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Official Gazette

Friday, August 18, 2017

Suggestions on standard terms in draft amendments to the 2005 Civil Code

Updated: 10:47’ - 20/08/2014

Đỗ Giang Nam, LL. M
School of Law, Vietnam National University

 Introduction

The Ministry of Justice has recently published the draft amendments to the 2005 Civil Code (the 2014 Draft) on its website for public discussion.[1] One of the new significant issues raised by the 2014 Draft is the provision on “general trading conditions”. Some specific comments on its definitions and its relationship with the provision on “standard form contracts”, which is already presented in the current 2005 Civil Code (the 2005 CC), will be discussed later. Here, for the sake of this part, both concepts can be generally understood as referring to the contracts containing standard terms which are not individually negotiated, but offered by one party to the other party who can only take it or leave it.

The standard terms, which can be used for multiple transactions, play an important role in promoting economic efficiency by reducing transaction costs in a lengthy negotiation process.[2] As a result, they have become an inevitable part of daily transactions in modern society. They are used not only in business-to-consumer (B2C), but also for business-to-business (B2B) transactions.

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Hanoi market management officers guide consumers to distinguish
genuine from counterfeit goods __Photo: The Duyet/VNA

However, the standard terms pose a new challenge for traditional contract theory, which is built on the idea of individual contracting.[3] It concerns a risk that the contract terms are imposed one-sidedly by these users on a “take it or leave it” basis.[4] The capability of the counter-parties to make a fair bargain, which the traditional contract theory depends on, would therefore be diminished.

This paper aims to explore to what extent the problem has been addressed by the current Vietnamese law, including the new provisions in the 2014 Draft. We would try to identify some specific challenges posed by the standard terms to the current paradigm of Vietnamese contract law, before analyzing the current regulations on standards terms in Vietnamese law. Then, the incorporation of standard contract terms, unfairness control of standard contract terms and interpretation issues would be dealt with. Finally, the paper is concluded with a call for further research to better the Draft.

Challenges of the standard terms to the principle of freedom of contract

The principle of freedom of contract signifies that one is free to decide whether or not to contract, with whom one wants to contract (party freedom) and on the terms of the agreement (term freedom).[5] The freedom of contract has been built up on the basic assumption that, because a contract is the result of the free bargaining of parties who are on equal footing, the contract terms are expected as a fair agreement between them.[6]

However, the freedom of contract paradigm in this classical contract law has faced many new challenges in modern societies when standard terms have become an inevitable tool of mass production of standardized goods and services.

When such terms are used, contract parties no longer truly bargain, so there is in fact no or little freedom to determine the contents of contract.[7] Indeed, a lack of negotiation can lead to a lack of informed consent where one party is not aware of the existence of certain contract terms which are pre-formulated by the other party. Hence, there is a need to justify how one contract party is bound by these terms. In other words, the first issue is how can a set of standard terms which is unilaterally offered by one party become part of an individual contract (the incorporation issue)? Secondly, how should vague or ambiguous clauses be interpreted if the other party cannot have any impact on the drafting process (the interpretation issue)? Thirdly, the most important problem of using standard terms is the potential one-sidedness of conditions when the counter party is imposed unfavorable or even unfair terms by the user of standard terms. Hence, how should the fairness of contract be guaranteed in such cases (the issue of control of unfair terms)?

When the standard terms are applied in the transactions between the businesses and consumers, one more important factor that should be taken into account is the status of the consumers as weaker contracting parties. Indeed, the weakness of the consumer relative to the suppliers of terms results from his lack of information and bargaining power.[8] To that end, Vietnam’s 2010 Consumer Protection Law (the 2010 CPL) was passed on the assumption that consumers require a higher level of protection than normal protection measures provided by general rules of contract law in order to ensure the balance of interests in transactions between consumers and businesses.[9]

It does not mean that the use of standard terms does not generate any problems for B2B transactions. Some scholars even convincingly argue that none of the policy reasons for the control of standard terms requires a limitation to B2C contracts or a different test for B2B contracts.[10] This paper, however, does not try to answer the normative question that whether the consumer protection should be extended to the business. The ultimate aim of the paper is to figure out to what extent the current Vietnamese law, including the new provisions in the 2014 Draft, has addressed the potential problems posed by the standard terms? Therefore, the scope of this research should not be limited to one specific kind of contract, but covers both B2B and B2C contracts.

An overview of the Vietnamese regulations on standard terms

As the law currently stands, there are two major pieces of legislation dealing with standard terms: the 2005 CC and the 2010 CPL. The 2005 CC has explicitly introduced one provision on standard form contracts, which focuses on the interpretation of standard terms and the exemption clauses.[11] It can apply to all kinds of contract, including one between one business and another, one between businesses and consumers, and to a limited extent, even to “private” contracts where neither party is acting in the course of a business.

