DISPUTE SETTLEMENT REGARDING OBLIGATIONS OF THE SELLER IN INTERNATIONAL SALES CONTRACT UNDER CISG 1980 AND REMARKS FOR VIETNAMESE ENTERPRISES

TABLE OF CONTENT LIST OF ABBREVIATIONS ...................................................................................i LIST OF TABLES AND FIGURES ..................................................................... iii INTRODUCTION ....................................................................................................1 CHAPTER ONE: OVERVIEW ON THE CISG 1980 THE DISPUTE REGARDING OBLIGATIONS OF THE SELLER IN INTERNATIONAL SALES CONTRACT ...............................................................................................9 1.1. Overview of The United Nations Convention on Contracts for the International Sales of Goods (CISG 1980) .............................................................9 1.2. Overview of obligations of the seller in international sales contract .........11 1.2.1. Delivery of the goods and handing over documents ..............................13 1.2.2. Conformity of the goods .........................................................................17 1.2.3. Thirdparty claim ....................................................................................21 1.3. Overview of dispute regarding obligations of the seller in international sales contract ...........................................................................................................23 1.3.1. Definition and characteristics of dispute in international sales contract 23 1.3.2. Modalities of dispute settlement in international sales contract .............25 1.3.3. Classification of dispute regarding obligations of the seller in international sales contract ................................................................................27 1.4. The importance of analyzing and studying the dispute settlement regarding the obligations of the seller in international sales contract under CISG 1980 ...............................................................................................................30 1.4.1. Literature meaning of the research .........................................................30 1.4.2. Practical meaning of the research ...........................................................31 CHAPTER TWO: DISPUTE SETTLEMENT REGARDING OBLIGATIONS OF THE SELLER IN INTERNATIONAL SALES CONTRACT UNDER CISG 1980 AROUND THE WORLD ..................................................................32 2.1. The application of CISG 1980 in dispute settlement ...................................32 2.1.1. Ground for application ............................................................................32 2.1.2. Remedies for dispute regarding obligations of the seller .......................33 2.2. The current situation of dispute settlement regarding obligations of the seller in international sales contract under CISG 1980 ......................................40 2.2.1. Number of dispute cases applying the CISG 1980 .................................40 2.2.2. Content of dispute cases .........................................................................42 2.2.3. Dispute settlement method .....................................................................43 2.3. Typical cases of dispute settlement regarding obligations of the seller in international sales contract under CISG 1980 ....................................................44 2.3.1. Dispute settlement regarding the delivery of goods and handing over documents ..........................................................................................................44 2.3.2. Dispute settlement regarding the conformity of the goods ....................48 2.3.3. Dispute settlement regarding thirdparty claim ......................................51 2.4. General evaluations ........................................................................................53 CHAPTER THREE: REMARKS FOR VIETNAMESE ENTERPRISES ......55 3.1. Forecast on the trend of dispute regarding obligations of the seller in international sales contract in Vietnam ...............................................................55 3.1.1. Factors affecting the trend ......................................................................55 3.1.2. Forecast on the trend of dispute regarding obligations of the seller .......57 3.2. The situation of applying CISG 1980 in international sales contract of Vietnamese enterprises ..........................................................................................61 3.2.1. The current situation of applying CISG 1980 in international sales contract of Vietnamese enterprises ....................................................................61 3.2.2. General evaluations ................................................................................64 3.3. Remarks for Vietnamese enterprises ............................................................65 3.3.1. Draft and sign international sales contracts with the highest concern ....65 3.3.2. Raise awareness and master the laws of international sales contract and relevant commercial laws in the world ..............................................................69 3.3.3. Develop qualified human resources with deep understanding of legal aspects of international sales contract ...............................................................71 3.3.4. Carefully research the foreign markets and partners in advance ............74 3.3.5. Prepare carefully for efficient litigation at court and arbitration center in case of dispute ...................................................................................................76 3.3.6. Strictly maintain prestige and reputation with foreign partners .............77 CONCLUSION REFERENCES APPENDICE

HO CHI MINH CITY CAMPUS

GRADUATION THESIS

Major: International Business Economics

DISPUTE SETTLEMENT REGARDING OBLIGATIONS OF THE SELLER

IN INTERNATIONAL SALES CONTRACT

UNDER CISG 1980 AND REMARKS FOR

VIETNAMESE ENTERPRISES

Author : Đàm Minh Hiếu Student ID : 1201035540 Class : K51CLC2 Supervisor : Nguyễn Tiến Hoàng (PhD.)

Ho Chi Minh City, May 2016

Code: 132

HO CHI MINH CITY CAMPUS

GRADUATION THESIS

Major: International Business Economics

DISPUTE SETTLEMENT REGARDING OBLIGATIONS OF THE SELLER

IN INTERNATIONAL SALES CONTRACT UNDER CISG 1980 AND REMARKS FOR

VIETNAMESE ENTERPRISES

Author : Đàm Minh Hiếu Student ID : 1201035540 Class : K51CLC2 Supervisor : Nguyễn Tiến Hoàng (PhD.)

Ho Chi Minh City, May 201

Code: 132

TRƯỜNG ĐẠI HỌC NGOẠI THƯƠNG

CƠ SỞ II TẠI TP HỒ CHÍ MINH

NHẬN XÉT KHÓA LUẬN TỐT NGHIỆP

Họ và tên sinh viên: ĐÀM MINH HIẾU MSSV: 1201035540

Tên đề tài: Dispute settlement regarding obligations of the seller in international sales contract under CISG 1980 and remarks for Vietnamese enterprises (Giải quyết tranh chấp phát sinh liên quan đến nghĩa vụ của người bán trong hợp đồng mua bán hàng hóa quốc tế theo CISG 1980 và bài học kinh nghiệm cho doanh nghiệp Việt Nam)

Điểm tinh thần, thái độ, chuyên cần (tối đa 1 điểm; cho điểm lẻ đến 0,1):

Ý kiến nhận xét (khoanh tròn lựa chọn phù hợp):

1 Sinh viên đã nghiêm túc thực hiện KLTN theo sự hướng dẫn của giảng viên GVHD chịu trách nhiệm về tên đề tài, mục đích, đối tượng, phạm vi & phương pháp nghiên cứu và tên các chương, các đề mục chính (2 chữ số)

2 Sinh viên chưa thực hiện đầy đủ hướng dẫn của giảng viên GVHD không chịu trách nhiệm về đề tài

3 Sinh viên không thực hiện hướng dẫn của giảng viên GVHD không đồng ý cho sinh viên nộp KLTN

Tp Hồ Chí Minh, ngày 04 tháng 05 năm 2016

Giảng viên hướng dẫn

(Ký và ghi rõ họ tên)

TS Nguyễn Tiến Hoàng

Ghi chú: Mẫu nhận xét này được đóng cùng cuốn KLTN, đặt ngay sau trang bìa phụ

SV chuyển GVHD nhận xét và cho điểm tinh thần, thái độ, chuyên cần rồi nộp KLTN cho BMNV

Mã KLTN: 132

LIST OF ABBREVIATIONS i

LIST OF TABLES AND FIGURES iii

INTRODUCTION 1

CHAPTER ONE: OVERVIEW ON THE CISG 1980 & THE DISPUTE REGARDING OBLIGATIONS OF THE SELLER IN INTERNATIONAL SALES CONTRACT 9

1.1 Overview of The United Nations Convention on Contracts for the International Sales of Goods (CISG 1980) 9

1.2 Overview of obligations of the seller in international sales contract 11

1.2.1 Delivery of the goods and handing over documents 13

1.2.2 Conformity of the goods 17

1.2.3 Third-party claim 21

1.3 Overview of dispute regarding obligations of the seller in international sales contract 23

1.3.1 Definition and characteristics of dispute in international sales contract 23 1.3.2 Modalities of dispute settlement in international sales contract 25

1.3.3 Classification of dispute regarding obligations of the seller in international sales contract 27

1.4 The importance of analyzing and studying the dispute settlement regarding the obligations of the seller in international sales contract under CISG 1980 30

