TRANSACTION STRUCTURE OF THE CONTRACT (PART III): Delivery & Warranty
DRAFTING BATTLE-TESTED CONTRACTS
CHAPTER 3
TRANSACTION STRUCTURE OF THE CONTRACT
(PART III)
III. DELIVERY TERMS
The delivery terms represent the fundamental obligations of the parties in a contract for the sale of goods. As one of the key clauses forming the transaction structure, drafting a standard delivery clause will help the parties achieve their objectives and avoid related disputes. When drafting a delivery clause, the following should be determined: (i) the core contents; and (ii) the extended contents of this clause.
- Core Contents in Delivery
The core contents are understood as those mandatory elements that must be present, regardless of the transaction value. Accordingly, when drafting, the following questions should be answered in sequence:
– Who has the obligation to deliver the goods?
– When will the delivery take place?
– Where will the goods be delivered?
– Which party will bear the delivery costs?
Delivery Obligation
Delivery is the fundamental obligation of the seller, and receiving the goods is the fundamental obligation of the buyer. This is stipulated by law. Clause 1, Article 34 of the Commercial Law 2005 (amended in 2017, 2019) states: “The seller must deliver the goods and documents as agreed in the contract regarding quantity, quality, packaging method, preservation, and other stipulations in the contract.”
However, the contract is an agreement between the parties, so they can agree on the delivery terms (whether the seller delivers or the buyer comes to the seller’s warehouse to receive the goods).
At this point, it is necessary to link to the pricing clause—whether the agreed price includes delivery to the buyer’s location (the seller has the obligation to deliver) or the price at the seller’s warehouse (the buyer will come to the seller’s warehouse to receive the goods or the seller will deliver, with delivery costs calculated separately).
In the absence of specific agreements, the seller has the obligation to deliver the goods and related documents as stipulated. Thus, whether the parties have an agreement or not, the law still prescribes that delivery is a mandatory obligation for the seller. During contract performance, if the seller does not deliver the goods, the buyer cannot fulfill subsequent commitments such as receiving the goods or making payment. Therefore, delivery is the most fundamental obligation and the first step in contract performance.
When to Deliver
In a sales contract, the element of time is always emphasized and considered important. The production schedule, efficiency, and business profits related to the subject matter of the contract are influenced by whether the seller delivers the goods as agreed. Some companies, to save costs (warehouse storage, inventory of raw materials, inventory of goods), often only maintain a minimum level of raw material and goods inventory, hence goods and raw materials are always being transported frequently. If the seller delivers late, the manufacturer will not receive the necessary raw materials for production, and retailers will also lack goods to sell. The parties can agree on the delivery within a certain period or at a specific time.
The timing of goods delivery and receipt is crucial in the performance of the contract, and it is considered a milestone to determine the subsequent obligations of the parties. The parties can choose a specific time (hour… day…) for the seller to deliver the goods. However, the movement of transportation means is often affected by many objective factors such as traffic congestion, vehicle breakdowns, weather, etc.
This will affect travel time and delivery schedule. Therefore, specifying the exact time for receiving goods is not encouraged in the contract because it may cause damage to the seller. In this situation, the parties should choose a delivery period, which will be more appropriate and facilitate the proper performance of the contract by both parties.
The delivery period is a specifically determined timeframe during which the seller is entitled to deliver the goods at any time without being considered in breach of contract, and the buyer is obligated to accept the goods.
For example, the parties may agree on the delivery period using the following methods:
(i) “The Seller shall deliver the goods within the period from April 3, 2023, to April 7, 2023.” Thus, within this period, the Seller may deliver the goods on any day and must notify the Buyer in advance.
(ii) “The Seller shall deliver the goods within 10 days from the date of contract signing or from the date of payment by the Buyer…”
Additionally, the parties may agree on multiple deliveries at different times depending on the type of goods. For instance, if the parties enter into a contract for the purchase of building materials for house construction, the Seller will deliver goods based on the construction progress as required by the Buyer.
