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Reinarks - This example shows exactly the relationship between the contract and the law: a contract sets out the rights and duties that apply between the two parties.. An example of a

NGUYEN TRONG DAN

QUtit TE

Xueit bcin lein this 6

International Trade Contracts

6t h Edition

NHA XUAT BAN LAO DONG

HA NOL 2007

Thu' tit g6p y xin

GS.TS Nguygn Trong Dan DTDD: 0904 055 077 Email: dhannte,fpt.vn

Tac gi6 gilt bgn quye'n

© Copyright by the author

Preface

This book is intended to provide commerce students of international trade and other readers with guidelines to the language of international trade contracts as the name of the book suggests

Despite the difficulty and complexity of the subject matter, the language used in the book is straightforward and readily understood

The book contains 11 parts The first eights parts deal with legal aspects and give examples of authentic language used to illustrate them At the end of each part, there are comprehension questions so that the students can check their understanding In the footnote from Part 1 to Part 8, four

or five words and/or expressions are listed with their context meanings

in Vietnamese

Part 10 gives examples of authentic contracts from various Vietnamese and foreign trading corporations All of these contracts are bilingual: English and Vietnamese Part 11 includes the ICC Model Sale contract and the remarks made on each individual provision in the light of the civil code of the SRVN regarding civil contracts

Although every effort has been made to ensure the reliability of the information in the book, for readers of the book, the author is not responsible for any losses resulting from using this book or specimen contract clauses taken from therein Before signing a contract, business persons should take appropriate legal advice

As mentioned the subject matter is very difficult and complicated, errors and mistakes might have been made here and there in the book Constructive suggestions and corrections are, therefore, highly appreciated

Prof Dr Nguyin Trong Dan

Hanoi, 2007

Acknowledgements

I would like to express my many thanks for Directing Board of the Foreign Trade University for their help and assistance during the preparation and production of this book

I also would like to express my sincere thanks for my colleagues at the English Department of the Foreign Trade University for their long and kind co-operation in the making of this book

I am deeply indebted to my Australian Collegue, Mr Timothy Maxwell Clemons for his valuable suggestions, comments, criticism and correction during the development of this book

I am also deeply indebted to all Vietnamese and foreign import and export organizations and commercial services to their assistance and permission for reproduction of their contracts and documents

As always I wish to express my special thanks to my wife and my children for their understanding and encouragement throughout the preparation of this book

I would like to thank Mr Nguyen Van Chau, BMA, Researcher, at the Foreign Trade University for his deligence shown in proofreading of the book and for all other things that he has done on my behalf so that the book would have been made possible for the first edition

Finally, I also would like to thank all of my friends and former students for their assistance in providing the contracts and their translation

Prof Dr Nguyin Trong Dan

THE RELATIONSHIP BETWEEN THE LAW AND THE CONTRACT 11

1 BRIEF INTRODUCTION TO THE LAW AND THE CONTRACT 11

2 THE RELATIONSHIP BETWEEN THE LAW AND THE CONTRACT 11

3 EUROPEAN (CONTINENTAL) LAW AND ANGLO - AMERICAN

1 THE ENTIRE AGREEMENT AND THE CONTRACT DOCUMENTS 43

Part 5 GOODS AND DELIVERY, PRICE AND PAYMENT 61

4 THE TIMING OF THE DEFECTS LIABILITY PERIOD 79

Part 1

Part 2

Part 3

- COMPREHENSION QUESTIONS 82

Part 9 THE INDUSTRIAL PLANT CONSTRUCTION CONTRACT 114

4 THE EMPLOYER'S DUTIES: PRICE AND PAYMENT 122

7 AN EXAMPLE OF A SUPPLY CONTRACT TO DELIVER AND

Part 11 ICC MODEL CONTRACT FOR THE SALE OF GOODS 340

3 MODEL CONTRACT FOR THE SALE OF GOODS AND THE CIVIL

2 HOP DOING MUA BAN TAI SAN THEO LUAT DAN SVCOA NUOC

Dan, Nguyen Trong Ngorr ngi? hop dong thu'ung mai Anh My Sinh

hoat khoa hoc trubng Dal hoc Ngoai thtrong 1993

Dan, Nguyen Trong Cau, menh de va ngi? trong hop eking thuzing mai quae re' Ky y6u HOi nghi Khoa hoc 1c'T ni4rn 30 nam Vien ngOn ngir hoc V* Nam 1993

Dan, Nguyen Trong The language of business correspondence in English NXB Gido duc Ha NO 1992

Groner, Sammel B Modern Business Law Reston 1983

Mc (Draw Hill - 1992 Gifis, Steven H Law Dictionary, Third Ed

International Chamber of Commerce:

+ Force Majeure and Hardship Paris ICC 1984

+ Guide to Penalty and Liquidated Damages Clauses Paris

ICC 1990

+ Incoterms - Paris ICC 2000

+ Model forms for Issuing Contract guarantees Paris ICC - 1992 + Rules of Concilliation and Arbitration Paris ICC 1988

Ma, Nguyen Thi va Thiet, Hoang Van Phap ly dai cumig TriOng

Dai hoc Ngoai thuong NOi 1991

Ma, Nguyen Thi va Hoang Van: Nhil'ng van de phap li trong ngoai thumg TrtOng Dai hoc Ngoai diming 1996