1.4.1 Literature meaning of the research 30

1.4.2 Practical meaning of the research 31

CHAPTER TWO: DISPUTE SETTLEMENT REGARDING OBLIGATIONS OF THE SELLER IN INTERNATIONAL SALES CONTRACT UNDER CISG 1980 AROUND THE WORLD 32

2.1 The application of CISG 1980 in dispute settlement 32

2.1.2 Remedies for dispute regarding obligations of the seller 33

2.2 The current situation of dispute settlement regarding obligations of the seller in international sales contract under CISG 1980 40

2.2.1 Number of dispute cases applying the CISG 1980 40

2.2.2 Content of dispute cases 42

2.2.3 Dispute settlement method 43

2.3 Typical cases of dispute settlement regarding obligations of the seller in international sales contract under CISG 1980 44

2.3.1 Dispute settlement regarding the delivery of goods and handing over documents 44

2.3.2 Dispute settlement regarding the conformity of the goods 48

2.3.3 Dispute settlement regarding third-party claim 51

2.4 General evaluations 53

CHAPTER THREE: REMARKS FOR VIETNAMESE ENTERPRISES 55

3.1 Forecast on the trend of dispute regarding obligations of the seller in international sales contract in Vietnam 55

3.1.1 Factors affecting the trend 55

3.1.2 Forecast on the trend of dispute regarding obligations of the seller 57

3.2 The situation of applying CISG 1980 in international sales contract of Vietnamese enterprises 61

3.2.1 The current situation of applying CISG 1980 in international sales contract of Vietnamese enterprises 61

3.2.2 General evaluations 64

3.3 Remarks for Vietnamese enterprises 65

3.3.1 Draft and sign international sales contracts with the highest concern 65

3.3.2 Raise awareness and master the laws of international sales contract and relevant commercial laws in the world 69

3.3.3 Develop qualified human resources with deep understanding of legal aspects of international sales contract 71

3.3.5 Prepare carefully for efficient litigation at court and arbitration center in case of dispute 76 3.3.6 Strictly maintain prestige and reputation with foreign partners 77

CONCLUSION

REFERENCES

APPENDICES

LIST OF ABBREVIATIONS

Number Abbreviations Definition

International Sales of Goods

Credits

21 ULF

Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods

International Sale of Goods

Law

Law

LIST OF TABLES AND FIGURES

Number Names of tables and figures Page

1

Figure 3.1: The number of dispute cases regarding

international sales contracts handled by VIAC from 2006 to

2015

58

2

Table 2.1: Statistics on 5 nations with the highest number of

dispute cases regarding obligation of the seller from 2001 to

2015

41

3

Table 2.2: Statistics on number of dispute cases relating to

each article of the seller’s delivery hand handing over

documents from 2011 to 2015

42

4

Table 2.3: Statistics on number of dispute cases relating to

each article of the conformity of the goods from 2011 to

2015

43

5

Table 2.4: Statistics on number of dispute cases regarding

obligation of the seller settled in Trial Court and Appeal

INTRODUCTION

1 The necessity of the research

In the era of globalization and trade liberalization occurring worldwide, the international trade of goods has become a key driving force to promote Vietnamese national economy According to the statistics of the General Department of Vietnam Customs, the national import and export volume reached 327.76 billion USD in

2015, increasing 10% in comparison with that of 2014 The total export volume in

2015 achieved 162.11 billion USD, 7.9% higher than that of the same period last year It can be seen that Vietnamese enterprises are effortfully expanding their export of key commodities to foreign markets while they are in need of importing raw materials, machines and equipment for their domestic production In these international business relationships, Vietnamese enterprise, as the seller or buyer, must realize the importance of drafting and signing an international sales contract with foreign partner to ensure the sustainability of the business transactions

However, although contracts for international sales have served as a guarantee for both parties in trading activities, the emergence of the dispute is inevitable, typically the dispute resulting from the irresponsibility of the seller in executing his obligations Whether the conflicts are caused by subjective or objective reasons, damage and loss still happen to both parties Considering the context of Vietnam actively stimulating export and the inexperience and ignorance of Vietnamese enterprises in the international market, the dispute regarding the obligation of the seller is unavoidably increasing, resulting in lawsuit and compensation

Besides, recently, the President of Vietnam has timely recognized the superiority of the United Nations Convention on Contracts for the International Sale

of Goods (hereinafter referred to as CISG 1980), a source of uniform law embodying a modern approach to govern international sales contract and adjusting about 80% of global transactions The official documents have been signed on

sources of applicable law for international sales contracts between Vietnamese and foreign traders Nevertheless, from the practice of business, the knowledge level of

Vietnamese enterprises about international commercial laws, in general, is still limited Domestic firms, which previously have less interest in understanding laws, now have to get accustomed to a new law code This state of uncertainty might lead

to more disputes arising in the upcoming period, especially dispute relating to the obligation of the seller

Acknowledged that these above-mentioned issues would put Vietnamese enterprises at a disadvantage position and huge financial risks if they fail to

anticipate the risks, the author is inspired to choose the title: “Dispute settlement

regarding obligations of the seller in international sales contract under CISG

1980 and remarks for Vietnamese enterprises” for this graduation thesis The

author will conduct the in-depth analysis into the law concepts and practical aspects

of dispute resolution on the obligation of the seller under the CISG 1980 to propose valuable remarks for Vietnam firms

2 Literature review

2.1 Overseas researches

On the worldwide scale, there are enormous sources of researches and papers

studying all extents of this subject The publication Uniform Sales Law - The

UN-Convention on Contracts for the International Sale of Goods (1986) of Peter

Schlechtriem is an outstanding study under which all provisions of the Convention are thoroughly and carefully elaborated in different aspects Especially, the section for the obligation of the seller (from Article 30 to 44) and remedies for the buyer (Article 45 to 52) were closely examined and received many commentaries

A Practical Guide to the CISG: Negotiations through Litigation written in 2007

is another study in which every provision of CISG is brought into light by accurately analyzing the usage of legal phrases under each provision The author Allison E.Butler had identified the seller’s obligation thoroughly on its meaning, purposes as well as the relevant problems arising from them

on Contracts for the International Sale of Goods by Peter Schlechtriem had taken a

closer look at the core subject of this research The author had paid his attention to

only three responsibilities of the seller under CISG and give a clear insight into what it means and how it applies in each circumstance

Last but not least, Rights and Obligations of the Seller under the UN

Convention on Contracts for the International Sale of Goods by Fritz Enderlein is a

valuable publication that had studied the entire Part III, Chapter 2 of the Convention, including the obligation of the seller and remedies available under CISG for the buyer Each provision is explained in the most precise and evident way that provided a deep understanding of the subject based on its roots and history

In sum, the statute of the obligation of the seller under CISG 1980 was highly favored by foreign academic community These researches are the helpful sources

of literature material to provide theoretical foundations and frameworks of seller’s responsibility under CISG 1980 However, it can be seen that most of them lack hands-on experience through the lenses of practical standpoints upon dispute settlement in global commercial activities Thus, they were unable to generalize the situation of conflict resolution around the world, and no remark was suggested

2.2 Domestic researches

In Vietnam, the number and quality of researches on CISG 1980 are not intensive and bounteous in comparison with foreign countries However, there are several outstanding articles and documents that could be useful for studying

The most recent scientific material is the summary book of the seminar Thực

tiễn áp dụng Công ước Viên 1980 về hợp đồng mua bán hàng hóa quốc tế – Bài học

Ho Chi Minh City by the university’s scientific research group The summary book fully contains ten comprehensive and rigorous reports about the practical application of fundamental institutions of CISG 1980, written by research group’s members and lecturers of International Commercial Law Typical reports can be

listed such as Thực tiễn một số tranh chấp liên quan đến hàng hóa theo quy định

của CISG 1980 written by Ms Nguyen Thi Thu Thao (MD.), Một số vấn đề về hợp đồng mua bán hàng hóa quốc tế trước cơ hội Việt Nam tham gia Công ước Viên

1980 written by Mr Nguyen Cong Phu and Một số vấn đề về bồi thường thiệt hại

do vi phạm hợp đồng – Luật và án lệ của CISG written by Mr Le Tan Phat (MD.)

