Conflicts Regarding the Effective Time of International Sales Contracts


make a legal agreement, in accordance with the provisions of the law. However, when a dispute arises, in many cases, determining whether the contract is valid or not is very difficult because the laws of each country have different provisions on quantitative and qualitative factors related to the conditions for the validity of the contract. In general, all countries stipulate the most basic conditions to determine the validity of the contract: the condition that the subject of the international commercial contract is legal and has full capacity to sign; the condition that the content of the contract is legal, not contrary to morality or public order; the condition that the parties to the contract voluntarily agree to the contract; the condition that the form of the contract is not contrary to the provisions of the law.

First of all, to determine the legal capacity of the contracting parties, the laws of each country often rely on personal law (including nationality law or residence law); countries with a written legal system (France, Germany, Austria, Belgium, etc.) often apply nationality law. However, countries with an unwritten legal system (England, USA) apply personal law. Only a few countries stipulate the application of the law of the place where the contract is signed or the law chosen by the parties to the contract to determine the legal capacity of the contracting party.

Second, when there is a conflict in the content of the contract, all countries apply the law chosen by the contracting parties and such choice is not contrary to the law of any party to the contract. In case the parties do not choose, the applicable law is the law of the place of signing or the law of the place of performance of the contract or the law of the place where the goods are the subject of the contract or the law of the country with which it has the closest relationship. (Article 4 of the Rome Convention of 1980 on the law applicable to contractual obligations), which means applying the law of the country where the party who must perform the main obligation in the contract at the time of concluding the contract has its headquarters or permanent residence. Although there may be many ways to resolve conflicts of law regarding the applicable law to determine the legality of the international sale and purchase contract, the law chosen by the parties shall be given priority because the nature of the contract is a voluntary agreement, the choice of the applicable law to determine the legality of the contract is also one of the voluntary agreements of the parties and it will be given priority.


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Third, to determine the formal element of a legal contract, most countries prescribe the law of the place where the contract is signed or concluded. However, some countries also apply the law chosen by the parties or apply the law of personal status to determine the legal form of the Contract. The law of the place of performance of the contract is also applied in some Eastern European countries.

If the parties do not specify which law will apply to the contract, the judicial body (national court or arbitration institution) responsible for resolving the case will have to decide the applicable law. Each country has its own rules to guide the choice of law, but one of the following two rules has been used by the international community.

Conflicts Regarding the Effective Time of International Sales Contracts

+ Applicable law is the law of the seller's country specified in the contract.

+ Applicable law is the law of the place where the contract is signed.

In addition, some international conventions or rules also have specific provisions on international transactions such as: United Nations Convention on Contracts for the International Sale of Goods of April 11, 1980, effective in 1988; Uniform Legal Principles (UNIDROIT) of International Commercial Contracts 1994. The above two documents and other similar international documents can be chosen by the parties to regulate the contract and resolve disputes arising in relations related to the contract.

In short, every cross-border transaction raises the issue of applicable law. Applicable law is the law that the contracting parties choose to govern the issues related to the contract or the law that will be applied when the parties do not pre-select a specific law.

1.4.2 Conflicts regarding the effective date of international sales contracts

The determination of the effective time of the contract depends on the type and manner in which the parties express their agreement on the content of the contract. Some countries stipulate that the contract is effective immediately when the parties have reached a legal agreement and clearly agreed on the basic content of the contract (the type of goods purchased and sold and the price of the contract) regardless of whether the agreement is expressed.


in writing or by words or other conduct. Contractual agreements are not valid unless one of the parties clearly shows by his intention or by his clear conduct that he deliberately excludes the legal effect of such agreements.

However, many countries stipulate that a contract is only formed and effective when the agreement of the parties is legal and must meet certain procedural and formal conditions, then the contract is complete and effective.

The determination of the time of validity of a contract depends on the countries' conception of the time when the contract or contractual agreement becomes valid. According to the law of Western countries, the term "contract" is used to refer to a promise to do or not to do something, guaranteed by law by penalties or at least recognized by law. However, the laws of different countries have different provisions on the nature of this promise [20]. For example, in countries following the continental law system (Romano-Germanique), the "consent" view is more prominent, the intention of the parties to enter into a contract is a necessary and sufficient condition to prove the existence of a contractual obligation and is valid from the time the parties clearly agree to that intention by specific actions. Other legal systems require that the promise must be completed by a subsequent procedure, which can be the signing of an official document, or the giving of something. Some other legal systems require an economic exchange to clarify and reinforce the promise (in English law called “consideration”) before the contract becomes valid.