In practice, there are cases where the Seller delivers goods not in accordance with the agreement, either late or early. The contract drafter should anticipate this situation to limit disputes. If there is no agreement, the parties shall apply legal provisions.
– If the Seller delivers the goods before the agreed time, the Buyer has the right to accept or reject the goods, unless otherwise agreed by the parties. If the Buyer accepts the goods, the Seller shall bear the storage costs until the agreed time or delivery date, as the ownership of the goods still belongs to the Seller and has not been transferred to the Buyer. If the Buyer does not accept the goods, the Seller shall retain the goods and deliver them to the Buyer on the agreed delivery date.
– If the Seller delivers the goods late, such late delivery may be considered a serious breach of the Seller’s contractual obligations. The Buyer should have the right to choose between remedies clearly stated in the contract: either accept the goods, impose contract penalties, and claim damages as in the case of non-performance; or reject the goods, impose penalties for delayed performance, and claim damages.
An often overlooked aspect when drafting contracts is the “minimum acceptance period for the Buyer.” If the Seller complies with the delivery period, a provision should also be made for the Buyer’s acceptance period, as a delayed acceptance by the Buyer could affect the quality of the goods (e.g., perishable goods) or increase costs for the Seller (e.g., rental costs for vehicles or storage).
The receipt of goods must take place within the agreed period to maximize business efficiency and minimize costs. Typically, the receipt period is calculated from the time the Seller is present at the delivery location, unless otherwise agreed by the parties. Moreover, the contract should stipulate penalties and damages in cases where the Buyer violates the receipt period, such as:
– Receiving goods later than the agreed receipt period;
– Being more than […] hours late from the delivery time without receiving the goods.
When the Seller has fulfilled the obligation to deliver goods at the correct time and place, the Buyer must receive them. If the Buyer fails to receive the goods at that time, the Seller must take necessary measures to preserve the goods and has the right to request reasonable expenses from the Buyer. If necessary, the contract may stipulate that late receipt by the Buyer constitutes a breach of contract, and if it causes damage to the Seller, the Buyer is fully liable.
Delivery Location
Answering the question of where to deliver means determining the delivery location where the delivery and receipt of goods will take place. This is an important issue as it relates to transportation costs and risk responsibility during transportation. The parties should clearly agree on the specific location for delivery and receipt of goods, and specifically record it as follows: “The Seller delivers the goods at [*] house number, [*] street, [*] ward, [*] district, [*] province.” If delivery is at a warehouse or port, the specific address of the warehouse or port should also be clearly stated.
The time and place of delivery are crucial for facilitating the delivery of goods, providing a basis for determining whether a party has fulfilled the obligation to deliver and receive goods, and for determining each party’s responsibility if this clause is violated.
Delivery Costs
Shipping costs in sales transactions are significant as they impact the business’s profitability. These costs are understood to be the transportation expenses of moving goods from the Seller’s warehouse to the Buyer’s warehouse. In the price agreement section, the parties should specify whether the price includes these shipping costs or not. If not mentioned in the price section, the parties should clearly state which party will bear the delivery costs.
In addition to shipping costs, the delivery and receipt of goods also entail unloading costs. This activity involves the Buyer receiving goods from the transportation vehicle or from the Seller’s transit warehouse. Unloading incurs expenses similar to delivery, such as labor costs for handling goods, machinery, and equipment. For certain special goods (such as frozen goods, heavy or bulky items), specialized machinery is required for unloading, resulting in additional costs for hiring specialized service providers. Typically, unloading costs are borne by the Buyer.
Even for domestic sales, the parties can refer to international trade practices that are applicable. For example, under CIF terms in Incoterm (Cost, Insurance & Freight as per Incoterm 2020):
– The Seller must deliver the goods on board a vessel or procure the goods for delivery on board. The risk of loss or damage to the goods transfers when the goods pass the ship’s rail at the designated port of shipment. The Seller must contract for and pay the necessary costs, insurance, and freight to bring the goods to the named port of destination.