This summary book is unimpeachably a reliable collection of informative and readable works that equips readers with most updated knowledge analyzing under the viewpoint of Vietnamese scholars for Vietnamese business environment

The research Đề xuất Việt Nam gia nhập Công ước Viên về hợp đồng mua bán

hàng hóa quốc tế by The Committee on International Trade Policies of Vietnam

Chamber of Commerce and Industry published on June 2007 had considered the experiences of the Contracting States when they became members of CISG Significantly, by analyzing the economy, legal systems and other aspects of Vietnam, the research also pointed out many benefits for Vietnamese enterprises and provided several solutions, which are practical and feasible for them to enhance their activities in international sales contracts by using CISG 1980

Besides, the website cisgvn.wordpress.com, established by Mr Nguyen Trung

Nam (M.D.) – Chief Executive Officer of EP Legal, and Ms Nguyen Minh Hang (PhD.) – Lecturer of Foreign Trade University, has published several articles which

examine many aspects of CISG The article Nghĩa vụ các bên supplied some legal

precedents on the matter of obligations of buyer and seller in international sales contracts, together with the author’s commentation on each case

These studies have reflected an utmost effort of Vietnamese researchers in generalizing the basic theoretical and practical framework of CISG 1980 to apply to Vietnamese economy However, as Vietnamese enterprises are increasingly doing international businesses, these works have not researched specifically for domestic firms Thus, they are unable to solve chronic and perennial problems in Vietnam

3 Objective and duties of the research

3.1 Research objective

On the basis of examining the practice of dispute settlement regarding the obligation of the seller in international sales contract under CISG 1980, the author aims at conducting distinct remarks for Vietnamese enterprises to prevent conflicts with foreign salesmen and strengthen their business activities

3.2 Research duties

To accomplish this thesis, the author has defined principal tasks that would be resolved in each chapter:

- Enquiring the theoretical foundations of the obligations of the seller in international sales contract under CISG 1980, from which, elucidating specific traits

of disputes usually arising and reasoning why this matter should be acutely aware of and actively studied by Vietnamese enterprises

- Interpret the grounds for application of the remedial provisions regarding disputes originated from the seller’s duties under CISG 1980

- Identify the current situation of dispute settlement concerning the seller’s responsibilities in international sales contract; analyze and elaborate on the typical legal cases around the world to detect general findings worth considering

- Inferring some remarks and recommendations for Vietnamese enterprises as

a precaution to prevent avoidable risks and unnecessary conflicts in international sales contract with foreign salespersons

4 Object and scopes of the research

4.1 Research object

The research object of this thesis is the dispute settlement regarding the obligation of the seller in international sales contract under CISG 1980

4.2 Research scopes

Scope of time: The thesis predominantly concentrates on the fundamental

theory and practical applications of CISG 1980 in settling disputes with respect to the contractual obligation of the seller based on legal cases collected from the 1990

up to now Thence, specific remarks and suggestions will be proposed for Vietnam’s enterprises in the near future

Scope of space: The thesis studies the usage of CISG 1980 in resolving typical

international disputes concerning the seller’s obligations between salesman from the Contracting States such as Germany, Italia, The selected legal cases were mostly handled by courts and arbitration centers

Scope of content: The thesis will elaborate on the regulations of CISG 1980

governing the obligation of the seller (specifically from Article 30 to Article 52) After that, an in-depth analysis will be conducted on the application of the Convention to three types of relevant dispute: dispute regarding the delivery of

goods and handing over documents; dispute regarding the conformity of the goods and dispute regarding third-party claim

5 Research methodologies

On the foundation of dialectical materialism and historical materialism, the author used principally the method of analysis and synthesis of the information collected throughout the researching process In order to attain the best outcome for the thesis, these following methodologies had also been applied to gather trustworthy information and data:

- Secondary data collection: This method combined a series of works, such

as collecting, making relevant comparisons, analyzing, scrutinizing, synthesizing information and data from reliable sources, namely textbooks, publications, journals, legal documents, annual reports, domestic and international researches

- Case study method: This technique involved collecting and selecting typical

and significant cases relating to the obligation of the seller from credible sources

(http://www.cisg.law.pace.edu) and International Institute for the Unification of Private Law (UNIDROIT) database (http://www.unilex.info/) After being chosen, the several outstanding cases would be examined carefully with the process as followed reviewing the case face abstract and issue, determining the rules and application, analysing the argument of parties and the Court, commenting on the final judgment Finally, the author will raise discussions, give comments and make evaluations, which, later, can be utilized to draw out remarks for Vietnamese enterprises

- Comparative law method: This method undertook essential comparisons

between CISG 1980 and other national or regional legal systems to determine the similarities and differences among jurisprudences on regulating the same issue, which is the dispute settlement regarding the obligation of the seller in international sales contract Other law codes consist of Vietnam Commercial Law 2005 (VCL 2005), Uniform Commercial Code (UCC), Principles of International Commercial Contracts (PICC), Principles of European Contract Law (PECL), Convention relating to a Uniform Law for the International Sale of Goods (ULIS)

- In-depth interview method: The author managed to consult Mr Nguyen

Cong Phu – Deputy Chief Judge of the Economic Court of People’s Court in

HCMC and Mr Pham Van Chat (PhD.) – Arbitrator at Vietnam International

Arbitration Centre (hereinafter referred to as VICA) All of these professional contributions and insightful advice helped with updating current reality of legal system and dealing with practical and complex situations of the dispute settlement, thus, brought out solutions and lessons for Vietnamese enterprises to minimize their risks and reinforce their efficiency The experts’ verifications and interview scripts can be found in detail in the Appendix of this thesis

6 Novelty of the research

The preceding research papers and articles have established a foundation on the theory and applications of CISG 1980 by enterprises, arbitrators, courts and law practitioners They have specific and detailed analysis of the feature and traits of the obligation of the seller and available remedial solutions for buyers in case of breach

of contract They also point out some culture and problems arising in interpreting and applying these provisions in courts and arbitration centers

Apart from positive results above, it is crucial to acknowledge that there are still demerits in the existing researches which should be carefully improved later

Firstly, most studies concentrate on the interpretation of regulations of CISG and

discuss the subject matters on the theoretical grounds This approach makes them unable to realize the reality of utilizing CISG and resolving dispute settlement

Secondly, these researches only argue about several aspects and issues regarding the

significant and important topics but lacks the solutions or recommendations for a

particular addressee Thirdly, there are rarely paper or document that solely examine

Vietnamese enterprises in using CISG for international sales contracts and thus, no general situation was summarized, and no remark was proposed in applying CISG and dealing with dispute and conflict

Recognizing the above achievements and drawbacks, the author will make every effort to inherit the insights gained from the previous studies and, at the same time, develop this thesis that can surmount the existing demerits There will be no replication or duplication maintained in this thesis Also, the author can assert that

this Thesis is the first to thoroughly discuss the dispute settlement regarding the

obligation of the seller under CISG 1980 in both theoretical and practical

perspective The subject will be open to explore a huge range of legal cases and

precedents together with their judgment in order to make comments and assessment

of the current dispute settlement concerning seller’s obligation Additionally, the

author will exclusively investigate the ongoing situation of Vietnamese enterprises

in using CISG and handling conflict to make relevant remarks for them The author

believes that this thesis will be helpful for future research projects and becomes a

useful reference for researchers, lecturers and students

7 Structure of the research

In addition to the Introduction, Conclusion, List of Abbreviations, List of

Tables and Figures, References and Appendices, this thesis consists of three main

chapters, namely:

- Chapter One: Overview on the CISG 1980 & the dispute regarding

obligation of the seller in international sales contract

- Chapter Two: Dispute settlement regarding obligation of the seller in

international sales contract under CISG 1980 around the world

- Chapter Three: Remarks for Vietnamese enterprises

The author would like to express sincere appreciation to all lecturers and the

Board of Management of Foreign Trade University for enabling him this precious

opportunity to conduct this research, by which he has a valuable chance to enrich

his intellectual understanding The grateful thanks would be to his supervisor, Mr

