Language plays a vital role in international commercial contracts, ensuring clarity and mutual understanding between parties from different legal and cultural backgrounds. The selection and proper use of language in a contract not only facilitate effective communication but also help prevent potential disputes. This document outlines the principles, considerations, and legal implications of language clauses in international commercial contracts, providing guidance for drafting and managing multilingual agreements.
- Principles for Choosing the Language in Contracts
Currently, two key laws governing contracts in Vietnam—the Commercial Law 2005 and the Civil Code 2015—do not contain specific provisions mandating the language of contracts or requiring contracts to be written in Vietnamese.
Based on the civil law principle that “parties are free to do what is not prohibited by law”, as well as the principle of freedom of contract in commerce, the parties to a contract are free to choose the language in which the agreement is drafted and expressed. This means:
- The parties are not required to have a Vietnamese version of the contract.
- Contracts drafted in other languages remain binding and enforceable between the parties.
- Key Considerations for Language Clauses in International Commercial Contracts
- Selection of the Official Language
The language clause must clearly specify the official language of the contract. This is the language that will be used throughout the negotiation, execution, and performance of the agreement. The choice of language depends on the mutual understanding and agreement between the parties:
- Choosing English: English is commonly selected as the official language in international commercial contracts because it is widely recognized and understood in global trade. Using English ensures that both parties can easily comprehend and fulfill their contractual obligations.
- Choosing Other Languages: In certain cases, parties may choose another language (e.g., Chinese, Japanese, Korean) if both have a deep understanding of that language. The contract can be drafted in any language, provided it is mutually agreed upon.
Additionally, the choice of an official language significantly impacts the dispute resolution process. In the event of a conflict regarding specific terms or content in the contract, having a designated official language facilitates a smoother dispute resolution process.
- Number of Contract Versions and Translations
When selecting the official language, parties should also agree on the number of contract versions and the treatment of translations:
- Prioritizing the Official Language: If the contract is drafted in multiple languages, the language clause should specify which version will take precedence in the event of inconsistencies. For example, if the contract is prepared in both English and Vietnamese, the clause might state that the English version prevails in case of conflict.
- Translation Costs and Accuracy: If multiple language versions are required, the parties should agree on: Who will bear the costs of translation and Responsibility for ensuring the accuracy of the translations.
- Practical Notes for Drafting Multilingual Contracts
While parties are free to choose the language of their contract, administrative procedures or interactions with state agencies (e.g., tax authorities, accounting departments) in Vietnam generally require the use of Vietnamese. Additionally, in the event of a legal dispute handled by Vietnamese courts, the official language of proceedings is Vietnamese, as stipulated in the Civil Procedure Code 2015.
For contracts not written in Vietnamese, a notarized Vietnamese translation is required for use in administrative or judicial processes. To address this, international commercial contracts are often drafted in a bilingual format (e.g., English and Vietnamese). To avoid inconsistencies between the original and the translation:
- Draft the contract bilingually from the outset.
- The bilingual contract can be prepared by the company, stamped for authentication, and the company assumes full legal responsibility for its accuracy.
- Alternatively, reputable translation agencies may be hired to ensure the highest level of precision.
- Legal Value of Language in International Commercial Contracts
- Dispute Resolution and Language Priority
International commercial contracts are often prepared in multiple language versions. However, achieving complete consistency across different language versions is extremely challenging. Translation errors or ambiguities can lead to differing interpretations, potentially resulting in disputes. In such cases, the question arises as to which version will be used for dispute resolution.
- Priority Based on Contractual Agreement: If there is a conflict between language versions (e.g., Vietnamese and English), the resolution will depend on the provisions of the contract. The language clause should specify the priority of one language over the other.
- Equal Legal Value: If the contract does not specify a priority language, all versions are deemed to have equal legal value. However, in practice, having a designated official language simplifies negotiations and dispute resolution in case of conflicts.
– Recommendation:
To avoid disputes, parties should explicitly agree on the legal value of each language version. The contract should specify which version will take precedence in cases of ambiguity or inconsistency. This ensures clarity and facilitates smoother resolutions in the event of disputes.
In conclusion, language clauses are a critical component of international commercial contracts, ensuring clarity, mutual understanding, and enforceability. While parties have the freedom to choose the language of their agreement, careful consideration must be given to the official language, the number of contract versions, and the treatment of translations. Explicitly defining the legal value of each language version in the contract minimizes risks of disputes and facilitates efficient resolution processes. By addressing these issues during the drafting stage, parties can enhance the efficiency and reliability of their contractual relationships.
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1. Lawyer Vu Thi Phuong Thanh, Chairman of the Members’ Council, Ha Noi Bar Association
Email: vtpthanh@tlalaw.vn
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Dinh Phuong Thao