→Expiry→Renewal→Extension→Renegotiation→Termination

19.1. Renewal

Automatic renewal is a management risk that is often underestimated.

Example

A contract expires on 31 December but renews automatically for 12 months unless notice is given 90 days in advance.

The date that really matters for management is not 31 December.

It is 2 October, or the corresponding notice date.

Practical tip

So a CLM system must track the decision date, not only the expiry date.

20. Termination must be designed from day one

The mechanisms may include:

  • completion;
  • mutual termination;
  • termination for cause;
  • termination for convenience, if agreed and appropriate;
  • insolvency-related events, where the law allows;
  • prolonged force majeure;
  • other specific triggers.

But the right to terminate is only part of the picture.

The harder question is:

What happens the next day?

21. Post-termination obligations

The exit plan must deal with
Money→Property→Data→IP→People→Transition→Claims

In particular:

  • outstanding amounts owed;
  • return of property;
  • revoking access rights;
  • returning or deleting data;
  • confidentiality;
  • IP;
  • warranty;
  • transition assistance;
  • pending claims;
  • audit rights;
  • surviving provisions;
  • settlement and release, if any.

For important outsourcing or technology agreements, transition assistance can be as important as the termination clause.

Risk to note

If a supplier runs an essential system and the contract only says “A may terminate immediately”, the business may win on the law but still be unable to operate the next morning.

22. Contract close-out

When a contract ends, the contract manager should carry out a close-out, rather than simply moving the PDF into an “Expired” folder.

Basic checklist:

  • Have all deliverables been completed?
  • Final acceptance?
  • Final invoice?
  • Amounts owed?
  • Has property been returned?
  • Has access been closed?
  • Has data been dealt with?
  • Is any warranty still running?
  • Which claims are unresolved?
  • Has any security or bond been released?
  • How long must records be kept?
  • Final supplier performance?
  • Lessons learned?

The final information should feed back into the templates, playbooks and negotiation strategy for the next contract.

That is a truly closed lifecycle.

23. Contract management in the digital era

A business should not start its digital transformation with the question:

“Which CLM software should we buy?”

A better question is:

“Which contract processes need to be standardised before they are automated?”

A sensible roadmap has four levels:

Level 01

Digitise

Central repository; searchable contracts; metadata; version control.

Level 02

Standardise

Templates; clause library; playbooks; approval matrix; standardised metadata.

Level 03

Automate

Workflow; e-signature; alerts; obligation tracking; renewal reminders.

Level 04

Analyse

Contract analytics; risk dashboards; supplier performance; deviation analysis; value leakage; portfolio intelligence.

WorldCC defines CLM as the proactive and methodical management of the contracting process across the lifecycle. Technology is a means to digitise and support that process, not the goal in itself.

24. How is AI changing contract management?

AI can help with
extracting obligationsidentifying clausescomparing deviationsfinding contractsclassifying risktracking renewalsportfolio analysissupporting contract review

WorldCC considers that AI has the potential to help analyse contracts at scale, identify interdependencies and risks, automate parts of the lifecycle and support mobilisation after signing.

But AI does not remove the need for human judgement.

In particular, control
ConfidentialityData protectionAccuracyHallucinationAccess controlHuman reviewAccountability
Legal note

The right principle is:

AI processes data and supports decisions; people are responsible for legal judgement and commercial judgement.

25. 30-point contract management checklist

The checklist has 30 criteria in 6 groups that follow the contract lifecycle: before negotiation (5), drafting (13), before signing (3), after signing (5), change and disputes (2), renewal and exit (2). The first group:

Before negotiation

  • Define the business objective.
  • Define the BATNA.
  • Define the risk appetite.
  • Carry out due diligence on the counterparty.
  • Define the approval authority.
The full 30-point checklist

The other 25 in-depth criteria (drafting, before signing, after signing, change and disputes, renewal and exit) are available from FC Legal on request.

Contact FC Legal

26. A contract management model for businesses

The whole article can be condensed into one framework:

  1. Design: define the deal, the objectives, the risks and the structure of the transaction.
  2. Draft: turn the deal into rights, obligations, performance standards and risk allocation.
  3. Deliver: hand the contract over from Legal to Operations and manage the obligations.
  4. Govern: monitor performance, risk, change and the relationship.
  5. Resolve: deal with issues, claims and disputes through the escalation pathway.
  6. Exit / renew: renewal, termination, transition and close-out.
  7. Learn: feed data and lessons learned back into templates, playbooks and the strategy for the next deal.

This is the difference between “having a contract” and “managing a contract”.

Conclusion

In an increasingly complex business environment, a contract should not be seen only as a legal document stored in the company’s filing system.

A well-managed commercial contract must do several things at once:

set up the dealallocate riskguide performancemeasure performancemanage changeprevent disputesprotect valueand design the way out

So contract management capability does not belong to Legal alone.