Pinnels, James International Procurement Contracts Prodec

Helsinki 1991

Sanderson, Steve Ed Standard Legal Forms and Agreements for Canadian business Canada 1989

Staple, James G et al "Know - how in the united States" in the know

- how contract in Germany, Japan and the United States

Ed Herbert Stumpf Deventer: Kluwer 1984

Tixu, Vu Hiru Tdchdc ky thugt Ngoai thurnig Trtthng Dai hoc Ngoai

thuang Ha NOi, 1991

White, James, et al - Uniform Commercial Code St Paul West 1980

Trinh, Dinh Xuan tay thank loan Quo.c Trubng Dai hoc Ngoai thtrong Ha NO 1991

Bo lugt Dan su' dia nu& Cong hoa xar 110i chi nghig Viet Nam Vietnam Law & Legal Forum 1996

Ludt thumig mai cua niffrc COng hoa xd hgi chi nghra Viet Nam

1996

Legal writings on Foreign Investment in Vietnam SCCI 1992

COng uOc Vien 1980 ye Hop (long mua ban QuCic to Paris 1980

HOW TO WORK WITH THE BOOK

This book is, as mentioned, meant to be used, firstly by commerce students at the Hanoi Foreign Trade University and otber business persons The focus of the book is on both the language and other legal aspects of contracts

Anyone who wishes to use the book effeciently should, first of all, attain

a fairly advanced level of English and then have a good understanding of such key subjects as:

- Laws applied to international business operations

- Foreign Trade Organizations and Techniques

- International Payment

- Shipping, Transport and Insurance

In order to understand, at the beginning, and be able to apply the contract terms and conditions, the students, readers and users are required to work through the book starting from Part I

The working phases are recommended as follows:

Phase 1:

- Understanding technical terms

- Being able to analyze clause structure

- Understanding every single grammatical unit

- Reading and understanding short contracts, and then long ones Phase 3:

- Translating some simple short contracts into Vietnamese, and comparing them with the ones provided in the book

- Drafting short provisions, and then long ones

Prof Dr NGUYEN TRONG DAN

2007

Part 1

THE RELATIONSHIP BETWEEN THE LAW AND THE CONTRACT

1 BRIEF INTRODUCTION TO THE LAW AND THE CONTRACT

When negotiators from different countries contract, they create a legal instrument What is the relationship between this legal instrument and the law

of the two countries?

Two parties may agree to bind themselves in any way they choose, provided their agreement does not come into conflict with the public law (including the constitution) of their countries or with stringent provisions of the private law The constitution of a country embodies the generally accepted principles that govern the country In addition to a constitution, each country has laws In general, laws establish two kinds of rights and duties: (a) the rights and duties that each citizen owes to and receives from the state, and (b) the rights to and duties that citizens owe each other The law that regulates the relationship between state and citizen is called public law Private law regulates the relationship between citizens

The public law of a country controls, for example, taxation, immigration, the formation of companies and similar matters Criminal law is also public law The private law looks at the behaviour of citizens (and companies) toward each other One branch of private law looks at agreements which citizens or companies make with each other - this is the Contract Law

2 THE RELATIONSHIP BETWEEN THE LAW AND CONTRACT

Business is based on agreements or Contracts During the performance of a contract, the parties may disagree on a particular matter and then the two parties will study their contract and ask what it provides in such a situation If there is

bind: rang buac

criminal law: luat hinh

legal instrument: cOng cu phap ly

private law: tv phap

provided: vdi diau kian la public law: cong phap stringent provisions: nhCing quy dinh nghiem ngat

no such provision, they must ask what, if anything, the law obliges them to do This raises the most basic question about contracts

What is the relationship betweenc the contract and the law?

to the offer it is making to PC only It keeps its right to cancel offers made to others

Reinarks

- This example shows exactly the relationship between the contract and the

law: a contract sets out the rights and duties that apply between the two

parties A contract sets aside rights and duties that exist under private law

(e.g BEC's right to cancel its offer) and creates new rights and duties (e.g the duty to deliver goods or the right to payment)

- And the public law? The provisions of the public law are never disposive For example, public law in Vietnam forbids the use of certain plastics in the manufature of insulation for cable Can BEC agree with PC that this law does not apply to their contracts? Obviously not Public law is not disposive - the parties to a contract cannot set it aside

- The idea of "law" that we have discussed so far is, of course, the traditional western view This view stresses that law and morality are close partners: The purpose of law is to provide order, stability and justice Thus viewed, the law consists of relatively fixed rules which regulate conduct according

to the morality of the community Proper conduct, as determined by the community, should be allowed or required Improper conduct should be prohibited Law then is a social institution, it is not an end in itself but is an instrumentality for obtaining social justice (Anderson, 1980 p.17)

contract law: luOt help clong

disposive: co the khutc ter

oblige: bat buiic

waive: khutc tit waivable rights: quyen co the khuUc tir

waiver: nguti khutc to quygn cluvc hutng

- Nothing could be further from the traditional eastern view In the extract below, the long-standing Korean view of "Law" is presented:

The idea that law is an accumulation of collective experience never had an existence in the Korean political tradition Law was an instrument for chastising the vicious and the depraved It was sharply distinguished from custom It always signified a norm with physical force as a sanction behind

it It was therefore synonymous with punishment, no more or less It is little wonder that the ruling elite considered law beneath its dignity Indeed, the concept that law applies only to the barbarians or to the ignorant masses and never to the proper Chinese or to the rulers is strongly rooted in Korean thought When the present- day Koreans try to follow the Anglo- American example, they have to depart so far from their traditional ways

of thinking that one cannot help wondering whether it is feasible, let alone advisable to do so (Pyon-choon 1982 pp 19 and 30)

