CONTRACT GENERAL PROVISIONS 2025

CONTRACT GENERAL PROVISIONS (PART I)

DRAFTING BATTLE-TESTED CONTRACTS

CHAPTER 6

GENERAL PROVISIONS

(PART I)

General provisions usually appear at the end of a contract. These provisions may include the following:

– Notices

– Confidentiality

– Allocation of Risk

– Dispute Resolution

– Other Provisions

I. NOTICES

After negotiating and drafting, signing the contract, during the performance of the contract, the parties will have information, documents, and notices sent and exchanged with each other. The general requirement for these notices is brevity, clarity, and that they are sent to the correct authorized recipient (e.g., delivery notices should be sent to the warehouse manager or the authorized representative receiving the goods; debt and payment notices should be sent to the representative of the accounting department…).

Additionally, it is crucial to confirm that the parties have received each other’s notices to ensure that they fulfill their obligations correctly (e.g., the parties agree to payment upon receipt of goods, so delivery-receipt notices are essential to determine the payment due date). On the other hand, having clear regulations on notices helps the parties reduce the risk of information leakage or prevent the occurrence of inconsistent information. A notice should fully include the basic contents such as: form of notice, recipient, and when the notice is considered received.

Typically, parties will send notices in the following cases:

– Amendment and supplementation of the contract: During the performance of the contract, if there are changes or new arising contents, the parties need to notify each other to renegotiate. The parties may sign contract appendices to make adjustments.

– Notices regarding delivery and receipt of goods: When the parties agree on the delivery time, before performing the delivery-receipt, the parties often notify about the time and conditions to prepare for the delivery-receipt…

– Notices of a party’s breach of contract obligations: When a party breaches the contract obligations (e.g., delivering goods in incorrect quantity, quality, late payment…), the non-breaching party will send a notice to the breaching party.

– Notices when a party falls into a circumstance excusing liability for breach of contract: When a party breaches the contract but falls into a circumstance excusing liability (e.g., force majeure events, compliance with decisions of competent state authorities…), according to legal regulations and the spirit of cooperation between the parties, the breaching party must notify the non-breaching party about this situation.

– Notices of suspension, termination, or cancellation of the contract: These are sanctions applied by the parties in case of contract breaches, and before applying them, the remaining party should be notified.

– Notices regarding the contract’s term, extension of the contract, and dispute resolution…

The timing of when a notice is considered received is also an important provision. This is the point in time that will trigger many subsequent obligations. The method of determining when a notice is considered sent depends on the form of communication:

Email or Electronic Data Transmission: Usually, these are notices sent during the performance of the contract, where representatives of different departments can exchange information without the need for a legal representative’s signature. For example, notices about delivery and receipt of goods, debts, payments, electronic invoices, quotes… When sending an email, it must be sent to the correct email address of the authorized recipient, and the contract should specify which email addresses to use for what content.

If notifying by email, a small tip is to use some popular email software to manage emails effectively. For example, using the Outlook email application allows you to check if the recipient has opened the email, if the email has been successfully sent (stored in the sent items), or if the email has not been sent, it will be stored in the junk folder. Alternatively, you can use the HubSpot extension available for free in the Google extension store, which helps track whether the sent Gmail messages have been viewed by the recipient.

Postal or Courier Services: Usually, these are important documents and notices that need to be exchanged and confirmed by the parties, such as: the original contract, contract appendices, debt reconciliation… The notice documents must bear the signature and seal of the authorized person or be accompanied by a power of attorney (for the authorized person), and the recipient’s information must be detailed.

For postal services, it is recommended to choose registered mail and return receipt (so that the recipient signs the receipt, and the postal office sends the receipt back to the sender; or if no one receives the mail, the postal office returns it to the sender). In this case, the sender must provide complete and accurate names and addresses of the sender and recipient and comply with the service conditions to ensure the safety of the mail. Additionally, the sender can track the delivery progress of the mail through the postal service’s website.

Other Communication Channels: Phone calls, text messages, Zalo… Specific phone numbers, Zalo IDs, and representatives should be detailed. This notification channel is often used for quickly exchanging information and immediate confirmation between parties. Contract negotiations and bargaining can be conducted over the phone, after which the parties will formalize these agreements in writing.