1.5 Importance of contract validity and legal consequences of international sales contracts

1.5.1 Importance of the validity of the International Sales Contract

First of all, we can affirm that the validity of the international sales contract reflects the freedom to enter into a contract and recognizes the legal agreement of the parties. A valid contract also means that the parties themselves have prevented fraud and abuse of power; any fraud or coercion regarding an agreement in the contract will not be legally effective. Sales contracts with fraudulent elements also destroy people's trust in the market and the legal system.


Furthermore, the parties themselves decide whether or not a contract exists to achieve their original purpose. Within the scope of an economy, business entities can only conduct their commercial activities abroad through commitments and international contracts for the purchase and sale of goods. An effective international contract for the purchase and sale of goods creates rights and obligations to transfer goods and make payments between the parties. Thus, through this contract, business entities can expand and implement their international business plans, bringing in more profits than when only doing business domestically. Within a country, the activities of that business entity contribute to the basis and driving force for the development of a country's foreign economy to integrate with the world economy.

Second, international contracts can exist in many different forms and are recognized and protected by law. The diversity in forms and methods of signing contracts has reduced transaction costs for the parties themselves and contributed to promoting commercial exchanges. If the cost of performing transactions is high, the parties will miss out on beneficial opportunities. Therefore, the procedures necessary to establish a valid contract, such as notary certification procedures in some legal systems, and mandatory written contract signing procedures have been limited in the legal systems of many countries. Moreover, by freely agreeing on contracts, the parties also limit themselves to the effective terms that the law must recognize. For example, the parties are still free to change the provisions prescribed by law as long as they are not contrary to the law, thereby significantly simplifying the process of signing a contract agreement.

1.5.2 Determining the effective date of the contract allows determining the time when the legal value of the rights and obligations of the parties begins to be binding.

The parties have no right to withdraw their commitments when the contract officially comes into effect, except in cases where the commitment can be changed by other agreements. From the time the contract comes into effect, the contract becomes important evidence to determine the law applicable to that contract and it is also the basis for starting to calculate the statute of limitations to file a lawsuit in court to request the contract to be declared invalid.


1.5.3 An invalid contract does not give rise to rights and obligations of the parties.

An invalid international contract is essentially a contract that is not recognized by law due to illegality during the signing process or the contents of the agreement between the parties being illegal, violating the prohibitions of the law. The consequences of invalidity directly affect the subjects participating in the transaction and society. When determining that a contract is invalid, the contract has no legal value at the time of signing, therefore, it does not give rise to the rights and obligations of the parties.

Ford, one of the world's largest car manufacturers, besides thousands of car sales contracts every day, also participates in many other business transactions such as investment, distribution, purchase of raw materials... John Mene, Ford's legal advisor [27] said: " On average, every day, our directors and department heads have to sign nearly 3,000 different contracts. And just one contract with errors is enough for us to lose millions of dollars. Therefore, the process of drafting and signing contracts is always carried out very closely, with many signatures of employees participating in the drafting of the contract" . Each contract will be the basis for creating related elements, thereby establishing business relationships between partners such as human resources, customers, contractors, costs, rights and responsibilities... and at the same time, it is the basis for legal protection.

In fact, there have been many cases where parties have signed contracts with each other and are in the process of implementing the contract, but then when a small dispute occurs, one of the two partners takes advantage of the lack of strictness in the contract to gain personal benefits. For example, if a partner signs a business contract with someone who does not have a business registration certificate and a dispute arises during the implementation of the business contract, and after the dispute arises, the other party agrees to complete the procedures within a certain period of time but that person still cannot complete the legal procedures to perform the agreed part of the contract, then one party can request to cancel the contract, declaring the content related to the goods invalid because the goods are not registered for business according to the provisions of law. At this time, even if that person is doing business legally, in this case there is still no basis to


require the business partner to fulfill the signed obligations of paying for the goods. Both parties will return to the original situation. Economic losses for both parties, but the person without a business registration when supplying goods will suffer much more. Thus, understanding the law of contracts will help the parties avoid or minimize disputes and losses that may arise when entering into a contract.

In many other cases, the rights and obligations of the parties are completely invalid because the subject of the contract is illegal or does not exist in reality from the beginning... (the contract is completely invalid). However, determining whether the contract is completely or partially invalid is also important because in cases where the contract includes many different provisions, not in all cases an invalid provision invalidates all other contents of the contract, but there are cases where a non-basic provision of the contract is invalid, the other contents are still legally binding on the parties, and the original purpose of the parties signing the contract is still achieved.