– In cases with multiple carriers involved: If no specific agreement is in place, the default location where the risk for the goods is transferred is when the goods pass the ship’s rail to the first carrier.
– Unloading costs at the destination port: If the carriage contract signed by the Seller includes unloading costs at the destination port, the Seller must pay these costs unless there is a prior agreement for the Buyer to reimburse the Seller.
- Expanded Delivery Contents
Depending on the characteristics of each type of goods, the parties may also agree on additional terms when delivering and receiving goods, such as:
– Accompanying documents;
– Delivery instructions;
– Advance notice of delivery;
– Goods inspection;
– Issues related to receiving goods.
a) Accompanying Documents
When delivering goods to the recipient, the goods being transported from the Seller to the Buyer must be accompanied by documents related to the goods. These documents contain necessary information about the goods (quantity, quality, type, characteristics…). The presence of accompanying documents is necessary because:
– It is a legal obligation. The Seller is obliged to deliver goods and documents as agreed in the contract regarding quantity, quality, packaging, preservation, and other contractual regulations. Additionally, goods transported without legal invoices and documents may be subject to administrative penalties for invoice violations, and the taxpayer may also be penalized for tax evasion.
– It serves as a basis for verifying transportation activities (if the parties have hired a transport service), verifying order information, and the responsibilities of the parties. In case of incidents with the goods, the documents can help the sender protect their rights and the transporter is responsible for resolving the incident satisfactorily for the customer.
Accompanying documents are the basis for the Buyer to receive the goods, verify the purchased goods, and conduct inspections. At this point, the contract clauses regarding the subject matter can be linked with the clause on delivery documents. Accordingly, it should specify what documents are needed to confirm the agreed-upon elements described in the subject matter, and whether the documents should be originals or copies, and the number of copies required. Typically, the set of delivery documents will include one of the following:
– Certificate of Origin (CO): Issued by the competent authority of the exporting country for goods produced in that country. The CO must comply with the regulations of both the exporting and importing countries according to the rules of origin.
– Certificate of Quality (CQ): This serves as a basis to measure whether the actual delivered goods meet the requirements set forth in the contract.
– Warehouse Release Note.
– Value Added Tax Invoice: This document serves as the basis for the payment process. It includes all necessary information about the goods, their value, conditions, and methods of payment.
Additionally, the parties should be aware of the regulations on invoices and documents for imported goods circulating in the domestic market: For goods directly imported by the production or business entity when displayed for sale at stores or kept in warehouses, there must be a Warehouse Release Note cum Internal Transport Document (in case the store is a dependent accounting unit within the same province or city), a Warehouse Release Note cum Internal Transport Document or an Invoice (in case the store is an independent accounting unit or not located in the same area as the headquarters), and a Warehouse Receipt (in case the goods are stored in a warehouse).
b) Delivery Instructions
Certain types of goods have specific requirements for packaging, transportation, or storage. Therefore, the Seller must also provide delivery instructions to the Buyer or the transporter. Additional guidelines may include the following:
Preservation and Transportation Instructions: For certain special goods, such as seafood, factors like packaging, temperature conditions, and short transportation times are crucial to ensure the seafood remains fresh upon arrival to the Buyer. The Seller must provide proper transportation instructions. Depending on the type of seafood, different packaging standards apply. The Seller must advise on appropriate storage temperatures, how to use temperature-stabilizing materials throughout the journey, and suitable transportation times. Additionally, the transport vehicle must be a refrigerated container truck equipped with a refrigeration and ventilation system to maintain the required temperature for each type of product.