Here are some reference examples of notice provisions:

Example 1:

All notices, consents, requests, and other forms of communication (collectively referred to as “Notices”) shall be made in writing, signed by the authorized representative of the respective party, and delivered or sent by registered mail or fax to the following addresses:

– For Party A:

Recipient: …

Address: …

Phone: …

– For Party B:

Recipient: …

Address: …

Phone: …

Any Notice given under this Article [*] shall be deemed to have been sent and received:
In the case of delivery by courier or registered mail, upon sending;
In the case of delivery by fax, upon confirmation of transmission to the recipient.

If the delivery or receipt occurs on a non-business day at the location to which the Notice is sent or after 5:00 PM (local time), the Notice shall be deemed to have been received on the next business day at that location.

Either party may change its address for receiving Notices at any time by providing written notice of such change to the other party in accordance with the provisions of this contract.

All Notices exchanged between the parties under this contract must be made in writing and sent to the other party at the addresses specified above by registered mail, courier, or fax.

If either party designates a representative to manage the performance of the contract, the designating party must notify the other party of the representative’s rights and responsibilities. Any changes in the representative must be communicated in writing to the other party within 7 business days of the change.

Example 2:

(a) Any Notice given under this contract must be made in writing and shall be deemed to have been given when the Notice is delivered by hand or sent by postal mail to the party to whom the Notice is intended to be delivered, at the address specified in this contract or at such other address as the party may notify the other parties in writing.

– To Buyer: COMPANY […]

Address: …

Phone: …

Name of Responsible Person: …

Title: …

– To Seller: COMPANY […]

Address: …

Phone: …

Name of Responsible Person: …

Title: …

(b) All Notices and exchanges of information shall be effective immediately upon receipt by the recipient, either (i) by mail, or (ii) by hand, at the address specified in section (a).

CONFIDENTIALITY

The confidentiality clause in a contract can be understood as the provisions for keeping confidential the information obtained during the formation and execution of the contract. Accordingly, when one party acquires certain types of information from the other party, they are responsible for keeping that information confidential. While a confidentiality clause is not mandatory, it is increasingly emphasized and appears in most contracts. Generally, the parties do not form a separate agreement but include a distinct clause within the contract.

Why is a confidentiality agreement necessary? In practice, when entering into and performing a commercial contract, there is a significant amount of important information that must be disclosed to the partner. This information and data are increasingly valuable commercially and can create a substantial competitive advantage. The main purpose of including confidentiality provisions in a contract is to ensure that important information is not disclosed. The party that breaches the contract by disclosing information will be liable for damages (if any) for failing to maintain confidentiality.

Different industries and fields have different contents for the confidentiality clause. Depending on the type of contract, the drafter needs to design an appropriate confidentiality clause, addressing the following issues:

– The subject and types of information to be kept confidential.

– Who will be responsible for maintaining confidentiality.

– The duration of confidentiality.

– Liability for breach of the confidentiality clause.

– Exclusions from confidentiality obligations.

Confidential Information and Subjects: Confidential subjects in a contract may include: pre-contractual agreements; customer lists, production processes, pricing (profits, commissions, discounts, promotional programs…), types of goods, formulas, compositions, designs… Alternatively, the confidentiality of all information within the contract can be agreed upon. Note that even in the pre-contractual stage, extensive exchanges, agreements, and information provision occur, making it essential to stipulate confidentiality for this stage as well.

Parties Responsible for Confidentiality: In addition to the parties involved in negotiating, signing, and performing the contract, other parties such as employees and staff within the companies may also be included, with clear provisions on the scope of access and use of the information.

Duration of Confidentiality: Specify the duration of confidentiality, either until the contract concludes or for a period of three years after the contract concludes; or confidentiality may be maintained during and after the contract’s termination or expiration.

Liability for Breach of Confidentiality: Sanctions can be stipulated for any party breaching the confidentiality clause, such as compensation for damages or penalties for disclosing information to any third party. This is necessary to mitigate risks for the parties and enhance awareness of confidentiality among customers and partners. Even during negotiations, upon receiving confidential information from the other party, the recipient is obliged to maintain confidentiality and not use it for purposes other than contract formation. If damage is caused, compensation is required.

Exclusions from Confidentiality Obligations: In certain cases prescribed by law or agreed upon, the recipient of information may be excluded from liability and not required to compensate for damages if the information is disclosed to a third party.

Some Examples of Confidentiality Clauses:

Example 1:

Both parties commit to maintaining the confidentiality of all exchanged information, including but not limited to: internal pricing, product sales plans, market research, promotional campaigns, sales data, marketing activities, statistical data reports, and other activities at any time during this contract (hereinafter referred to as “Confidential Information”).