However, in 2010, the drafting committee of the 2010 CPL argued that although some provisions on standard terms have been presented in the 2005 CC, they are insufficient to protect consumers.[12] Hence, the 2010 CPL has created a more detailed regulation on standard terms. The new regulation covers almost every important issue including the interpretation of unclear contractual terms[13], the invalidity of unfair contractual terms,[14] and mandatory registration of standard form contracts and “general trading conditions” which apply only to contracts for goods/services included in the “list of essential goods and services”[15]. Thus, so far the 2010 CPL is the most comprehensive regulation on the standard terms in Vietnamese legal system. However, as compared to international practice, the problems of standard terms faced by consumers have not been sufficiently addressed.

It is widely argued that the 2005 CC should be upgraded to better regulate the standard terms, which are applied in all kinds of contract.[16] In contrast to this high expectation, the regulation on the standard terms in the draft has been marginally reformed. First, the 2014 Draft introduces the notion of general trading conditions, which is mainly inspired by the same concept in the 2010 CPL.[17] Second, the article on exemption and restriction clause is set forth under the 2014 Draft as a mandatory rule rather than a default rule under the current 2005 CC.[18]

In the 2014 Draft, a “standard form contract” is still defined as the same wording in the 2005 CC as a contract which contains provisions prepared by one party and given to the other party for reply within a reasonable period of time; if the offeree gives its reply of acceptance, the offeree shall be considered as having accepted the entire content of the standardized contract offered by the offeror.[19] Whereas, Article 415 of the 2014 Draft states that general trading conditions are rules which are announced by the offeror and generally applicable to the offeree; if the offeree gives its reply of acceptance, the offeree shall be considered as having accepted the entire content of the standardized contract offered by the offeror.

Contrary to the lengthy definition in the 2005 CC, the 2010 CPL gives a much simpler definition of standard form contracts and general contract terms. According to Article 3, standard form contract is a contract drafted by a trader for multiple transactions with consumers”. Furthermore, Article 3 of the 2010 CPL introduces the new notion of “general trading conditions” which has not been presented in any other Vietnamese legislation. It is literally defined as “rules and regulations on sale and/or supply of services which are announced by a trader and applicable to consumers”.

According to one of the members of the drafting committee of the 2010 CPL, the general trading conditions have three typical features: (i) they are rules and regulations which are individually drafted by the seller; (ii) they are mainly applied for the consumers, and (iii) they are generally applicable for multiple transactions with consumers.[20] This author also argued that the general trading conditions can be presented in various forms, and one of its most popular presentations is the standard contract form. Hence, it can be argued that the general trading conditions should be understood as rules and regulations which are announced by a trader and applicable to the consumers regardless of whether they are accompanied to the main contract or not. As a matter of fact, the 2010 CPL has given the same legal effect for rules concerning both general trading conditions and the standard contract forms in all the related provisions and it is also the case of the 2014 Draft.

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Customers visit a real estate exhibition __Photo: Thanh Vu/VNA

Although there is a minor difference between the notions of standard terms and general conditions, it is more important to understand that both of them indicate the same phenomenon where the contract terms have been formulated in advance for general and repeated use by one party and which are actually used without negotiation with the other party. From a comparative perspective, although there are also many different definitions of standard terms, all of them, focus on the key characteristics of these clauses, which is the fact that they are not negotiated between the parties.[21]

The current Vietnamese regulations, including the new provisions in the 2014 Draft, therefore, should be tested to what extent it addresses the potential problems posed by the above notion of standard terms.

Incorporation of standard terms

The first important issue regarding the regulation on standard terms is how and under what prerequisites standard terms may be incorporated in a contract. According to traditional theory of formation of contract, it is firmly required that in order to integrate the standard terms which are drafted by only one party in a contract, these terms should be accepted by the other party. However, as mentioned above, in many cases, the other party who has even accepted an offer is unable to know about all the standard terms because these terms may be represented outside the contract. The first question may arise whether a mere reference to standard terms is sufficient to incorporate such terms in the contract or whether a supplier of standard terms may make the text of terms available to the other party. Furthermore, in many transactions between two businesses that both use their standard terms, the second question is what terms are part of the contract.

The 2010 CPL has implicitly provided a general solution to the first question. The most related provisions that should be mentioned are Article 17 on performance of standard form contracts and Article 18 on implementation of general trading conditions. Article 17 states that traders must, when entering into standard form contract, provide a reasonable period of time for a consumer to examine the contract. Whereas Article 18 requires any traders using general trading conditions to publicly announce such conditions prior to entering into transactions with consumers.[22] The underlying rationale of these provisions is that the issuer of standard terms must provide the other party with the opportunity to take notice of them. However, those provisions do not clearly define what are the legal consequences if the issuer of the terms has not fully performed their duties?