Packaging Instructions: Each type of goods has its specific packaging requirements. For example, items that must not come into contact with water or moisture should be packed in plastic bags to ensure safety. Fragile items (thin plastic, glass, crystal, porcelain, ceramics…) should be packed using double boxes, with a layer of foam around the smaller box. If the shipping box is not full, use bubble wrap, newspapers, or foam to fill the gaps to avoid impact and damage during transportation. Additional packaging methods based on the type of goods include:
– PE Film Wrapping: Can be done manually or with a machine, but must be securely wrapped (if on a pallet, ensure the PE film is wrapped around the pallet).
– Cardboard Box Packaging: Typically used for lightweight, non-bulky items. Based on the size of the goods, the Seller will choose a suitably sized cardboard box. For heavy goods, ensure the box is robust to avoid tearing or bursting during loading and unloading, which could affect the goods inside.
– Foam Box Packaging: Usually for fragile items, food, fruits… Choose an appropriately sized foam box for packaging; for ventilation, make a few small holes around the foam box to prevent damage due to lack of oxygen.
– Pallet Packaging: Often used for heavy, large-sized goods or lightweight but numerous items that are prone to loss. Stack and secure the goods on the pallet for easier management, preservation, and transportation. Pallets come in various sizes, so choose a pallet size based on the dimensions of the goods. Specify the material of the pallet, such as metal, plastic, or wood (for long-distance or international transport, avoid wooden pallets due to potential mold issues and the need for disinfection before transport).
Furthermore, the packaging method depends on the transportation route, mode of transport, and transport vehicle. The Seller must provide appropriate instructions to the Buyer for the transportation process.
c) Advance Notice of Delivery
Advance notice of delivery is not a mandatory provision in a contract. If the delivery schedule is specified (e.g., October 5, 20xx), notice may not be necessary. However, if the delivery period is agreed upon (e.g., within 2 weeks from the contract signing date), it is advisable to include advance notice provisions. For bulky goods, preparation of storage space may be needed; for machinery requiring installation, notice should be stipulated in the contract. In some cases, lack of clear advance notice can disrupt the Buyer’s purchasing and receiving process. Advance notice allows the Buyer to prepare for receipt, including:
– Preparing storage space to ensure enough area and space for the goods.
– For special goods, ensuring suitable storage conditions (e.g., humidity, light, air quality) or arranging for the necessary conditions for receiving complex technical machinery in a reasonable time frame.
– Arranging suitable manpower for unloading activities.
Form of Notification: For large, high-value, or complex delivery contracts, clear notification provisions in the form of templates or written documents are typically included. For smaller contracts, the Seller may use other forms of notification such as email, phone calls, text messages, or notification software to inform the Buyer.
Content of Advance Notice: Include the time and place of delivery, and may include conditions for receiving the goods.
Example 1: When the Seller needs to deliver goods to the Buyer (a paint distributor with paint mixing machines), the Seller may notify the Buyer in advance with the following details to facilitate the delivery and receipt process:
– Delivery time, quantity of goods, and delivery location;
– The Seller is responsible for providing technical guidance and operational knowledge to the Buyer. Therefore, the Buyer must have a technical staff member present for the Seller’s instructions.
– Conditions the Buyer needs to prepare for receiving the goods:
+ Forklift (paint mixing machines and mixers are very heavy and require a forklift for support).
+ A flat, sheltered area (preferably indoors) with necessary infrastructure to install the “machine,” maintaining an ambient temperature of approximately 25°C, and providing a power supply of 220V-10A for the color mixing machine and 220V-16A for the shaking and mixing machine.
Thus, advance notice of delivery benefits both parties. Through notification, important issues related to the delivery and receipt of goods, such as time and location, will be addressed.
Expanding further, besides advance delivery notices, there are other frequent communications between the two parties, such as price adjustment notifications, order notifications, and debt notifications. These notifications also require agreements to ensure they are issued and received by the authorized persons.