“Confidential Information” has no expiration date, even after the termination of the contract. If, for any reason, one party discloses “Confidential Information” to a third party, the other party has the right to claim full compensation for damages from the breaching party.

Example 2:

Each party must take necessary measures and actions to maintain the confidentiality of Confidential Information.
The parties in this contract and their employees are not permitted to use or disclose Confidential Information for any purpose other than the performance of this contract.
Each party ensures that any third party receiving Confidential Information will not be permitted to disclose such information to any other person and will only process Confidential Information according to the provisions and for the purpose of performing this contract, except when disclosure is required by law or a competent authority.
If any party is required to disclose Confidential Information to authorities as prescribed by law, the required party must send a prior written notice to the other party about such a requirement, unless otherwise requested by the competent authority.
The expiration or termination of this contract does not terminate the confidentiality obligations of the parties regarding Confidential Information.

Example 3:

Article 7. Confidentiality:

7.1. Confidential Information includes all unpublished trade secrets and technical and non-technical information, including but not limited to design drawings, production processes, projects, products, costs, financial data, marketing plans, customer and supplier lists, or business activity plans.

7.2. Each party commits to the other that they will:

– Not use or disclose the Confidential Information of the other party obtained without the prior written consent of the other party;

– Endeavor to prevent the use or disclosure of the other party’s Confidential Information.

7.3. Notwithstanding the above provisions, the parties agree that information will not be considered Confidential Information and the receiving party will not have an obligation to maintain its confidentiality if such information:

– Was already known to the receiving party and disclosed by a third party who has no confidentiality obligation to the disclosing party; or

– Is publicly known without any misconduct by the receiving party or its representatives; or

– Is independently developed by the receiving party without reference to any Confidential Information disclosed hereunder; or

– Is approved for disclosure (and only to the extent approved) by the disclosing party; or

– Is disclosed pursuant to a legitimate request by a court or government agency or as required by law.

III. ALLOCATION OF RISK

When drafting and signing a contract, the parties expect the contract to be performed. However, in practice, unforeseen events may interrupt or change the performance of the contract, resulting in the parties’ responsibilities. Therefore, the parties need to anticipate such situations and include them in the contract to allocate risks. Common situations that hinder contract performance include: Force Majeure and Fundamental Changes in Circumstances during contract performance.

Force Majeure

This clause aims to exclude the liability of a party in case they fail to fulfill their obligations due to a force majeure event. A force majeure event is a legal occurrence beyond the parties’ control that directly affects the performance of the contract. When drafting a force majeure clause, the drafter should consider two issues:

– The method of determining a force majeure event.

– The legal consequences when a force majeure event occurs.

A force majeure event occurs objectively, is unforeseeable, and cannot be remedied despite taking all necessary and possible measures [Clause 1, Article 156, the 2015 Civil Code]. These are events beyond the parties’ control, unpredictable, and unpreventable, causing one party to temporarily or permanently fail to perform their contractual obligations. A force majeure event exempts contractual liability when the following conditions are met:

– Occurs objectively after the parties have entered into the contract: These events occur objectively, meaning they happen independently of the parties’ will, or in other words, the events are not created by the parties or arise from their subjective faults. The timing of the event must be after the parties have entered into the contract. Examples include: war, riots, civil war, fire, earthquakes, tsunamis, droughts, strikes…

– The event is unforeseeable: Events that occur affecting the contract performance, which the parties did not know, anticipate, or predict at the time of signing the contract. When these events happen, one party cannot fulfill their obligations.

– Cannot be remedied despite taking all necessary and possible measures: This condition aligns with the principles of good faith, honesty, and aims to ensure the parties’ contract performance.

In practice, when drafting contracts, besides the events prescribed by law, parties often agree to include additional events considered as force majeure, such as: power outages, computer network failures, general material shortages… Currently, the inclusion of these additional events is not regulated by law, and there are no guidelines on the application of law regarding this issue.

– Is the cause leading to contract breach: The occurrence of a force majeure event does not automatically exempt the breaching party from liability. Non-performance of contractual obligations due to a force majeure event can only be accepted if the event is the direct cause of the contract breach.

A common question regarding force majeure events is: Is the Covid-19 pandemic considered a force majeure event exempting businesses from fulfilling their contractual obligations? The pandemic’s outbreak and rapid spread are objective and unforeseeable events. However, to prove that the pandemic is a force majeure event, the remaining legal elements must be demonstrated, such as “unavoidable,” “despite taking all necessary and possible measures,” and being the direct cause of the contract breach. Thus, only when the above conditions are met can an event be considered force majeure and a basis for exempting the breaching party from liability.