If we accept this view as typically eastern, then clearly the gap between easterner and westerner is wide For a westerner, a contract is of the highest significance It put into words powerful moral forces as they apply to the case

in hand Behind the contract stands a huge body of law and 3,000 years of religious and moral tradition For the easterner, the contract is a simple agreement without such psychological and philosophical roots Both sides should be aware of this gap during contract negotiations It is the source of much misunderstanding

3 EUROPEAN (CONTINENTAL) LAW AND ANGLO - AMERICAN LAW

"Continental" law

The so-called "continental" law prevails in most of continental Europe, in France and Germany for example This law derives from a code which the Roman Emperor Justinian developed 1,50Q years ago For this reason, lawyers often call it "Roman law" The Code Napoleon of 1803 developed and updated Justinian's code and influenced many legal systems around the world including those of Japan and most South American countries The essence of

"continental" law is Codification A clear code expresses what is legal and what

is not The German BGC (Civil code) is an excellent example The continental

accumulation: tich luy

beneath one's dinity: kh6ng xerng vol pha'm cach cua

chastising: trerng trq

conduct: qui t6c ung xer

depraved: suy doi, sa doe

family of law has well developed private law, especially the contract and the commercial branches

"Anglo - American" law

Unlike Continental law, the Law of England, the United States (and many other English - speaking countries) is not completely codified The tradition of uncodified law goes back to ancient kings who sat under oak trees and made legal decisions case by case

To achieve fairness, the king decided each case in line with earlier decisions in

similar cases, the so-called precedents For this reason, lawyers often call

Anglo - American Law "case law"

Today, public law is generally codified, while private law remains largely case law The case - law system prevails in England, in the United States, and in many ex - colonies of Britain such as Australia

It is important to note that the USA has codified its commercial law - tidying up the chaotic situation in which some fifty states followed often widely different legal practices The Uniform Commercial Code (UCC) was written between

1941 and 1952 A 1962 revision was adopted by 49 states A 1972 revision was also widely adapted, although different states and courts interpret the UCC differently, it offers a vital guide to current American thinking

Because England and the United States were predominant in world trade until recently, Anglo - American legal thinking strongly influences international practice The Anglo - American family has a fully developed private law In particular, the big trading countries have developed a strong commercial and contract law

Anglo - American and Continental Law: the Differences

Anglo - American contract law is largely case - law Each decision on a new set

of facts or on the construction of a previously undisputed law by a judge creates

a precedent This precedent may be binding, if so future judges will follow it

The chart below compares how Continental and the Anglo - American law treat

the relationship between a case and the law

Anglo-American law: luat Anh-M2

case law: luOt an 10

codify: soap thanh luat

barbariaus: ke man rq

code: bq luOt

Continental law: luOt chau Au

oak tree: cay soi precedent: tin la, an la UCC: bQ luOt thu'ang mai th6ng nhat philosophical: trial hoc, triet ly psychological: tam ly elite: tinh nhua, qui ph&

14

The Anglo - American and the Continental approaches to law produce different styles of legal argument, and very different contract language Much of the material in the following chapter explores these differences Let's take a single example for now: the length and complexity of Anglo - American contracts You have probably noticed that English and American lawyers draft long contracts in difficult language Why is it? Perhaps lawyers are paid by the word, and a long contract makes more money than a short one! Although it was true in the past, it is not the heart of the problem at present

In the Anglo - American legal world, as we have seen, nobody knows the result

in any given case until the judge reaches a decision If the parties want to avoid surprises, they must draft a detailed contract covering all future possibilities This makes contracts long and full of exceptions and conditions Further, judges must take binding precedents into account when making their decisions Each case may have dozens (even hundreds) of precedents 'Contract language has developed over the centuries to "force" the judge to arrive at the same result whatever precedent(s) he or she uses One example, if a judge once refused damages because the plaintiff had incurred "costs" while the contract spoke only of "expenses" Future contracts will tend to speak of "costs and expenses", and thus avoiding the problem

approach: phtrang phap tigp can plaintiff: nguyOn dan

exception: ngoai le take st into account: tinh den

incure: phat sinh tend: cO xu fluting

CONTINENTAL

Start with a clear legal code

When a case occurs, the judge simple

applies the code Sometimes the

judge must interpret the code to see

how it applies in a particular case

Very difficult cases go to a higher

court The higher court interprets the

code and decides how it applies in

the difficult case

ANGLO-AMERICAN

Start with a case decided on its merits

When a similar case occurs, the judge decides the case on its merits and in line with the precedent set by the first case

A huge body of case law develops with

many precedents in slightly different cases

PERHAPS

The legislature passes a statute (= law) that tidies up a complicated situation, or

it may pass completely new laws

Before applying a statute, a court may evaluate its constitutionality This

means that the courts may reject a

statute and refuse to apply it, if it is found to be unconstitutional Judges also have wide powers to interpret statutes; the court must decide what the statute means "The courrt's

interpretation is the law" (Groner, p.8)

constituonality: tinh, khth nang lap hian

interpret: then giai

legislature: co quan lap phap

merits: tinh fiat (cue vu kien) occur: phat sinh, xay ra statute: hanh vi lap phap, luat thanh van

16

4 THE APPLICABLE LAW

No contract is complete When the contract does not answer a question, the answer lies in the applicable law, the law of a particular state or country In principle the parties are free to choose the law which applies to the contract What is important in choosing an applicable law? What happens if the parties cannot agree on an applicable law?