Certainly, here is the translation in professional English used by American attorneys:
Example 2: Notification Clause
Article 10: Notifications
10.1. All notifications, approvals, requests, orders, and other communications (collectively referred to as “Notifications”) must be in writing, signed by an authorized representative, or sent by the respective representatives of the parties, delivered or sent by registered mail, fax, Zalo, or email to the following addresses:
For the Buyer:
– Orders via Zalo/phone: [*] or Email: abc@gmail.com
– Debt reconciliation with accounting department: Zalo/phone [*], Email: acc.123@gmail.com
– Information for mail/notifications sent to the address: No. [*], [*] Street, [*] Ward, [*] District, [*] City. Recipient: Nguyen Van A – Phone number [*]
For the Seller:
– Order receipt: Zalo/Phone: [*] Email: [*]
– Debt reconciliation: Zalo/Phone: [*] Email: [*]
– Information for mail/notifications sent to the address: No. [*], [*] Street, [*] Ward, [*] District, [*] City. Recipient: Tran Thi B – Phone number [*]
10.2. Any notification provided under this Article 10 will be considered sent and received by the recipient:
- In the case of delivery by courier or registered mail; or
- Sent via Zalo/email/representative address of the parties.
10.3. Either party may change its address for receiving notifications at any time by notifying the other party in accordance with the provisions of this contract.
d) Goods Inspection
Inspecting goods before delivery is crucial for the Seller to prevent errors and increase the effectiveness of contract performance. However, this obligation is not only on the Seller but also the right of the Buyer. Here, we will discuss the inspection of goods by the Buyer upon receipt.
Inspecting goods allows the Buyer to review the quality, quantity, and specifications of the goods as described in the contract. If defects or discrepancies are found, the Buyer has the right to return the goods, suspend payment, and request the Seller to provide goods of the correct quality. Inspection also helps to identify defects, thereby avoiding disputes over the quality of goods after they have been transferred to the Buyer. This process also helps save handling, transportation costs, and time for both parties.
The Buyer can inspect goods at two stages:
Before Delivery: The parties may agree that the Buyer or the Buyer’s representative will inspect the goods before delivery. The Seller must ensure that the Buyer or the Buyer’s representative has the conditions to perform the inspection, and the Buyer must conduct the inspection in the shortest time possible given the actual circumstances.
– Example: Company A signs a contract to purchase 10 tons of coffee from Company B. Company A may inspect the quality of the 10 tons of coffee at Company B’s premises if Company B agrees. This allows Company A to have a more accurate assessment of the quality and quantity of the batch of goods.
At the Delivery Location: The stage and method of inspection depend on the type of defects in the goods. Generally, defects can be classified into two categories:
– Visible defects detectable through normal inspection.
– Defects not detectable through ordinary means, such as technical standards; defects only identifiable when the goods are put into use or production.
If the defects are visible through normal inspection but the Buyer does not conduct the inspection, the Buyer will be deemed to have waived the right to complain. For example, if a Buyer purchases a television and does not inspect it upon receipt, later discovering screen scratches, they cannot request a return. Thus, the Buyer has waived the right to complain from the moment of receipt without inspection.
For defects only detectable during operation or use (e.g., poor sound quality, unclear images in a television) or in some production lines or machinery where quality can only be assessed during use, the Seller remains responsible to the Buyer even after receipt. Clause 5, Article 44 of the 2005 Commercial Law (amended in 2017, 2019) stipulates: “The Seller shall be liable for defects in the goods that the Buyer or the Buyer’s representative has inspected if the defects could not be detected through normal inspection methods and the Seller knew or should have known about these defects but did not inform the Buyer.”
Goods Inspection Methods: The Buyer will relate the inspection clause to the description of the goods to verify if the received goods match the agreed terms in the contract. Depending on the type of goods, different inspection methods are applied, such as:
– Full Inspection: At the time of receipt, the recipient’s representative inspects all products purchased according to the contract. This method is applicable for orders with small quantities or technical machinery. The Buyer may also inspect all goods if there are doubts about the quality or inconsistency in the goods.