Nguyen Tien Hoang (PhD.), who had encouraged and advised him in completing

this thesis

Although this thesis had been revised for several times, there might be

inevitable mistakes due to insufficient knowledge and narrow awareness The

author is looking forward to better improving his works thanks to feedback and

suggestions from all lecturers and readers

The author

Dam Minh Hieu

CHAPTER ONE: OVERVIEW ON THE CISG 1980 & THE DISPUTE REGARDING OBLIGATIONS OF THE SELLER IN INTERNATIONAL SALES CONTRACT

1.1 Overview of The United Nations Convention on Contracts for the International Sales of Goods (CISG 1980)

The United Nations Convention on Contracts for the International Sale of Goods (CISG) has long been acknowledged as the most successful effort in unifying and harmonizing international sales laws The self-executing treaty has contributed immeasurably in minimizing obstacles to international trade, by forming reasonable and modern substantive rules governing issues arising from contracts for international sales However, this enormous accomplishment would have never come into existence if it had not been for the predecessors of CISG The Convention was originated from two substantive international sales treaties sponsored by UNIDROIT – Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF) and the Convention relating to a Uniform Law for the International Sale of Goods (ULIS), both of which were signed at Hague in 1964 and came into effect since 1972

Despite covering relatively all provisions regarding the formation and performance of contract, these two creations appeared not to gain worldwide acceptance and even encountered severe oppositions from many nations at that

time It has been argued to have no chance to succeed from the beginning (Bruno

Zeller, 2007, page 16) since the root of this failure can be traced back to the fact that the involvement of the Socialist States or developing countries were inconsiderable and insignificant among 28 contracting states participated in Hague Conventions This leads to the subjective inferences criticizing the two conventions for being weighted in favor of developed countries (Laszlo Reczei, 1981, page 513) and Capitalist states as popular sellers, while the interest of developing countries and Socialist nations, as buyers, were understated and undervalued

In 1968, after considering the request of most countries within the United Nations, UNCITRAL initiated an innovative project to draft a new Convention that could solve the inherent problems of the two forerunners As a result, the CISG was

formed and signed in Vienna (Austria) in 1980, with comprehensive innovations and substantive improvement Since then, the new Convention has ceaselessly assisted traders from over the world in their business and earned certain achievements From the first 11 countries to ratify CISG as a multilateral treaty on 1 January 1988, it had steadily and continuously increased the number of countries of adherents As of March 2016, there are 84 States that have enacted the CISG, including nine out of ten nations achieving the biggest export and import volume worldwide in 2015 (Appendix 3), accounting for over two-thirds of international

trade and representing every geographic region, every stage of economic

development and every major legal, social and economic system (John Felemegas,

2000) Vietnam was the most recent state to ratify the participation plan to the Convention, prospectively having acceded to it on January 01st, 2016

Part of the success might be due to the ameliorative structure of Convention which combining and reparing all the unsolved problems of the ULIS and ULF The Text of the Convention is presented with 101 Articles, organized into four Parts, which standardize sufficiently all essential elements arising from contracts for international sale of goods, Its structure can be briefly summarized as follows:

Part 1 - Sphere of application and general provisions, comprises of the first

13 articles, stipulating clearly the applicability of the Convention and dealing with general principles in interpretation, formality requirements and sales practices Noticeably, Article 7 underlines the strict adherence in interpreting the Convention, aiming at promoting the uniformity and the good faith in global trade

Part 2 – Formation of the contract, ranges from Article 14 to Article 24,

addressing legal matters in contract formation This part focuses on issues emerging from offer and acceptance, with specific regulations about definition, feature, validity, withdrawal, and revocation The final two articles state the time when a contract is concluded and when an indication of intention “reaches” the addressee

Part 3 – Sale of goods, possesses the largest number of articles (from Article

25 to Article 88) This part is logically organized into five chapters, one of which is

the core subjects of this thesis, named as Obligations of the seller Remarkably,

there is no separate chapter for breach of contract and its applicable remedies These

provisions are integrated and presented correspondingly after the lists of obligations

of each party This arrangement proves to be preeminence over other international sales laws since it not only eases the difficulty of lookup but also reflects the motive

of generating juridical fairness for both sides in a contractual relationship

Part 4 – Final provisions, contains the last 13 Articles, sets out procedural

rules for nations, including the entrance process, reservations, effectiveness of CISG and other matters regarding denunciation

1.2 Overview of obligations of the seller in international sales contract

obligation is a formal and binding agreement or acknowledgement of a liability to

do a certain thing Accordingly, international sales contract is one kind of

reciprocal legitimate agreement producing obligations binding buyer and seller in a commercial transaction Conventionally, the right of a party in a contract is not

explicitly established but inclusive in the duties of other party In CISG, one finds

the rights of the buyer implied in the obligations of the seller in Articles 30-44 and the rights of the seller implied in the obligations of the buyer in Articles 53-60”

(Fritz Enderlein, 1996, page 135) Therefore, with the purpose of smoothening the trading process, avoiding conflicts and, mostly, ensuring the interests of parties being fulfilled, sales laws usually concentrate on these legal responsibilities and require the highest commitment to performance from both sides

For PICC, the drafters do not separate the duties of each side in a contract but

neutrally demonstrates in Article 5.1.1 that the contractual obligations of the parties

may be express or implied It means that seller might find himself binding not only

by the expressly stipulated contract clauses but also by implicit terms The main reason for these definition can be found in Article 1.7 of the same code, which is

each party must act in accordace with good faith and fair dealing in international trade Other cause might be the fact that given the nature of the purpose of the

obligation, the seller feels that these obligations went without saying, or are

included in the practices formed between the parties or prescribed by trade usages Similarly, the PECL also generalize joinly their contractual obligations as express

and implied responsibilities in Article 6:101 and Article 6:102

On the contrary, the Uniform Commercial Code, which have been promulgated

to harmonize the law of sales accross the United States of America, has set up

briefly in Article 440.2301 that the obligation of the seller is to transfer and deliver

in accordance with the contract Especially, these obligations are emphasized to be

perfect tender, which means delivering goods that precisely meet the contract terms

In the CISG 1980, the general obligations of the seller are summed up in Article

30 as deliver the goods, hand over any documents relating to them and transfer the

property in the goods, as required by the contract and this Convention In

comparision with the above sales laws, CISG has a more particular approach to define the legal responsibilities of the seller in international contract It sets forth three elements of due performance while the actual standards for each element are explained in subsequent articles Notably, despite ruling the transfering of property

in the goods as part of seller’s obligations, the Convention does not provide specific regulations but leave the governance for domestic law chosen by conflict-of-law rules Therefore, applicable domestic law administers when the property is consider passed or which documents may be needed for the transfer of property Besides, the Convention also extends the seller’s duties to conformity of the goods and third-party claims Similar to the Convention, Vietnam Commercial Law 2005 categorizes the seller’s obligation into three main duties which is delivering goods and handing over documents; conformity of the goods and third-party claims

Although each sales law have its own definition, the essence of the seller's obligation is specified by what the parties have agreed upon and written in the contract This reflects the general spirit fact that sales laws exalt the impotant of freedom of contract in the context of a maket-oriented economic Article 1.1 of

PICC states that the parties are free to enter into a contract and to determine its

content The Vienna Convention specifically designs Article 6 to address this

principle, which allows both parties to exclude the application of the Convention, derogate from or vary the effect of any of its provisions The reiteration of freedom

of contract in sales law, therefore, lessens the value of CISG and its detail seller’s obligations can be used only as supplementary to the contract of the party (Fritz Enderlein, 1996, page 137)

1.2.1 Delivery of the goods and handing over documents

Delivery is considered to be the most fundamental obligation of the seller in international trade The performance of the seller other than delivery represents an attempt to fulfill this core obligation The concept of delivery, however, is not distinctly construed in the CISG The Convention only describes how the seller can perform their obligations, rather than whether delivery actually takes place So, delivery may involve different actions by the seller, such as transferring the goods

to a carrier or place goods at the buyer’s disposal if the buyer comes and collect the goods Therefore, it can be suggested that “delivery”, in a broader term, can be expressed as any actual or physical actions to transfer the posession of goods by handing them over or even by placing them at the buyer’s disposal In CISG, the seller’s obligation to deliver will be broken down to the following aspects