The parties should agree on the applicable law before drafting a contract Without a defined applicable law, the parties may write unenforceable provisions Further, some applicable laws require a more detailed contract than others If the parties simply cannot agree on a law, then they must write a very long contract

If a contract is a fish, it swims in water In principle the parties are free to decide which water their fish will swim in A Chinese - German contract could choose German, Chinese, English, or, to oversimplify a little, any other national law

You often find the Applicable Law clause at the end of a contract Even so, you should turn to it first before reading the rest of the contract Some provisions of

a contract change their meaning radically under different legal systems

An example of a carefully worded applicable law provision:

This contract, and all questions concerning its formation, validity, interpretation and application shall be governed by the laws of the State of New York

Study this wording It says that the laws of the State of New York govern the contract That is clear enough The clause also mentions four questions governed by these laws:

4.1 Formation

Was the contract correctly formed? That depends on the applicable law But if the contract was not correctly formed, it does not exist, and so there is no applicable law And if there is no applicable law, it is impossible to decide if the contract is correctly formed or not! This legal knot is easy to untie if the

applicable law: luat ap dung

defined: dich danh

formation: hinh thanh

govern: chi ph6i oversimplify: don gian h6a qua mut unforceable: khOng c6 hie‘u lut validity: thdi han hiau luc

17

parties agree that not only the contract itself but also the question of its formation is subject to the laws of the State of New York

4.4 Application

How will the parties carry out their duties? What rules apply to the performance

of the contract? As with interpretation, a dispute might arise about a substantive law and procedural rules Again the wording makes the situation absolutely clear

An applicable law clause not only states the law applicable to the contract, it sometimes states what law is not applicable This clause is from a subcontract for space technology The main contractor is American; the subcontractor is German

The contract shall be governed by, subject to, and construed in accordance with the laws of the State of Florida; This Contract shall not include or incorporate the provisions of the "United Nations Convention on Contracts for the International Sale of Goods"

be subject to: re thu'ec vao substantive law: lust flux tai

legal knot: chot phap ly untie: gO cal

rules for procedure: quy tac ye thu tyc

18

This contract was written at a time when both the United States and Germany were in the process of ratifying the United Nations Convention (the so-called Vienna Sales Convention) The parties wished to exclude its provisions from their agreement Since the matter is disposive, they had every right to do so What happens if during negotiations the two parties cannot agree on an applicable law? If a French company, for example, will not accept Chinese law, and its Chinese counterpart will not accept French law? First, the parties could decide on a neutral law, for example, English law, or Swiss law as applied in their respective countries Second, the parties might agree to the law of one side, but write a very detailed and extensive contract leaving almost nothing for the applicable law to decide Accepting the law of "the other side" is not particularly dangerous if you research carefully and write a clear, detailed and fair contract There is a third possibility If two sides reach no agreement, you sometimes see a provision such as this:

13.1 During the performance of the Contract, any dispute in connection with the Contract shall be settled by both parties through consultation

in the spirit of friendliness; If no agreement can be reached after such consultation, the dispute shall be submitted to arbitration

13.2 The arbitration shall be conducted in the Arbitration Institute of the Stockholm Chamber of Commerce, Sweden

13.3 The law applicable to the arbitration shall be neutral and be decided by the arbitration committee

arbitration: trong tai

construe: didn clich

consultation: hip thtrang

convention: cong vac

dispute: tranh chap neutral: trung lap ratify: phO chudn respective: mOi, ttrng, rieng

19

Allowing the arbitration committee to decide the applicable law is dangerous Neither party knows what law to apply to the contract The results of fairly common actions become unpredictable, and the chances of an expensive dispute increase

The next clause, taken from a contract to supply German equipment to the United States, illustrates a fourth possibility:

This Agreement shall be interpreted in accordance with the laws of the Federal Republic of German If, however, the German law conflicts with Texas or U.S federal laws regarding any dispute between the parties, then the parties agree to use their best efforts to negotiate an equitable compromise acceptable to both sides hereto; In the event that such a compromise cannot be reached in a timely manner, then the dispute shall be settled in accordance with the separate

"Arbitration Agreement" between the parties

The parties were (apparently) unable to agree on one applicable law, so they named three The clause foresees trouble, disputes and arbitration ahead

because of this awkward arrangement In the end, the arbitrator will decide what law really applies

A surprising number of international contracts use the weaker options, in effect allowing the court or arbitration to decide the applicable law How does the court, if required, make its decision? What does it take into account? The ICC

Rules of Conciliation and Arbitration 1988, says:

In the absence of any indication by the parties as to the applicable law, the arbitrator shall apply the law designated as the proper law by the rule of conflict which he deems appropriate (Article 13.3)