– Representative (Random) Inspection: For large orders, the Buyer randomly selects representative items or boxes from each truckload for inspection. This method is commonly used for large quantities of goods with consistent quality.
– Sensory Inspection: Using the inspector’s senses and some necessary tools or simple devices to inspect the goods. This method is commonly used for agricultural products, food, etc. For example, to inspect rice, the inspector can randomly sample from bags in the trucks using a sampling probe.
– Laboratory Testing: Conducted in a laboratory with specialized equipment to determine physical, chemical, electrical, or mechanical properties, or the composition and ratio of elements in the goods. This method relies on technical standards and machinery measurements. For example, testing the quality of paint, cement, additives, and construction chemicals.
– Trial Run: Also known as the trial use method. The goods are put into use, operation, or production under the conditions specified by the Seller to determine quality indicators. This method is typically applied to technical machinery and production lines.
The law does not prohibit the Buyer and Seller from agreeing on a period for quality inspection after receipt. If defects are only detectable during use or operation, the parties can agree: “When the goods are delivered, a delivery receipt is signed by both parties, but the Buyer’s signature on the receipt does not imply acceptance of the goods’ quality. The Buyer has [*] days from the date of signing the delivery receipt to file quality complaints (if any).” For large quantity purchases, where only quantity can be checked upon receipt, signing the delivery receipt only confirms the delivery date and quantity, not the quality of the goods.
Additionally, some types of goods can be stored by the Buyer without immediate use, which does not exclude the Seller’s responsibility, as the Buyer retains the right to complain. Article 318 of the 2005 Commercial Law (amended in 2017 and 2019) stipulates the time limits for complaints as follows:
Except as provided in point e, clause 1, Article 237 of this Law, the time limit for complaints is as agreed by the parties. If there is no agreement, the time limit for complaints is as follows:
- Three months from the date of delivery for complaints about the quantity of goods;
- Six months from the date of delivery for complaints about the quality of goods; in the case of goods with a warranty, the time limit for complaints is three months from the expiration of the warranty period;
- Nine months from the date the breaching party must fulfill its contractual obligations or from the expiration of the warranty period, whichever is later, for complaints about other violations.
Note: For some complex, high-value machinery goods, additional terms should be agreed upon for delivery and receipt, such as:
– The Seller must provide the Buyer with guidelines on the conditions for receiving the goods (e.g., the Buyer must prepare necessary conditions such as ground space, machine supports, support equipment, and vehicles to receive the goods);
– The Seller must inspect the conditions prepared by the Buyer to ensure they meet the Seller’s standards;
– Machinery is a special type of goods, unlike other goods where obligations can be fulfilled upon delivery and receipt. Operation instructions are still necessary. Therefore, the parties should agree on the duration for the Seller to guide the Buyer on how to operate the machinery, including the accompanying documents. Are these operation instructions free of charge? A critical point to note when purchasing machinery is the difficulty in inspecting its quality. Therefore, a “trial run” is necessary to inspect, test, and only sign the receipt if the machinery passes the test.
- e) Receipt of Goods
Authorized Representative for Receiving Goods: Alongside the Seller’s obligation to deliver goods is the Buyer’s obligation to receive them. The Buyer must receive the goods as agreed and perform reasonable tasks to assist the Seller in delivering the goods. Reasonable tasks include arranging storage space, designating a person to receive the goods, and providing specific information about these issues to the Seller before delivery. Failure by the Seller to deliver or by the Buyer to receive the goods may constitute a breach of contract and result in penalties (if applicable).
Identifying the Authorized Recipient: This is a crucial clause and must refer to individuals pre-agreed in the contract (or in purchase orders). Incorrect delivery to an unauthorized person can lead to disputes regarding the quantity, condition of goods, and affect payment. In drafting the contract, the parties may specify related individuals, such as:
– Recipient information: Nguyen Van A, ID No. [*], issuance date and place; position; phone number; email…
– Delivery address: No. [*], [*] Street, [*] Ward, [*] District, [*] City.