1.2.1.1 Place of delivery

Place of delivery is the location where the seller is obligated to deliver the goods to Together with time of delivery, this element is indispensable as it not only serves business purpose but also, under the CISG, determines the passage of risk and conformity of the goods In practice, the seller is bound to the location of delivery which are mutually agreed and expressly written in the contract The contractual autonomy of parties always prevails the regulations of CISG However,

if the parties have not agreed on a specific place for delivery, Article 31 of the Convention provides three additional situations for application

The first situation discusses the international sales contract involving carriage of the goods The Convention indicates that seller will fulfill his obligation to deliver

only when he hands the goods over to the first carrier for transmission to the buyer

A typical example is a contract with FOB terms, which the seller have the

obligation to place the goods free on board the vessels acknowledged as the first

carrier of the buyer This regulation mentions the first carrier because there are usually several carriers involved In any case, handing the goods over to a first carrier means handing them over to an independent organization If the seller himself operates trucks, he is not the carrier Besides, carrier is the collective term used for different means of transportation

The other two situations deal with contracts concluded without the involvement

of the carriage of goods, which is uncommon in international sales, thus, only apply for a small minority of international sales The seller must place the goods at the buyer’s disposal if the contract of sale does not involve carriage of the goods and

the goods are specific goods, or unidentified goods to be drawn from a specific

stock or future goods – which are to be manufactured or produced at a particular

place that, at the time of the contract conclusion, the parties are all aware of Example might be a certain quantity of rocks from a quarry, a certain quantity of wine from the next crop in a certain vineyard, and the like In this case, both seller and buyer must be aware of the specific place that the goods will be drawn from or

produced at Placing the goods at the buyer's disposal means doing everything

necessary to make the goods available so that the buyer need to do no more than take possession This includes specification or at least precise identification of the goods, and, in some circumstances, preparation of the goods as required, such as

packaging and notification to the buyer

The last situation of Article 31 implies cases of delivery in which neither the carriage of goods nor the place of goods are specified during the conclusion of the contract Therefore, the seller’s place of business at the time of the conclusion of the contract are chosen If the seller has more than one place of business, reference must be made to Article 10

1.2.1.2 Time of delivery

Similar to place of delivery, the time for delivery is an integral part of the contractual obligation because the buyer’s duty of payment arises upon delivery Article 33 of CISG provides three circumstances regarding time of delivery Subsection (a) of Article 33 states that the seller must deliver the goods on a date

fixed or determinable from the contract Usually the parties will mutually agree on

the time of delivery in their contract so there is no negative legal issue as the date is clear and explicit However, the delivery time can be referred from the contract if it follows established practices or usages impliedly made applicable

Under subsection (b), if there is an agreement on a period of time during which delivery can be made, the seller is at liberty to choose at which date within this time

span he wants to deliver For example, given that April is set to be the time of delivery, the seller can deliver on the first of April as well as on the thirtieth Predetermining a period of time often gives him necessary flexibility to prepare the goods and arrange the transport Nevertheless, several cases give buyer the right to choose a date of delivery, such as in FOB contract, the buyer himself has to arrange the carriage of the goods and charters a vessel This will be taken as an indication that the buyer reserves the right to choose delivery date within the agreed period In this case, he has to send the seller the necessary shipping instructions in due time For all cases falling out of the above categories, subsection (c) of Article 33

declares that the seller must deliver the goods within a reasonable time after the

conclusion of the contract This rule corresponds to the respective rules of

numerous domestic laws, typically UCC (Section 2309(1)) It is meant to apply on case whose date cannot be ascertained due to ambiguity or absence in a contract The “reasonable time” varies from case to case and depends on numerous factors, such as nature of the goods, buyer purpose of the goods, distance covered, parties statements during negotiations, acceptable commercial conduct and practice in relation to similar circumstances and so on Determining reasonable time can only

be specified precisely if buyer and seller cooperate with good faith or jurisdiction authority handle the problem Therefore, subsection (c) is an open regulation for courts to make verdict in cases both parties reach an impasse in a dispute

There was a case that an Italian plaintiff sold a bulldozer to a Swiss defendant who did not pay two remaining instalments as he accused the seller of late delivery Because no date had been fixed in the contract, the court applied Article 33.c of CISG, and found that the delivery, made within two weeks after the seller had received the first instalment, was in reasonable time Hence, the seller was granted with claim for payment of the two outstanding instalments

1.2.1.3 Handing over documents

Documentation plays an essential role in international transaction since it legitimates the goods in sales However, the seller is not bound to hand over documents in all cases and the Convention also does not regulate the seller to do so But, if the contract or Incoterm clause or usages request the seller to tender

documents relating to the the goods to the buyer, Article 34 of CISG states that he

must perform this duty at the time and place and in the form required by the

contract Here, the contract is dominant in the international business relationship

The place, time and form of tendering documents can be found in the contract or Incoterms and are not neccessary to be accompanied with the delivery of the goods The time at which documentation must be handed over is frequently made the subject of an express provision in the contract If the seller places the goods at the buyer’s disposal on a particular date, the necessary documents should be tendered in sufficient time to enable the buyer to take over the goods on that date In other cases where specific time is not indicated, it is required to be “as soon as possible” after the goods have been shipped

About the place, the seller must hand the documents over at the place stated in the contract If there has been no specific place agreed upon, the parties may be identify one from the circumstances, for instance by the method of payment If payment is to be made by documentary credit through a bank in the seller’s country, the place of tendering is likely the premises of the bank

The form of tendering are less likely to be concerned However, it is important

to conform to the form since this shows goodwill of the seller in business The form

of tendering will set forth the method of transfering documents to the buyer such as

by post, by the carrier or by directly delievering at seller’s office

One thing should be noted is that Article 34 neither provides a definition of the required documents The type of documents will often be determined by the contract, by the clause of Incoterms or by usages This can cover documents of title

or other ancillary kinds which do not represent the goods, such as bills of lading, warehouse receipts or other shipping documents

The remaining of Article 34 grants that if the seller has handed over documents before the delivery date, he have a right to cure any lack of conformity in the documents up to that time, provided that his act does not cause the buyer unreasonable inconvenience or expense For instance, he might supplement additional copies for the missing papers or exchange documents if they were in the wrong language

1.2.1.4 Other obligations in delivery

Article 32 works with the remaining aspects of the delivery of the goods Subsection 1 concerns the seller’s obligation to give notice of the consignment to the buyer, specifying the goods in cases where the goods are not clearly identified to the contract by markings on them or by shipping documents, stamps, or otherwise This requirement protects the buyer from the seller if he intends to identify the goods for the contract later, particularly after the goods have been damaged or lost, and thus passing the risk to the buyer In practice, the seller usually inform the buyer of the consignment in any case The seller’s duties to give the buyer notice of having loaded or delivered the goods into the custody of the railway or on board the vessel is also contained in several clauses of the Incoterms, such as FOB

Subsection 2 refers to the arrangement of carriage of the goods, which the seller

is not obligated to perform in all cases However, if the contract or delivery clauses said so, the seller must make other necessary contracts for the carriage to the place fixed by both parties The means of transportation to be chosen by the seller have to

be appropriate in the circumstances These circumstances can be listed such as the

kind, quantity and packing of the goods, the distance of carriage, the season, the available means of transport or existing transport relations In the case of perishable goods, refrigerated wagons would be appropriate or, depending on the nature of the goods, a fast means of transport such as airplane or express railway should be considered.The standard for these obligations must be according to the usual terms The last subsection of Article 32 concerns with the seller who is not bound to effect insurance for the shipment In CISG, the seller is not responsible for the insurance of the goods during carriage, but also finds himself obliged to such duties from the contract or from the clauses of Incoterms, such as CIF However, if the buyer requests insurance information, the seller must send it as soon as it available