This doesn't help much: the rules governing conflict of law are a study in themselves, and so, for the parties to the contract, the arbitrator's decision is unpredictable As a rule of thumb, however, the court usually weighs four factors, whatever conflict - of - law rules it is applying

awkward: vung ve

clause: diet., khoan

compromise: nhuvng b6

conflict: xung d6t

equitable: cOng bang

foresee: luring trutt ICC Rules of Conciliation and arbitration 1 986: quy Mc h6a giai va trong tai 1988

unpredictable: khOng luring trutc duce

20

a The place of performance of the contract (i.e the place where most of the work is actually done);

b The place of execution (= signature) of the contract;

c The language of the contract;

d The currency or the weights and measures prescribed

Taken together, these points show the gravity of a contract - it's "natural weight" It practice, the place of performance, is often decisive In an FOB sales contract, this is the country of the seller In a construction contract, that of the buyer

5 SOME SPECIMEN CLAUSES

Applicable law This contract shall in all respects be construed and interpreted

in accordance with the law of the People's Republic of Bangladesh including any such Laws passed or made or coming into force during the period of the Contract

Governing Law These General Conditions and the Contract are governed by

Italian Law

Applicable Law Regardless of the place of agreement, the place of

performance, or otherwise, this agreement and all amendments, modifications,

or supplements hereto, shall be construed under, governed by, and the legal relations between the Parties hereto determined in accordance with, the laws of the Republic of the Philippines

conflict - of - law rules: qui pham luat có xung dOt or otherwise: hoac khac di

designated: chi dinh regardless of: bat ke

gravity: trong diem rule of thumb: qui tbc thvc nghiem

specimen: mau

In each case, the water round the fish is labeled: Bangladeshi law, Italian law the law of the Philippines Even so, the third formulation is clearly better than the other two: it takes into account most of the legal problems that arise in disputes about the applicable law

IMPORTANT REMINDER: The applicable law governs the disposive

provisions (or traditions) of the private law: things that the parties could decide themselves but - for whatever reason - left unregulated Public law always

applies, whatever the parties agree

6 COMPREHENSION QUESTIONS

6.1 A Tax - Free Contract

BEC, an English company, is selling switchgear for power stations in Vietnam The parties agree that "English law applies" BEC, however, wants to ensure that it is not liable for tax under Vietnam tax law Therefore the lawyer drafts this clause:

All income taxes or other tax obligations created as a result of this contract shall be assessed and regulated exclusively according to the English tax law in force at the time of assessment

I Is BEC now free of Vietnam income taxes? (Choose one answer)

q YES

q NO - because tax law is public law and the parties cannot set it aside

q NO - because the clause is worded too weakly

ensure: bac, dam liable for: clip trach nhiOni

hereto: 1 doi vUi hop clang nay tax-free: mien thue

2 tham gia hop dong nay

2 Does the clause below create a "tax - free contract" for BEC?

The buyer shall compensate and save harmless the Seller from all taxes assessed

against the Seller by the government of the Buyer's country

1956, the Factories, Machinery and Building Works Act No 22 of 1941 as amended applicable, as well as all regulations made in pursuance thereof

1 Are the Mine and Works Act, 1956, and the Factories, Machinery and Building Works Act No.22 of 1941 Public law or private law?

4 What do you think the purpose of such lause is?

act: luat, dao

collaborate: hop tac

in pursuance: theo, theo ducli save harmless: mien trach

6.3 A Law without a Family

These presents shall be governed by and constructed in accordance with British

Common Law

An international bank included this clause in a Performance Guarantee Unfortunately:

a There is no "British Law", only English or Scottish Law (Scottish law

is a member of the continental law family.)

b Specifying "Common Law" seems to exclude Equity and Statute Law

Questions: If a contract is a fish swimming in water, in what water does this fish swim?

q ENGLISH COMMON LAW

q ENGLISH LAW IN GENERAL

q SCOTTISH LAW

q NO LAW

common law: th6ng phap (luat tuc le va an le) presents: hop Jong

equity law: luet tong bring, c6ng chinh statute law: luet thanh van hay an le

Part 2

THE LANGUAGE OF CONTRACT IN ENGLISH

1 THE CONTRACT SENTENCE

The opening sections of an Anglo- American contracts are often puzzling: it is

hard to see how the whereas, the witnesseth, and the rest fit together Sadly,

many international contracts are poorly drafted: the wording is often ungrammatical and sometimes nonsense What is the key to contract language? Traditional English-language contracts are drafted as a single sentence: the

"contract sentence" In principle, all the parts of a contract fit into a single grammatical unit

Lawyers are conservative Lawyers working in English today may still draft contracts in the ancient style, even though these old forms internationally may

be a source of confusion One tradition is the drafting of contracts as a single sentence This sentence pattern has three main variations

1.1 "This Contract Witnesseth " (Variation 1)

The lease on the next page illustrates the most common contract pattern No matter how long a contract is, it can still follow this one sentence pattern Let's look at the grammar of the sentence:

THIS LEASE

This lease is the subject of the contract sentence Many contracts begin with a similar subject: This Licensing Agreement, This Technical Assistance Agreement, and so on

BETWEEN

The word between introduces the names of the two parties Each party is usually given a " hereinafter referred to" title: the buyer or the seller; Employer or Contractor or whatever

conservative: beo thu

lease: hop dung cho thud va thud

puzzling: rec roi, khO hieu

whereas: xet, vi rang

witnesseth: lam bang charg

THIS LEASE Made the tenth day of August 2000

WHEREAS

This lease contains no "whereas" clauses It is commonly understood that

a string of whereas clauses at this point gives, if necessary, the background to the agreement

commence: b6t dau hereby: theo hop dung nay

contractor cht) than hereinafter referred to: sau day goi la

employer: chi.), chi.) dau ttr instalment: Pea dan

whereof: vi0c nay

The two clauses in italics are noun clauses, they are direct objects of the verb

"said" In structure, however, they are exactly like sentences In the same way, the many "sentences" in a contracts are noun clauses, direct object of the verb