It sits at the intersection of:

Legal+Sales+Procurement+Finance+Operations+Risk+Technology

Legal designs the legal structure and controls risk. The business defines the commercial value. Operations turns obligations into results. Finance controls cash flow. The contract manager connects all of these functions throughout the lifecycle.

The most important question is therefore not:

“Has this contract been signed?”

but:

“Is this contract delivering the value the business negotiated?”

A good contract does more than protect the business when a dispute arises.

A well-managed contract must help the business make the right deal, perform it properly, spot risks early, protect commercial value and end the contractual relationship in a controlled way.

Key takeaways
  1. Start with a contract strategy, not a template.
  2. Clearly distinguish the governing law, the CISG, the UNIDROIT Principles and Incoterms®.
  3. Scope, deliverables, acceptance and payment often decide a contract’s success as much as the boilerplate does.
  4. Force majeure and hardship must be designed as two different mechanisms.
  5. Signing is only the handover point from negotiation to performance management.
  6. Every important contract needs a contract owner, an obligation register, a milestone calendar and change control.
  7. Dispute management must start from the issue, the notice and the evidence, not from the day the claim is filed.
  8. Termination must come with an exit plan.
  9. CLM technology only works when process, data and accountability have been standardised.
  10. Finally, a contract should be managed as a business asset, not just as a legal document.

Frequently asked questions about commercial contracts

What is contract lifecycle management (CLM)?

WorldCC defines CLM as the proactive and methodical management of the contracting process across the lifecycle. Technology is a means to digitise and support that process, not the goal in itself.

Do Incoterms® replace the contract for the sale of goods?

The ICC states that these rules mainly answer three groups of questions: who does what, where and when the risk passes, and which party bears which costs. Incoterms® do not by themselves replace the sale contract.

Since when has the CISG been in force for Vietnam?

Vietnam acceded to the CISG in 2015, and the Convention has been in force for Vietnam since 1 January 2017.

Can an MOU or LOI marked “non-binding” still be binding?

The biggest risk is an accidental binding effect. An LOI may state that it is “non-binding” but also contain clauses designed to take effect immediately, such as confidentiality, exclusivity, access to information, allocation of negotiation costs, governing law and dispute resolution.

How do force majeure and hardship differ?

Force majeure: in nature, an impediment to performance; the focus is the ability to perform. Hardship: in nature, a serious change in the economic balance of the contract; the focus is the burden of performance. Do not automatically treat “hardship under UNIDROIT” as the same as Article 420 of the Civil Code.

Should we choose arbitration or a court to resolve contract disputes?

No option is best for every contract. The choice should be based on the contract value, the location of assets, the country of performance, enforceability, cost, language and the type of dispute expected.

How should the liability cap be set?

The key point is not “the lower the cap, the better”. The cap should be proportionate to: contract value + probability of loss + potential severity + insurance + bargaining position.

Why is automatic renewal a management risk?

A contract expires on 31 December but renews automatically for 12 months unless notice is given 90 days in advance. The date that really matters for management is not 31 December, but 2 October or the corresponding notice date. So a CLM system must track the decision date, not only the expiry date.

About the content. Main sources: UNCITRAL, UNIDROIT, ICC, World Commerce & Contracting and Vietnamese law. Prepared by the FC Legal professional team and reviewed by the FC Legal legal team, FC Legal Law Company Limited, advising businesses on governance, contracts, employment, intellectual property and personal data protection.

Note: this article is research and gives a general management framework. Applying it to a specific contract requires an assessment of the type of transaction, the governing law, the parties’ agreement and the specific circumstances. It reflects the rules in force at the time of publication.

References

  • International legal instruments: United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG), UNCITRAL.
  • International legal instruments: UNIDROIT Principles of International Commercial Contracts 2016.
  • Vietnamese legislation: Civil Code No. 91/2015/QH13.
  • Vietnamese legislation: Commercial Law No. 36/2005/QH11 and its current validity status as recorded in the National Database of Legal Documents.
  • ICC materials: Incoterms® 2020, ICC.
  • ICC materials: ICC Force Majeure and Hardship Clauses 2020.
  • ICC materials: ICC Arbitration Clauses and ICC Arbitration Rules 2026.
  • WorldCC materials: World Commerce & Contracting, Contract Management Standard and Contract Lifecycle Management resources.
  • WorldCC materials: WorldCC, Relational Contracting and Governance Guide.
  • WorldCC materials: WorldCC, AI and the Contract Management Lifecycle.
  • Books and professional references: Tina L. Stark, Drafting Contracts: How and Why Lawyers Do What They Do.
  • Books and professional references: Kenneth A. Adams, A Manual of Style for Contract Drafting.

FC Legal Law Company Limited, Hanoi, Vietnam. This page is general information, not legal advice for any specific situation.

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