1.2.2 Conformity of the goods

1.2.2.1 Definition of conformity of the goods

In international sales, goods is the motive of the buyer, thus, the conformity of goods is the utmost concern that the seller should focus As stipulated in Black’s Law Dictionary (10th edition), conformity is correspondence in form, manner or

use; agreement; harmony; congruity Accordingly, conformity of the goods can be

explained as the adherence of the goods to the contractual agreement of the parties Due to the importance of conformity, necessary standards must be established to determine the accuracy and reliability of the goods, which can be found in laws and regulations The CISG 1980 has already governed this matters in Article 35 with

two approaches At first, Article 35.1 makes clear that the seller must deliver goods

which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract It is

undoubtedly that the first conformity determination begins with the expressed contractual requirement since CISG dignifies the flexibility in agreement of both parties This provisions specify the standards of conformity based on four objective elements which are quantity, quality, description and packaging, as provided in the contract In the lack of the requirements in the contract, the court will review other documents or the prior practices of the parties to determine the conformity

For the second approach, in case the parties are unable to define the conformity based on the contract, Article 35.2 defines four criteria in which the delivered goods are deemed to non-conform with the agreement if the parties have not agreed

otherwise In the first criteria, the non-conforming goods is described to not be fit

for the purposes for which goods of the same description would ordinarily be used

The standard of ordinary use is be reflected through the usual qualities of the goods such as endurance, fail-safety, design or intrinsic characteristics For example, if the

goods are specified as durable refrigerator, those products will not be considered fit

for the purposes if the buyer can only use them for a few weeks, which clearly was

not durable In other word, goods unfit for the purposes usually lacks suitable property or hold defects, which degrade its market value or lessen its usage efficiency, comparing to the goods with same description

For the second criteria, non-conforming goods will not be fit for any particular

purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement This particular purpose is the buyer’s specific intention when buying the

goods for usage or resales This purpose should be make clear explicitly or implicitly to the seller so that he give full consideration for providing the satisfied goods However, this regulation also rule out that if the buyer does not consider the the seller’s skills and judgments in purchasing, the goods will be considered conformed For instance, if the buyer orders specialized drillers for severe conditions from a trader of used drillers, the sole notice of his particular purpose is not sufficient since the trader is not familiar this kind of products

The third criteria states the conformity of the goods can be acknowledged by comparing with the quality of sample or model, which can be provided by the seller

or the buyer requested himself This criteria is relied on whether both parties agree

to use sample or model to specify the characteristics of the goods Lastly, the Convention defines that the goods is non-conforming if they are not contained or packaged in usual manner of similar goods, for example, the usually manner used for the similar goods that are normally observed in the practice of the seller's branch If the usualness in manner is undefined, adequate manner to preserve and protect the goods must be made to ensure its conformity Also, Article 35 restricts the seller’s liability under the above four circumstances for non-conformity of the goods if, at the time of concluding contract, the buyer knew or could not have been unaware of these lack of conformity

The two approaches of CISG are restructured from the former one approach of ULIS Clearly, the CISG regulations are more logically, understandable and give more flexibility for the parties in drafting contract On the other hands, the regulation of Vietnam Commercial Law 2005 bear the resemblance to the CISG According to Article 39 of VCL 2005, the non-conforming goods is also based on 4 criteria: the unfit for the ordinary use purpose of goods in the same category; unfit for any specific purpose informed by the purchaser; the quality of the samplle goods and the usual manner in preserving or packing goods of the same category

1.2.2.2 Obligations of the seller in case of non-conformity

The obligation of the seller in case of non-conformity refer to the duties of the seller when he violates one of the criteria listed in Article 35.1 and Article 35.2 The

Convention gives clear instructions in Article 36.1 that the seller is liable in

accordance with the contract and this Convention for any lack of conformity which exists at the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only after that time The determination of whether the

goods conform to the contract is made at the time of the risk passing to the buyer, which is dealt later in the Convention Risk usually passes when the seller hands over the goods to the first carrier (Article 67) or when the buyer takes over the goods or the goods are placed at the buyer’s disposal (Article 69) Under the FOB clause, the risk passes when the goods have effectively passed the ship's rail

In practice, the buyer usually detects only apparent defects at the time he takes over the goods Then, he will detect latent defect after a thorough examination of the goods or not until after the goods have been used Therefore, Article 36.1 makes

it clear that any non-conformity apparent only after the risk has passed to the buyer

is still under the seller's liability Nevertheless, the buyer, in this case, must prove that the lack of conformity already existed at the time of passing of the risk

Also, the Convention regulates in Article 36.2 that the seller will be responsible

for all lack of conformity of the goods which occurs after the time of passing the risk and which is due to a breach of any of his obligations, including a breach of

any guarantee that for a period of time the goods will remain fit for their ordinary purpose or for some particular purpose or will retain specified qualities or characteristics Unlike the previous paragraph, paragraph 2 of Article 36 does not

require the buyer to prove that there was non-conformity when risk passed but base

on the obligation and performace of the seller during the transaction For instance, when the seller fails to package the goods in a manner which preserves and protects them, the goods may be damaged during transport but also after the passing of the risk Bad weather conditions thereafter may also cause the poorly protected goods to spoil and the carrier hired by the seller cause damage to the goods In all these cases, the seller must take bear full liability

Obviously, the seller delivering non-conforming goods is legally responsible for breach of contract pursuant to the CISG provisions However, the CISG 1980 provides an important right of the seller to cure the breach in case of early delivery

It is provided in Article 37 that, up to the date of delivery, the seller is allowed to

deliver any missing part or make up any deficiency in the quantity of the goods delivered as long as his actions do not cause any unreasonable inconvenience or expense to the buyer For example, in a FOB clause, when the buyer has chosen a fixed date for the ship to take delivery at the port, it may be unreasonable inconvenience for him to provide another ship at a later date for missing goods On this matters, VCL 2005 also have the similar regulation, which is Article 41

Moreover, the Convention obliges the seller to disclose any defects of the goods

to the buyer If the seller could not have been unaware of the defects but choose to keep secret from the seller, he cannot use the excuse that he did not know of the defects to rely on Article 38 and 39, which regulating the responsibilities of the buyer in examination and notice of the goods Thus he is also obliged to examine his goods himself, to make sure that his goods conform to the contract

1.2.3 Third-party claim

Third-party claim is a branch of non-conformity of the goods but is being dealt separately in the Convention with Article 41 and Article 42 This structure is different from its predecessor, ULIS, which only have one article in this matter The

first article reads the seller must deliver goods which are free from any right or

claim of a third party, unless the buyer agreed to take the goods subject to that right

or claim This regulation coincides with the seller's obligation under UCC section

2-312.(1): the goods shall be delivered free from any security interrest or other lien

or encumbrance of which the buyer at the time of contracting has no knowledge

This stance can also be met in the English Sale of Goods Act (section 12), the German Civil Code (section 434 and 439(1) 449) and the Swiss Code of Obligations (Article 192 to 196) In this worldwide perspective, is can be assumed that the seller must be responsible for the deliveried goods not subject to any third

party right or claim, in order to protect the normal expectation of a buyer that he is

not purchasing a lawsuit (John Honnold & Harry M Flechtner, 2009, page 264)

The decisive time of the goods to be free form third-party rights and claims is at the time of delivery, not at the time of the contract conclusion Rights and claims might include rights of title For example, in the case of the reservation of title under some legal systems, a third party can sell goods to the seller with the

condition that the goods title shall only pass on full payment of price and if he has not been fully paid, he is able to request the goods returned Another right of title might be pledge (possessory and non-possessory pledge) or obligatory claims under certain agreements, like rent or lease Moreover, rights or claims of the third party must be able to affect the buyer, hinder him from using the goods or at least may cause expenses to the buyer, for instance, a lawsuit in court

On the other hand, the buyer can agree to take the goods subject to third party rights or claims and only in this case, the seller is excluded from liability The buyer’s intention need not be given expressly but can be construed if he definitely knows of such third-party rights or claims and still decides to take the goods The buyer usually engages in this risky act if he expects such claims to soon disappear Under Article 42, the Convention restrict the seller’s liability in accordance with third-party right or claim based on intellectual property, which denotes industrial property, patents, trade marks, models, denomination of origin, copy rights and others The drafters of the CISG understood that this obligation has been limited by the principle of territoriality governing most of intellectual property rights The seller is undoubtfully unable to have complete knowledge of the status

of international intellectual property rights in the same way the seller would have in its own country Therefore, the seller must deliver the goods not subject to any third-party claim based on interllectual property only if, at the time of contract

conclusion, he knew or could not have been unaware, provided that the right or

claim is based on industrial property or other intellectual property: (a) under the law of the State where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; (b) in any other case, under the law of the State where the buyer has his place of business