Delivery and Receipt Record or Signed Confirmation: An important note in the clause is that the parties should have a delivery and receipt record after each delivery, signed by the authorized representatives of both parties. The delivery and receipt record should include the following basic information:
– Delivery location.
– Delivery time.
– Quantity and quality of goods.
– Representatives of both parties for delivery and receipt.
– Method of sampling the delivered goods (if any).
– Signatures of both parties.
Although not the most critical accounting document, the delivery and receipt record is an essential part of the payment request file. It serves as important evidence that the Seller has delivered the goods or assets and the Buyer has received them fully and on time as agreed. The delivery and receipt record should be prepared in two copies for both parties to keep.
Nature of the Delivery and Receipt Record: It confirms that one party has delivered and the other party has received the goods according to the contract. This does not mean the Buyer accepts the quality of the goods. To avoid unnecessary disputes, all participants in the delivery-receipt process should acknowledge that the delivery and receipt record is a crucial document, even for goods of small value.
Return of Goods and Compensation for Damages: This is an important issue to consider when agreeing on delivery terms. Confirming whether goods conform to the contract in terms of the subject matter and quality is crucial when the Seller breaches the delivery obligation. If the Seller delivers non-conforming goods, the Buyer has the right to reject them. The return of goods usually arises when the Seller breaches the delivery obligation. Depending on the characteristics of each type of goods, the parties will have different agreements on the return of goods. Generally, the time when the Buyer requests a return is when the Buyer discovers defects in the goods.
For goods with defects that the Buyer can detect immediately upon receipt, and if the Buyer creates a delivery and receipt record confirming the non-conforming goods, the Buyer may return the goods.
However, for goods that the Buyer cannot inspect for quality upon receipt (e.g., electronic devices, machinery, construction chemicals), if the inspection later reveals non-conforming goods, the Buyer must notify the Seller within a specified time frame. The complaint period is stipulated in Article 318 of the 2005 Commercial Law (amended in 2017 and 2019) as follows:
- Three months from the date of delivery for complaints about the quantity of goods;
- Six months from the date of delivery for complaints about the quality of goods; for goods with a warranty, the complaint period is three months from the expiration of the warranty period;
- Nine months from the date the breaching party must fulfill its contractual obligations, or from the expiration of the warranty period for other violations.
During the complaint period mentioned above, the Seller is liable for any defects in the goods that existed before the risk passed to the Buyer, even if such defects are discovered after the risk has passed.
If the Buyer does not notify the Seller but still receives the goods, the Seller will not be liable for any defects in the goods. Therefore, in some cases, even if the quality and quantity of the goods do not conform to the contract, the Seller will not be responsible for the defects in the delivered goods.
Seller’s liability for non-conforming delivery should be stipulated in the contract, or remedies may be based on the provisions of the Commercial Law as follows:
Remedy by the Seller: If the contract only specifies the delivery period without an exact delivery date, and the Seller delivers before the end of the delivery period but delivers incomplete or non-conforming goods, the Seller can still deliver the missing goods or replace non-conforming goods within the remaining delivery period. If the Seller causes inconvenience or incurs unreasonable costs for the Buyer during this process, the Buyer has the right to require the Seller to remedy the inconvenience or bear those costs.
Return of Goods by the Buyer: If the contract allows the Buyer to reject non-conforming goods, the Buyer should document the return of goods to the Seller and address the Seller’s responsibility for any costs incurred in the return process.
Suspension of Payment by the Buyer: This is a crucial aspect for the Buyer to protect their interests when the Seller breaches the contract. The Buyer can agree to suspend payment until the Seller remedies the non-conformance.