1.5.4 An invalid international contract for the sale of goods causes material and spiritual damage to the parties due to the need to restore the original state and return to each other what has been received.

In case the contract has not been performed, the parties must stop performing the contract. However, in most cases, the contract is in the process of being performed and one of the parties discovers that the contract is invalid and affects their rights or the rights of a third party. In that case, the parties must cancel the contract and return it to each other in the original condition before signing. The consequences of this handling are extremely difficult for the parties because the contract has been performed, the property is no longer intact, the money has lost its value, the investment opportunity has been lost, etc. Therefore, all countries stipulate that if the return cannot be made in kind, it must be paid in cash according to the compensation method equivalent to the price at the time of signing the contract, and at the same time, the party at fault for making the contract invalid must compensate. In case the contract is completely invalid because the goods of the contract are not allowed to circulate/are prohibited from circulation, the parties will also have the goods confiscated by the public.


In summary, the analysis of the role of the validity of international goods sale contracts shows that, for a contract to be valid and legally binding on the parties' obligations, the subjects participating in international goods sale activities need to carefully prepare the terms before signing the contract to ensure that the contract is valid in practice, avoiding possible risks that may cause the contract to be invalid.

1.6 Sources of law governing the validity of international sales contracts

1.6.1. National law

When the parties to a contract agree or the court or arbitrator, when resolving a dispute, chooses to apply the national law of the contracting country or the country where the contract is performed or the country where the goods that are the subject of the contract exist..., national law becomes an important source of law governing international sales contracts.

The national law of each country has legal regulations on the validity or legality of the International Sales Contract. The laws of most countries stipulate that the parties to an International Sales Contract may choose their own law or a foreign law to apply to the contract. The law of the country where the contract is signed or performed is often applied to determine the valid elements of the contract. Traders of a country have the right to choose a national law to regulate the International Sales Contract. When applying the law, the correct specialized law must be chosen and reference must be made to other laws if provided for in that specialized law.

In case the parties do not have an agreement on the applicable law governing the validity of the contract, the provisions of international treaties to which their country has signed or joined may be applied.

The cases where the Court or Arbitration chooses the law are cases where the contract does not specify the applicable law, and there is no separate written agreement between the two parties (the buyer and the seller) on the law applicable to the contract between the two countries involved in the contract or participating in an international treaty stipulating which law applies to the contract. When deciding which country's law to apply to resolve a dispute, the Court or Arbitration usually bases itself on the law of its own country or if the law of the country the Court indicates the law


If the law of the place where the contract was signed is specified, the Court will apply the law of the place where the contract was signed to resolve the dispute.

However, different national laws have different regulations on the choice of foreign law. Some countries allow the choice of any national law without any conditions. Some countries set certain conditions when choosing a foreign national law. For example, the 2005 Civil Code stipulates that foreign law can be applied if the application or consequences of the application are not contrary to Vietnamese law. In some cases, the parties may refer to the law of a third country to determine the validity of the contract, for example, a contract for the sale of goods in a third country.

In China [12], the relationship between the purchase and sale of goods is regulated by the Law on Contracts, while in the UK and the US there are many laws to regulate this relationship; in the UK there are: the Credit Sales Law of 1965; the Delivery Law of 1973; the Sales Law of 1979...; in the US there is the Uniform Commercial Code (UCC); Law on measures to secure the sale of consumer goods... In Vietnam, before the 2005 revised Civil Code, there were many legal documents regulating the sale and purchase of goods, including regulations on the conditions for the validity of civil contracts, economic contracts and invalid contracts such as the 1995 Civil Code, the Economic Contract Ordinance dated September 25, 1989, the 1997 Vietnam Commercial Law, Decree No. 57/1998/ND-CP detailing the implementation of the Commercial Law on import-export, processing and agency activities for the purchase and sale of goods with foreign countries, and documents guiding the implementation of that Code and Law. However, the provisions on the validity of the contract in those documents are still incomplete and inconsistent because there is no original law on contracts and there is still a distinction between economic contracts and civil contracts (commercial or civil elements in the contract are still controversial), there is no consensus on the definition of foreign elements, the status of the subject of the contract with foreign traders. The 2005 revised Vietnamese Civil Code, the 2005 Commercial Law and the implementing documents such as Decree No.

12/2006/ND-CP dated January 23, 2006 of the Government detailing the implementation of the Commercial Law on international goods trading activities and activities of agents purchasing, processing and transiting goods with foreign countries, Circular of the Ministry of Trade

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