Article 42 also restricts that the buyer's knowledge of third party rights might

free the seller from his liability if at the time of the conclusion of the contract the

buyer knew or could not have been unaware of the right or claim In contrast to

Article 41, the seller is not required to earn the agreement of the buyer taking goods with third-party claim to be free from liability but only prove that the buyer knew of

the third party right at the time of concluding the contract Another difference is that the buyer must have been aware of intellectual property rights at the time of the contract conclusion, not the time of delivery as in Article 41

The last restriction of the liability of the seller in Article 42 speaks of the right

or claim results from the seller’s compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer Here, the buyer's

knowledge of third party rights is not needed The buyer has to bear any consequence due to his specific instructions to the seller Meanwhile, if the seller knows of such right, under general rules of good faith, he should inform the buyer

If then the buyer still insists on his order, the seller will not be liable for this issue Notably, the Convention only regulates the relations between the seller and the buyer, not those between the buyer and the third party Therefore, the seller should question such claims and, if neccessary refuse them to favor his transaction

1.3 Overview of dispute regarding obligations of the seller in international sales contract

1.3.1 Definition and characteristics of dispute in international sales contract 1.3.1.1 Definition of dispute in international sales contract

As explained in Black’s Law Dictionary (10th edition), dispute is a conflict of

claims or rights; an assertion of a right, claim or demand on one side, met by contrary claims or allegations on the other In Vietnamese Dictionary 13th edition

of Nguyen Nhu Y (chief editor), dispute is a conflict in doing or performing one

matter with contradictory view Therefore, the terminology’s definition can be

acknowledged briefly as conflict or disagreement on the rights and obligations of both sides in a specific relationship

In practice, dispute is a common and prevalent concept in international commerce Article 9.4 of the US - Vietnam Bilateral Trade Agreement defines that

commercial dispute means a dispute between parties to a commercial transaction

which arises out of that transaction Meanwhile, in Vietnam Law on Commercial

Arbitration 2010, Article 3.4 regulates that dispute involving foreign

elements means a dispute arising in commercial relationships or other legal relationships involving foreign elements as defined in the Civil Code From this

point, it can be known that an international commercial dispute is merely a dispute but in a commercial relationship and with foreign characteristic This dispute can emerge from several reasons such as the contract’s content, parties’ rights and obligations or contract performance

Dispute in international sales contract is a dispute between parties in a contract for sales of goods over the performance of obligation which was previously agreed upon, thus, harming the rights and interest of the other Different from other dispute such as dispute between employee and employer, this kind of dispute occurs between businessman, having their commercial headquaters in diffrent nations, and both of whom are bounded by a internationally contractual relationship

Nowadays, dispute in international sales contract arises with a high frequency, causing significant and considerable damage to the enterprises themselves and the economy as a whole As business relationship get more complicated, the value of commercial activities increases and, correspondingly, the probability of a dispute becomes higher The first reason for this trend might be the international factors in the sales contract that create grave dissimilarities and divergences between parties from different nations These inherent and natural discrepancies can be listed such

as culture, language, business practice and usage, but especially, the domestic regulations which are changing frequently and the lack of understanding legal systems Secondly, the interest and obligation of each party will be perceived distinctly and tend to clash with one other Thus, there is a high chance that one side will take advantage of the legal loopholes and the insufficient knowledge of the other to create conflict and gain benefits However, the principle of fair trading and respecting partners is still dignified by bona fide enterprises

1.3.1.2 Characteristics of dispute in international sales contract

Firstly, dispute in international sales contract is conflict arising from

international sales of goods so it will be controlled by various economic determinants such as profit, loss, business opportunity or trade secret

Secondly, the disputing parties in international sales contract are businessmen,

or at least, one side of the parties is businessman These parties must have different nationalities or have their business head offices located in different nations

Thirdly, this type of dispute characterizes by contractual relationship in an

international sales of goods Therefore, an asset factor will exist, connecting closely with the right and obligation of buyer and seller The infringement of obligation of one side results in the violation of the other’s interest, causing conflict and dispute

Fourthly, there will be differences and disagreement in the breach of contract or

the solution to the consequence When conflict occurs, the parties have the right to resolve by themselves on the basis of equality and agreement, or file law suit

In sum, dispute in international sales contract converges sufficiently all characteristics of a general dispute However, it also bears distinct features for an international sales activity, specifically, the issue emerging from the contract conclusion and performance Hence, before signing international contract, salesman are required to foresee any incident in order to bring forward contingency and mitigation plan or prepare efficient and flexible solution to any potential problem

1.3.2 Modalities of dispute settlement in international sales contract

1.3.2.1 Non-jurisdictional modality

Non-jurisdictional modality gives prominence to the voluntariness and goodwill

of the parties, also dignifies the freedom and equality when both sides review the issue together This type of resolution includes mediation and negotiation

Negotiation is a dialogic method between parties on the basis of concessive debate with the intention of reaching a beneficial outcome This is a simplest and quickest modality since only buyer, seller and their consultants participate in a negotiation, which also saves time and legal fee for both sides

Mediation, on the other hand, is undertaken through a mediator coming from legal company or mediation center The attempt of this modality is to help parties in

a disagreement hear one another, maximize any area of agreement, and seek a compromise or mutually agreed outcome With the mediator’s participation, the dispute can be resolved amicably since he acquires professional knowledge and skills in legislation and mediation However, his job is limited to only be a third party consulting both sides and finding reasonable solution without any jurisdiction When applying these two modalities, if two sides reach a satisfactory agreement, they can continue to execute the contract and keep the relationship

However, since this is non-jurisdictional, any party can choose to refuse the settlement result without any legal enforcement In the case of no adequate solutions

to agree on, the buyer and seller can turn to jurisdictional modality

1.3.2.2 Jurisdictional modality

Different from non-jurisdictional modality, jurisdictional modality is specialized with compulsory legal remedies The parties can ask for this type of method at the arbitration center or the court These addresses are trustworthy and reliable since their process and formality have been legalized and backed with legal mechanism to guarantee the performance of parties after judgement

A court is a governmental institution with the authority to adjudicate legal disputes between parties and carry out the administration of justice in accordance with the rules of law The procedure at court will proceed through two level: trial court and appellate court Trial court pronounces preliminary conclusion on the case, which will not take effect immediately in order for both sides to file for appeal

at the higher court At the second level, the final judgement becomes effective promptly after announcement

Arbitration is a technique for dispute resolution outside the courts The parties designate to one or more persons, called the "arbitrators", and agree to be bound by his decision An arbitrators will review the case and rule out final judgment without any appeal, which is immediately binding on both sides and legally enforceable Normally, international businessman prefer their dispute solved at the arbitration center than the court The explanation for this general trend can be found

in the way each place executes their hearing While the seller and buyer are being judged publicly by the court, which can affect their image and reputation, the arbitration center enables them to settle their conflict privately, hence, protecting the prestige of both parties Besides, the arbitrator is also known as a professional in legal aspects of international trade and an experiencer in dispute settlement, while the court’s judge is perceived to not always possess intellectual and practical understanding in the matter of dispute

In addition, the process of arbitration center is much simpler and more flexible than the court, which is time-saving and cost-cutting As shared by Mr Nguyen

Cong Phu, Deputy Chief Judge of the Economic Court of People’s Court in HCMC, before the Vietnamese court start the hearing, they have to convey all subpoena and documentations to the foreign side through an international accredited process, which is multistage and complicated Moreover, the verdict of the court might not

be applied promtply since it has to be recognized and approved by the government

of other nations On the other hands, aritrator’s award is acknowledged globally thanks to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention 1958) However, when choosing arbitration center, the parties should consider the fact that their decision is final and unappealable so the demerit made by arbitrator can not be mended