Compensation for Damages by the Seller (if any): Typically, contract penalty provisions are drafted separately, but in delivery and receipt terms, lawyers may integrate compensation for damages. To agree on compensation, the injured party must have suffered actual damages and must prove the losses, the extent of the damages caused by the breach, and the direct benefits the injured party would have received if there had been no breach.
IV. Warranty of Goods
A goods warranty is a written assurance from the Seller to the Buyer (consumer) to repair or replace the product if it meets the conditions promised. For the Seller, this can be considered a post-sale service to enhance customer satisfaction in the sales process. However, not all products can be warranted, so it is necessary to clearly agree on warranty-related issues in the contract, such as:
– The type of goods covered by the warranty.
– The defects that will be covered under the warranty.
– The warranty period.
– When the warranty obligation arises.
Example: Warranty Clause of [*] Vietnam:
Warranty Registration: To enjoy full warranty benefits, customers must register their warranty within 14 days of purchasing the machine through one of the following methods:
– Online registration on the website: www…com.vn.
– Call the toll-free hotline […] (toll-free for the caller).
Products under warranty: Refrigerators, washing machines, air conditioners, and small household appliances (hereinafter referred to as “new products”) bearing the [*] brand and sold at [*] Vietnam-authorized dealers or other dealers.
Warranty Location: Refrigerators, washing machines, and air conditioners are warranted at the centers authorized by [*] Vietnam, or at the customer’s home within 50km from the center of the province or centrally-governed city.
Warranty Period: Registering the warranty correctly ensures the full warranty period and benefits for the new product. The warranty period is calculated from the date of purchase:
– Refrigerators, washing machines, air conditioners: 24 months;
– Small household appliances: 12 months…
Warranty Forms and Conditions: Free repair or replacement of parts and components if the customer meets the conditions; exchanging for a similar new product for the customer;…
Non-warranty Cases:
– The product is no longer within the warranty period.
– The product is not used for the intended purpose, function, or in accordance with the manufacturer’s instructions.
– The product is used for business purposes or exceeds the manufacturer’s design limits.
– The housing and accessories of the warranted product are not covered by the warranty.
– The product is damaged due to external factors such as natural disasters, floods, lightning, fire, accidents, misuse, improper power supply, cracks, or impacts due to transportation, or poor storage.
– The product shows signs of prior repair at locations not authorized by [*] Vietnam.
– Damage due to incorrect installation and use not meeting the technical standards and safety regulations of the product.
SUMMARY OF CHAPTER 3
The structure of the transaction is the “dynamic” part of the contract and is characteristic of the transaction, including the following basic terms:
- Contract Subject: The contract subject must be described in detail and accurately. There are two ways to describe it: directly describing the type of goods; or listing the type of goods with detailed information included in an annex.
– Criteria for describing goods: Describe physical characteristics; chemical and biological characteristics; combine physical and chemical-biological characteristics; describe technical characteristics; combine with samples or images; describe using national or industry technical standards.
– Pay attention to the name of the goods, origin/quality certification, weight, and packaging.
- Price and Payment:
– When drafting the price clause, consider the following issues: Factors that may affect the price of goods? How to record the price (fixed price, mixed price); costs affecting the price.
– For the payment clause, consider the following details: Amount to be paid; specify who pays whom; calculate any amount that can be determined before signing, instead of including a mathematical formula; when to make the payment; the method of payment; if payment is based on a formula, state the exact formula.
- Delivery Clause:
– When drafting, clarify the following questions: Who is responsible for delivering the goods? When to deliver? Where to deliver? Who bears the delivery costs?
– Additionally, consider the expanded terms related to delivery such as: Accompanying documents; delivery instructions; advance delivery notice; goods inspection; issues related to receipt; considerations for returning goods and compensation; goods warranty.
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- Email: info@ntpartnerlawfirm.com – luatsu.toannguyen@gmail.com
- Phone: 090 252 4567
- Address: B23 Nam Long Residential Area, Phu Thuan Ward, District 7, Ho Chi Minh City, Vietnam