According to the 2005 Law on Commerce (amended in 2017, 2019):

– The breaching party must have the responsibility to notify the other party and clearly state the notification period in the contract.

– The parties may agree to extend the term or refuse to perform the contract in case of force majeure [Article 296 of the 2005 Law on Commerce (amended in 2017, 2019)].

– The breaching party may be exempt from liability if the conditions mentioned above are met, meaning the breaching party will not bear any legal consequences (penalties, compensation for damages…) and must provide evidence of their exemption from liability.

Here are some notes for contract drafters when drafting this clause:

– Clearly define what constitutes a force majeure event: The parties can base the drafting of this clause on legal regulations in the most general way. Additionally, the parties should list as many specific instances considered as force majeure events as possible, depending on the timing and circumstances of the contract performance.

– Include a notification obligation when a force majeure event occurs during the contract performance: When a force majeure event occurs, the breaching party must notify the non-breaching party within a specified period. This ensures good faith cooperation between the parties.

– Agree in advance on the handling plan and responsibilities of the parties when facing a force majeure event: This requires the parties to anticipate and address potential issues when drafting the contract, helping to resolve the consequences of a force majeure event. The parties can agree on sharing damages, terminating the contract in the event of a force majeure, or extending the term of contract obligations.

The method for drafting this clause can combine the definition method and the listing method for force majeure events.

Some sample clauses for reference:

Example 1:

– In the event that one party is unable to perform all or any part of its obligations under this contract due to any force majeure event, the affected party shall be excused from performing such obligations to the extent and for the duration that the force majeure event prevents performance. The affected party shall immediately notify the other party and provide an estimated timeframe for the disruption, and shall use its best efforts to mitigate the consequences. If the force majeure event continues for more than thirty (30) days, the affected party shall have the right to terminate this contract in its entirety by providing written notice to the other party, effective immediately.

– For the purposes of this clause, “force majeure event” means an event beyond the control of the parties, unforeseeable, or if foreseeable, unavoidable, and preventing the performance of all or part of any party’s obligations. This includes, but is not limited to, fires, floods, other natural disasters, acts of war, or acts of hostility of any nature, laws or regulations or actions of government, and competent state authorities.

Example 2:

– The party affected by the force majeure event shall, as soon as it becomes aware, notify the other party in writing of the full particulars and shall use all reasonable efforts to mitigate the damage or loss caused by the force majeure event. The other party shall assist and cooperate with the affected party.

– If the force majeure event lasts for a continuous period exceeding fifteen (15) days, the affected party has the right to terminate the contract immediately by providing written notice to the other party. In this case, neither party shall be liable for any compensation or penalties to the other party. However:

+ Party A shall still pay Party B for the value of the works completed and accepted but not yet paid.

+ Party B shall refund Party A for the value of the contract paid by Party A but not yet completed.

Example 3:

– “Force majeure event” means, for the purposes of this contract, any event that causes either party, or both parties, to be unable to perform its rights or obligations, including but not limited to: government or public authority prohibition or delay, riot, war, national emergency (whether declared or not), hostilities, public disturbance, strike, labor dispute, boycott, sanctions, other labor disputes and work stoppages, epidemic, fire, flood, earthquake, storm, tsunami, or other natural disasters, and any other events beyond the reasonable control of the parties.

– If a party is prevented from fulfilling its obligations under this contract due to a force majeure event, it must notify the other party in writing within seven (7) days of the occurrence of the force majeure event and consult with the other party, and each party shall use reasonable efforts to mitigate the damages to the extent possible.

If a force majeure event occurs, the affected party shall not be liable for any damages, increased costs, or losses that the other party may suffer due to non-performance or delayed performance. The affected party shall take appropriate measures to minimize or eliminate the effects of the force majeure event and shall resume performance of the affected obligations as soon as possible.

CAN ANY EVENT BE AGREED UPON AS FORCE MAJEURE?

This is one of the most frequently asked questions, especially in the context of the Covid-19 pandemic, which has caused significant disruptions to economic activities. The concept of “force majeure” has never been referenced and discussed as much as it has been recently. There are some opinions that the application of force majeure may need to be reconsidered.

The issues raised are:

– What is a force majeure event?

– The concept of force majeure events, events excusing liability, and the expansion of force majeure events.