The four above-mentioned modalities are legally assented in Vietnam (stated in Article 317, Vietnam Commercial Law 2005) However, due to its significance and importance, the thesis will only focus on analyzing jurisdictional modality

1.3.3 Classification of dispute regarding obligations of the seller in international sales contract

The buyer’s performance of his obligations is one of the most basic and determinant elements, deciding the success or failure of the sales contract, concurrently, brings along the interest of the buyer in receiving the expected goods Therefore, dispute regarding the obligation of the seller is the most common conflict emerging from international sales contract The dispute can originate from various matters related to the seller’s obligation explicitly written in the contract However,

in the sphere of this research, the author will concentrate on three typical disputes concerning the duty of the seller, based on the regulations in the Convention

1.3.3.1 Dispute regarding the delivery of the goods and handing over documents

Delivery of goods in international sales contract is a major complexity in world trade since the parties of the transaction locate in different nations which are separated by a long distance, making the journey of delivery conceal a lot of uncertainties and problems Therefore, the delivery of the goods is usually regulated heavily and cautiously in the contract and international regulations The dispute

frequently emerges from those provisions when the seller does not commit judiciously to his performance

There are two matters relating to most of the conflicts, which are the place and time of delivery The seller might not transport the consignment to the exact destination stated in the contract or place the goods at buyer’s disposal in the wrong location Regarding the time of delivery, the most usual dispute happening is the late delivery by the seller, which negatively affect the buyer’s business in case of their urgent need There is also one type of dispute that usually arising, which is the non-delivery Several reasons for this non-performance can be listed but, as explained by Mr Nguyen Cong Phu and Mr Pham Van Chat, mostly due to the price fluctuation The price is usually fixed at the time of contract conclusion However, later, the price increases and the seller concerns that he might be at loss or unprofitable, so he decides to unilateral exit the contract Furthermore, other disputes regarding seller’s delivery can be counted such as the inappropriate form of carriage, the lack of notice of consignment or non-disclosure of goods information Besides the delivery, dispute can also originate from handing over documents relating to the goods Since documentation is an important evident to prove the title

of the goods and reflect other aspects of the transaction, any breach in tendering documents to the buyer, in regard of time, place and form, can be responsible for dispute between buyer and seller

1.3.3.2 Dispute regarding the conformity of the goods

As analyzed in part 1.2.2 of this thesis, the conformity of the goods will be determined by the agreement in the contract If it is unable to specify the conformity

of the goods by the contract’s provisions, the Convention provides the parties with basic criteria for the identification Nevertheless, in reality, the interpretation and application of those criteria by the contracting parties and the jurisdictional institutions vary greatly, which might cause dispute over whether that goods adhere

to the conformity It can be the result from the fact that contracting parties are located in two nations with discrepancies in culture, business practices or domestic laws, influencing them to perceive the matters of conformity differently Another convincing reason is the ceaselessly movement of the real world, creating

unpredicted circumstances For example, a new prohibition on the export of specific goods due to epidemic or new requirement of certificate of quality will constitute the non-conformity of the goods The third reason is the lack of specific and meticulous provisions defining the term relating to conformity in the contracts This negligence in drafting can cause misunderstanding and misconception of the proper obligations Last but not least, the inability of the seller in accomplishing his obligation can lead to dispute regarding the conformity of the goods For instance, the buyer might argue that he is unable to supply the appropriate goods to plead for his incompletion, which encounters disagreement from the buyer and triggers the dispute between contracting parties

1.3.3.3 Dispute regarding third-party claim

There is a breach of contract if the seller delivers goods which are not free from any right or claim of a third party, except for the case the buyer agrees to take such goods The regulations of the Convention provide protection of the buyer's right against the incapacity of the buyer in transferring the goods ownership, for example,

he sell goods which he does not own, or the goods sold are encumbered by a third party right However, these unfounded claim from the third party must have an impact on the buyer and cause inconvenience to the buyer, such as the possession of the goods, or the use or disposal are restricted by the third party Since they do not expect to be hindered in the use of the goods or to deal with the additional sides, the buyer can reasonably believe the seller violate the contract agreement and start to dispute over his rights

Moreover, this kind of dispute also emerge from the right or claim based on industrial property or other intellectual property Because the seller is not expected

to perceive comprehensive understanding of the status of international intellectual property rights, dispute will happen if one party reasons that the other party knew or could not have been unaware of such claims (Article 42 of CISG), but he still decide to breach the contract Also, it is important to note that the Vienna Convention only provides provisions governing the relationship betweem the seller and buyer, not between the buyer and the third party

1.4 The importance of analyzing and studying the dispute settlement regarding the obligation of the seller in international sales contract under CISG 1980

The United Nations Convention on Contracts for the International Sale of Good

is indeed the story of a worldwide success that everyone had hoped for but most probably did not expect (Ingeborg Schwenzer and Pascal Hachem, 2009, page 458) Therefore, on the way to the adoption of the Convention into Vietnamese legal system, the study on dispute settlement regarding the obligation of the seller in international sales contract under CISG constitutes an indispensable role which should be done meticulously and carefully so that the application of CISG to Vietnam can also witness considerable success

1.4.1 Literature meaning of the research

Firstly, lessons and remarks from the research will assisst legislative body in

realizing the advantages and preeminences of the Convention, and accordingly, collate them with domestic commercial law to find out some drawbacks or demerits

in the current regulations of Vietnam Then, necessary modification and edification

of the law can be made to correspond with the real situation of the economy The trend of domestic law amendment to be in compatible with international legislative models in specified areas such as the sale of goods is not unfamiliar anymore

because transplantation of laws is an effective way to speed up law reforms by

avoiding the natural evolution of laws (Bruno Zeller, 2007, page 11)

Secondly, the study of dispute settlement regarding the obligation of the seller

in international sales contract under CISG 1980 would be an essential documents for advanced academic studies Since the research of the Convention does not receive proper attention in Vietnam, this thesis unquestionably helps to enlarge and diversify the sources of legal studies, which provides scholars, researchers and students with an innovative writing for their scientific study With this contribution, the academic community can take further steps in conducting deeper research on other aspects of the seller’s obligation under CISG 1980 and, by that, bring out more lessons and recomendations for Vietnamese enterprises, stipulate the development of Vietnamese business environment

1.4.2 Practical meaning of the research

Firstly, the deep investigation into the practice of resolving dispute regarding

seller’s obligation under CISG 1980 will provide Vietnamese enterprises with

reliable and trustworthy sources of experiences and remarks for their business with

foreign partners Even though CISG will eventually become the primary applicable

law of foreign trade activities in Vietnam, the awareness and understanding of

Vietnam enterprises are still at a low level Therefore, it is absolutely beneficial of

this research to supply domestic firms with a comprehensive view in dealing with

conflict resulting from the breach of obligation of the seller Vietnamese salemen

can be confident in drafting contracts, dealing with unexpected problems and

minimizing unneccessary conflicts

Secondly, this research would be an useful material for the arbitrators and

judging bodies in their profession They can extract general findings and valuable

remarks in dispute settlement so that it would be easier for them to recognize the

potential causes of the issues and be able to select the most appropriate and optimal

method to resolve the conflict between the contracting parties On the long-term, the

research on these dispute cases also provides a vivid reality for this issue, which

improves the profession of related state cadres

Finally, dispute settlement bodies can also reduce the amount of time spending

on processing every case by reading exemplary legal cases as an invaluable

reference By researching precedents and experiences in judging worldwide, dispute

settlement bodies can acquire precious knowledge for their professions and apply

them into actual cases that they are going to handle in the future

In conclusion, chapter 1 has explained basic foundation on the concept of

obligation of seller under CISG 1980 and, from that point, recognized potential and

typical disputes that might arising from the duties of seller in international sales

contract Besides, the author also have briefly introduced the Convention and

clearly stated the necessity and benefits for conducting this research These general

background theories shall serve as a basis for a systematic research about the

application of CISG in practical settlement of dispute regrading obligation of the

seller and help to draw general evaluations, which will be presented in Chapter 2