"witnesseth" This means, of course, that the periods (full stop) at the end of each provision in the contract are grammatically wrong, but in a long contract they are unavoidable (This also explains why the provisions of a contract are

often called clauses and not sentences)

IN WITNESS WHEREOF

The two parties sign the contract to "witness" it, in other words to "give proof of their agreement" This use of the word witness can cause confusion because, in many documents, the signatures of the parties must themselves be witnessed In this case, however, the signature of the

"witness" simply confirms that the signature of the party is genuine

1.2 "Know All Men " (Variation 2)

This variation occurs in short document as Bid Bonds, less often in contracts The document below is a transfer of ownership for a new car Again the contract is a single sentence

a string of: mot loaf

bid bond: bao dam dot than

italic: in nghiOng

unavoidable: kh6ng the tranh duw variation: bien cach

Know all Men by These Presents

That

The Albert Motor Company, the Seller, whose address is 3 Dry Boulevard, Alton, New Hampshire, for and in consideration of the sum of $ 17,000 paid by Joe Ditherspoon, the Buyer, whose address is 1983 Long Lane, Alton, New Hampshire, has bargained, sold, granted and conveyed; and by these presents does bargain, sell, grant and convey unto the Buyer, the Buyer's successors (heirs, executors, administrator) one Ford Mustang

KNOW ALL MEN

This means "All men (people) are informed " know is main verb of the

contract sentence : it is in the command (imperative) form

bargain and sell: ban

by these presents: bai hop clang nay

for and in consideration of: nhan

grant and convey: chuyen

In witness whereof: de lam bang chirng cho vi0c nay know all men: moi ngtrai duVc thOng bao (biet)

"K' THE SELLER

The name of the seller is introduced

FOR AND IN CONSIDERATION OF

The price is named

"Y" THE BUYER

The name of the Buyer is introduced

HAS BARGAINED, SOLD

The seller has sold Then the goods are named

IN WITNESS WHEREOF

The formula is the same as for Variation 1 (The seal in the case of a Transfer of Ownership like this is important; since only one party signs the document, the seal makes it legally binding.)

1.3 "The Parties Hereby Agree That "'

The agreement on the next page is a standard form for selling a second-hand car in the United States It contains a heading that is not integrated into the contract sentence, and then a double wording The rights and duties of each party exactly balance, resulting in two mirror-image sentences

This form is fairly common in short agreements or in a "one-page" contract to which many contract documents are annexed

"of the first part" and the second name "of the second part" and "the party

of the second part"

annex: kem, lam thanh phy lyc transfer of ownership: chuyen quyen so) hit

integrate: gQp, nha't the

Articles of the Agreement

New York, NY of the second part

The party of the first part in consideration of nine thousand dollars ($9,000) covenants and agrees to sell to the party of the second part a 2003 black Ford automobile including the transfer to the party of the second part of the Certificate of the Title and any other documents necessary to effectuate a complete transfer of title from the party of the first part to the party of the second part

The party of the second part, in consideration of the complete transfer of title

of the 2003 black Ford automobile from the party of the first part to the party

of the second part convenants and agrees to tender payment of nine thousand dollars ($9,000) to the party of the first part in the form of cash with payment due on the date of delivery of the said automobile

In Witness Whereof,

the parties hereunto have set their hands and seals the seventh day January

in the year two thousand and three

THE PARTY OF THE FIRST PART CONVENANTS AND AGREES

This contract sets out the rights and duties of the first party in one sentence, and the rights and duties of the second party in a second sentence In both cases, consideration is mentioned

IN WITNESS WHEREOF

The formula is the same as for Variation 1

convenant and agree: dungy old-pashioned usage: cach dung da cif

effectuate: thut hiOn to tender payment: thanh toan

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2 THE LANGUAGE OF ANGLO-AMERICAN CONTRACTS

The Anglo-American contract often seems lengthy, complicated and repetitious A negotiator may try to simplify the English wording But this is sometimes dangerous

Anglo-American contract law is mostly case law, so lawyers draft contracts with cases (precedents) in mind If a judge in the past based a decision on the precise wording of a contract, later contracts may try to avoid or embrace the implications of that decision Further, to compensate for the absence of a codified law, lawyers try to cover all eventualities in the contract itself The result is "contract English" - a language with rules of its own

The contractor shall be under no liability whatsoever by way of indemnity or otherwise for or in respect of destruction of or damage to the Works or to the Temporary works or any property whether of Government or third parties or for

or in respect of injury or loss of life which is the consequency, whether direct or indirect, of the outbreak of war (whether war is declared or not) in which the country shall be actively engaged, invasion of the country, act of foreign enemies, rebellion, revolution or military or usurped power in the country, civil war, or otherwise than amongst the contractor's own employees or the employees of any subcontractor or a contractor executing any specialist works, riot, commotion or disorder, (hereinafter comprehensively refereed to as "the said special risks") and the government shall indemnity and save harmless the contractor against and from the same and against and from all claims, demands, proceedings and damages, costs, charges, and expenses whatsoever arising therefrom or in connection therewith and shall compensate for contractor for any loss damage to the property of the contractor used or intended to be used for the purpose of the works, and occasioned either directly or indirectly by the said special risks

codified law: luat thanh van

embrace: bao gom

eventualities: tinh huOng co the xay ra

lengthy: dai thing repetitious: lap, trung lap

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Anglo-American law is largely case-law: each decision by a judge may create a

precedent If this precedent is binding, future judges always follow it The

Anglo-American drafter knows this and writes the contract to avoid the problems created by binding precedents in the past Study for example, the language of the contract provision above It is Clause 114 of the Conditions of Contract of the Public Works Department of a country in East Asia within the Anglo-American law family