– Does a force majeure event terminate the obligor’s obligations?

A force majeure event is an event that occurs objectively, is unforeseeable, and cannot be remedied despite taking all necessary and possible measures (Clause 1, Article 156 of the 2015 Civil Code).

According to this regulation, an event is considered a force majeure if it meets the following criteria:

– The event occurs objectively.

– The event is unforeseeable.

– The event occurs and cannot be remedied despite the obligor taking all necessary and possible measures.

Looking at these conditions, it is clear that the obligor is not at fault for failing to perform the obligation. Therefore, the 2015 Civil Code stipulates: “In case the obligor fails to perform the obligation due to a force majeure event, they shall not be liable for civil liability, unless otherwise agreed or provided by law (Clause 2, Article 351).”

CURRENT CONTRACT STATUS

The liability exemption characteristic of a force majeure event significantly impacts risk allocation, so it is understandable that parties always include a force majeure clause when drafting contracts. Sometimes this clause is considered a default that must be included in the contract, regardless of whether the drafter has legal training.

Many drafters include the following:

“A force majeure event is an event that occurs objectively, is unforeseeable, and cannot be remedied despite taking all necessary and possible measures. Force majeure events include but are not limited to war, natural disasters, earthquakes, epidemics…”

Recently, some opinions suggest that parties can agree on an event being considered a force majeure event. This opinion is based on the parties’ freedom to contract. However, this view needs to be reconsidered based on the following points:

Clause 1, Article 156 of the 2015 Civil Code defines the criteria for a force majeure event. This means that any event that meets the criteria in Clause 1, Article 156 of the 2015 Civil Code is naturally considered a force majeure event, regardless of whether the parties include it in the contract.

The issue becomes more complicated when parties interpret force majeure events in their drafted contracts. For example, suppose that in mid-September 2021, the parties signed a contract and defined a force majeure event as follows:

Who can be certain that the pandemic will end after October 2021? It may or may not. Therefore, in this context, at this time, the parties relying on the contract agreement to claim it as a force majeure event is perhaps not valid. It is important to see that force majeure events and events excusing liability are not entirely synonymous. A force majeure event is an event excusing liability. However, it does not stop there; based on the freedom to contract, the parties can agree on an event as an excusing liability event. In other words, an excusing liability event has a broader scope, including:

– Force majeure events;

– Excusing liability events prescribed by law;

– Excusing liability events agreed upon by the parties.

The essence of Clause 1, Article 156 of the 2015 Civil Code is a defining norm. This means it provides criteria to identify whether an event is a force majeure event. With a defining norm, the definition cannot be expanded. Remember, the concept of force majeure affects various other aspects such as the statute of limitations for litigation, the exemption of parties’ liability…

Therefore, if anything is noteworthy, it is that when anticipating risk scenarios, we want to eliminate risks, and the law entirely allows us to agree on an excusing liability event. However, identifying it as a force majeure event is a regrettable mistake and will be difficult to apply if it does not meet the criteria in Clause 1, Article 156 of the 2015 Civil Code.

FORCE MAJEURE, WHAT NEXT?

When faced with a force majeure event, there are two issues to consider:

First, if the obligor fails to perform their obligations due to a force majeure event, they shall not be liable for civil liability, unless otherwise agreed or provided by law (Clause 2, Article 351). In other words, the parties can completely agree otherwise, for example, that even in the event of a force majeure, the obligor shall still be liable.

Second, does the termination of a force majeure event mean the obligor must continue to perform their obligations? According to Article 372 of the 2015 Civil Code, a force majeure event is not a basis for terminating obligations. In other words, a force majeure event only exempts the obligor from liability for damages, not from penalties for breaches, but it is not a basis for terminating obligations.

TO SUM UP

If you are very legally savvy, then delve into the force majeure clause. If not, it is better to avoid it, because even if you do not stipulate force majeure in the contract, if the event meets the criteria of Clause 1, Article 156 of the 2015 Civil Code, it will still be considered a force majeure event.

The parties can agree on many things related to a force majeure event, such as whether liability is exempted, how to handle the performance of obligations when a force majeure event occurs.

The regulation on force majeure is a defining norm, not a discretionary type that can be expanded to include any event the parties aim to cover. When wanting to allocate risks, the parties can use the concept of an excusing liability event so that when the event occurs, it still ensures the element of liability exemption but also complies with the provisions of the 2015 Civil Code regarding force majeure events.

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