This clause uses the word or many times In each case the drafter has a

particular problem in mind Let's take three examples:

liability for problems caused by "war" ran into legal problem, and so drafters

adopted the habit of adding "whether war is declared or not"

Example 2

The drafter writes of "property used for the purposes of the Works." The

wording here perhaps reflects a judgment in particular case where the judge

distinguished between property "used for the purposes of the Works" and

property delivered to the site but not yet in use The drafter covers both possibilities

Example 3

One phrase here is typical of Anglo-American drafting: "all claims, demands, proceedings, damages, costs, charges and expenses whatsoever" The drafter is probably making no difference between claim, proceeding and demand or between costs and charges and expenses He used this list of terms for safety's

sake: whatever the situation, the contract covers it This need for safety reflects

a major principle of case law: it is impossible to know the result until the case

foreign enemies: ke thei ngoai bang

all claims, demands, proceedings damages: tat ca

thief hai

all costs, charges and expenses: tat cá chi phi

revolution: cach mang

in respect of: ve, co lien quan d6n

indemnify: b6i thutng

military or usurped power: th6 luc quen

su va ciao chinh

rebellion: not loan

riot: bao d6ng, not loan commotion: huyen rick

therefrom: of nhCing rut ro dOc biet nay therewith: c6 lion quan d6n nhimg rui ro da:c bet nay

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has been decided So, don't simplify the language of an Anglo-American

contract until a lawyer has studied it carefully

A case in point: Courts in the United State have trouble with know-how

contracts Is know-how the same things as trade secrets? And do both mean the same as confidential information? The position is unclear Accordingly we find

in a lawbook this recommendation:

The following conclusion can be drawn from an analysis of the terminology used by the courts: (a) the cases are not reconcilable if it is assumed that the different phrases (know-how, trade secrets, confidential information) are intended to define dissimilar legal concepts; (b) the contract drafter who wishes to cover as many future contingencies as possible should use an alternative expression [= an expression containing alternatives] on the theory that subjects matter which might elude one label will surely be covered by another Thus an alternative phrase such as "confidential information, Know-how, and/or trade secrets" should cover most contingencies The alternative "and/or" provides the projected enforcer with maximum flexibility in selecting that specific characterization of the misused property which appears best suited to the facts and the law of the forum (Staples and Bertagnoly, p.264)

Two points emerge here: First, case-law leads to considerable confusion about the meanings of words; it is often necessary to use several words rather than one to ensure that the true meaning is covered Secondly, using several words rather than one gives the lawyer great flexibility if the contract becomes the subject of a court case

3 THE CLAUSES PATTERN IN CONTRACT ENGLISH

Long sentences quickly become confusing in English Especially in the international arena, the drafter must know, and work within, the limits of basic English clause structure when combining ideas into longer sentences

Four basic patterns of combination are effective in English Without making it into a religion, many drafters try to limit themselves to these patterns, especially if English is not the first language of either party

confidential information: th6ng tin bi mat

contingencies: cac tru'ang hgp bgt nga

distinguish: Oen bat

know-how: bi guy& alternative: co thg they the

creolize: hinh thanh ng6n ngir ti? 3 ter hai

ngOn ngt`r ban deu

emerge: not len

reconcilable: co thg h6a giai trade secret: bi mat nhe nghe blurred: nhat

elude: khuygt

English is a mix of French (from the Norman conquerors of 1066) and Anglo- Saxon (the German dialect of the invaders who filled the vacuum left by the Roman withdrawal from England) When languages combine (or creolize), two results are common:

- An oversize vocabulary with blurred distinctions of meaning;

- A simplified grammatical structure with usage and idiom replacing

"logical" rules

Both results occurred in the case of English Because English grammar is thin

on rules and rich in "illogical" usage, it is difficult to express complex, logical relationships among ideas As a basis for expression, try to work with the four basic clause structures that underlie most well written contract provisions

Structure 1: Main Clause Plus Main Clause

Two sentences (main clauses) joined by and (or a similar conjunction) - this is

the most frequently used structure in the English language Because most

languages freely use and, but, or between main clauses, this construction

presents no problems internationally

Example:

The stipulated prices are fixed, and they are to be understood delivered and

paid to the place of destination

The headings and marginal notes in these General Conditions shall not be

deemed part of this Contract, and they shall not be taken into consideration

in the interpretation thereof

Structure 2: Main Clause Plus One Subordinate Clause

The simplest relationship between two ideas is to make one into a main clause and the other into an explanatory or subordinate clause These simple sentences

are sometimes enough to express quite elaborate contract provisions

conjunction: lien to

delivered paid to the place of destination:

ctrac van 6i a tra den nai den

marginal notes: ghi chO ben le subordinate: menh de phy thin on rules: lOng go ye qui tec

MAIN CLAUSE SUBORDINATE CLAUSE

If the construction work is not carried out in accordance with the local law, then the employer has the right to terminate this contract

by-Structure 3: The Chain: Main clause plus more than one subordinate clause

In contracts, a string of conditions is often attached to a main provision Then you must "chain" the clause:

SUBORDINATE CLAUSE (TYPE A)

by-law : cac van ban chid lua't if - clause : menh de bet deu bang "if"

terminate : ket thuc

Naturally, the main clause can also come after the daisy-chain You should repeat the conjunction, for example, if, at the start of each clause A ood example occurs in these Terms for Deliveries Abroad:

The delivery time has been adhered to if the consignment is ready for dispatch ex works within the agreed period and if notice to this effect is sent

to the purchaser

This structure is common in whereas-recitals: "whereas whereas , whereas , and whereas "

Structure 4: Main clause between subordinate clauses

Where a sentence contain clauses of several types (let's say an if-clause and a because-clause), you should place these clauses on either side of the main clause:

SUBORDINATE

CLAUSE

(TYPE A)

SUBORDINATE CLAUSE (TYPE B) MAIN CLAUSE

Example:*

Where the contract provides for deliveries in lots or installments, penalties for late delivery shall be calculated on the basis of the value of each lot or installment, provided that the late delivery does not impede the general performance of the contract

adhere to : tuan thu

consignment : chuyen hang

ex - work : tai )(clang

: ngan can, can tret

at one's discretion : dua vao su suy

)(et caa ai dO

muddle : Ion x6n notice to this effect th6ng bao ye va'n de nay penalties : phat

provided that : mien la, vdi dieu kin la arbitrator : trong tai

A monthly progress report should be

sent to the Employer at his registered

office

The Contractor should send a monthly progress report to the Employer at his registered office

Payment is required on or before 13th

of each month

The Licensee shall pay the Licensor

on or before 13th of each month

4 THE PASSIVE FORM

Contract English is rich in passive verbs Unluckily for lawyers, modern English is moving away from the passive Further, many languages have no passive; their speakers have no "feel" for this form

Avoid using passive verbs where active verbs convey your meaning clearly Passive verbs test out badly, especially in instructions Readers respond slowly and less accurately when instructions use passives For example:

Passive

For the watch to be set, both the command button and the recessed set button must be used If the set button is to be depressed, use should be made of a small object such as paper clip Damage could be incurred by the watch if a large object is employed

Active

When you set your watch, you'll have to use both the command-button and the recessed set-button Use something small, a paper clip for example, to depress the set-button If you use something bigger, you could damage your watch

The passive is sometimes dangerous if you assign a duty but fail to say who must perform it Just compfare the following Examples :

Or

The problem is acute with oriental languages which often have no passive form

A Chinese-speaker, for example, may miss the difference between:

defective : cO khigrn khuyet assign : giao (vigc)

loophole : ke ha c6 the trenh ne dtrac inaccurately : khOng chinh xec

purity : dq tinh khigt, thugn chgt paper clip : kep gigy

The Licensee's personnel were given training (Passive) and

The Licensee's personnel were giving training (Active)

Where possible, therefore, try to avoid the passive

5 COMPREHENSION QUESTIONS

5.1 Study the form of the contract sentence in this Memorandum of

Understanding How would you reword the document so that it makes sense grammatically? Omit "witnesseth" or omit "expresses" an understanding and add that after witnesseth

Memorandum of Understanding

This Memorandum of Understanding expresses an understanding between the Moran Corporation (hereinafter called "Moran") and The Ministry of Public Works of the Republic of Verbena (hereinafter called "the Ministry") regarding development of a photovoltaic system of power generation for use

in the Republic of Verbena

Witnesseth:

Whereas Moran and the Ministry have cooperated on the development of a prototype system

Now therefore the parties hereto agree as follows:

licensee : ngtrai thus

licensor : ngud cho thus

memorandum of understanding : biOn ban ghi nha

prototype : nguyen mau registered : da clang ky

1 Moran and the Ministry shall cooperate in producing a plan for the

installation of a pilot project plant at a site to be designated by the Ministry

[Further provisions]

In Witness Whereof the parties hereto have caused this Memorandum to be this day executed in Verbena City

5.2

1 Study this extract from a warranty for advanced electronic equipment:

Any defects or faults detected or occurring must be notified by the Buyer to the Seller within 30 days of the defect or fault being detected or occurring

a Can a clear distinction be made between faults and defects in a warranty?

or refurbished components shall not be used

components : linh kien pilot project plant : nha may thut nghiOm cua du an execute : thut hien, ky ket impair : lam ton thuttng den

a Is there a clear distinction between the terms new, unused, and not of

an age which would impair their performance?

b If no, why do you think the drafter used all three terms ? same as C :

c Is there a clear distinction between reconditioned and refurbished

a Rephrase these sentences in the active form:

Corrections to drawings shall be discussed (Passive Verb) and agreed (Passive Verb) by such members of the Consortium as are thereby affected

(Passive Verb)

b

A unanimous decision is required (Passive Verb) on all technical questions

by which members of the Consortium are affected (Passive Verb), and, as far

as single members are concerned (Passive Verb), their express written approval is required (Passive Verb)

consortium : c6ng xo6c xiom, tap doan

rephrase : viet lai cho r6 nghia

unanimous : nhat tri