Regarding the second issue, contrary to B2C contracts, in B2B contracts, it is not uncommon that both refer to their own standard terms when negotiating to reach an agreement which is normally called as the “battle of the forms” issue.[23]

The 2014 Draft, as mentioned before, does not give any further instructions rather than current provisions in the 2005 CC. Hence, when dealing with conflicting standard forms, some provisions in the traditional theory of formation of contract should be carefully examined. First and foremost, according to Article 395 of the 2005 CC, if the offeree accepts to enter into a contract but states the conditions therefore or modifies the offer, the offeree shall be considered as having made a new offer. By this mechanism, the original offeror now becomes the offeree who must in turn accept the counter-offer. Therefore, when applying this rule to cases involving standard terms, it is likely that the party who last refer to his terms would prevail. This solution is very close to the “last shot” doctrine in English law.[24] On the other hand, in some countries, such as the Netherlands, if offer and acceptance contain references to different standard terms, the second reference has no effect.[25] Thus, it is named as “first shot” doctrine.[26]

However, both doctrines are problematic when the parties have negotiated during a long process and it is difficult to determine who has made the final offer or final acceptance. In this aspect, the approach in the Unidroit principle,[27] or the Draft Common Frame of Reference (DCFR),[28] which is named as the “knock-out” rule is to be preferred. Under these provisions, both sets of standard contract terms apply to the extent that they are common in substance and neither sets applies in so far as terms conflict with each other.[29] Therefore, it is useful to learn some inspirations from these models to draw a clearer solution to the problem of battle of forms in Vietnamese law.

Fairness control of standard contract terms

Once the standard terms have passed the incorporation test for integrating into the contract, legislation typically provides for control over their content. There were two competing approaches - the transaction cost theory and the “abuse of power” theory, which are mainly applied to explain the legislative control over unfairness in standard contract terms.[30]

The transaction cost theory: This theory relates to an inherent nature of standardized contract terms, which emphasize the asymmetry of “transaction costs” between the users and their counter parties.[31] Since the users of standard contract terms only pay once for multiple transactions, they are always better informed, which then enables them to unilaterally decide the content of contract. Meanwhile, for the counter parties, it is often too expensive to obtain the information needed for the negotiating process. As a consequence, the use of standardized contract terms presents an inherent danger of depriving one party of the possibility of revising the terms of the contract in detail and thus requires some external control over the fairness of the transaction. In light of the problems identified with standard terms, it has been advocated that the legislators should play an active role to remedy the market failure in order to promote competition and consumer confidence.[32]

The ‘abuse of stronger position’ theory: The rival theory rests on the notion of an “inequality of bargaining power”.[33] Accordingly, the rationale behind the control of contract terms, as opposed to the “transaction costs” theory, is not the inherent risk of standard terms, but rather a protection of an identified class of persons.[34] Due to his economic, social and psychological superiority, a business will be capable of one-sidedly imposing his contract terms to the consumer’s detriment. The legislative control of fairness, therefore, is based on the new paradigm of contract law - the protection of the weaker party. Some typical examples of this paradigm are the rules designed to protect not only consumers but also employees, and tenants.[35]

In Vietnam, evidence of both approaches could be found in the regulations on standard terms. On the one hand, it is obviously stated by the draft committee of the CPL that the main purpose of this act is to protect the consumers who are regarded as vulnerable market participants against unfair terms, which are imposed by the traders.[36] To this end, Article 16 of the 2010 CPL sets out a list of nine kinds of terms which are deemed to be invalid.[37] On the other hand, since the 2005 CC and the 2014 Draft are both consistently driven by the idea that a contract is the result of the free bargaining of parties with equal footing,[38] the regulation on unfairness of contract terms is likely based on the transactions cost theory. Accordingly, the 2005 CC provides for a provision, which invalidates any exemption clauses in standard form contracts which are applied for all kinds of contracts.[39] The 2014 Draft has introduced a new provision regarding general trading conditions.[40] However, as analyzed above, it is only limited to exemption clauses, thus it is not a very important development of the Vietnamese regulations on standard contract terms. The main differences between the 2005 CC and the 2010 can be outlined below:

From the surface comparative study, the current status of Vietnamese Law is quite identical to English Law. On the one hand, the decision of the 2014 Draft to continue limiting the scope of control only over the exemption clauses is very similar to the idea of Unfair Contract Terms Act adopted in 1977.[41] The Act does not allow the control of unfair terms in general and mainly focuses on limitation and exclusion clauses that are inserted in B2B and B2C contracts. Outside the Scope of the Act, no general contract law doctrine of unfairness exists to which a party that seeks to set aside a term can appeal.[42] On the other hand, the 2010 CPL can be compared to Unfair Terms in Consumer Contracts Regulations (UTCCR 1999).[43] This act was adopted to implement the Directive 93/13/EEC on Unfair Terms in consumer contracts.[44] This regulations are confined to consumer contracts and terms, which were not individually negotiated, it contains, however general provisions that provide more general control on unfairness in consumer contracts.[45]

Nevertheless, to look closely at the regulations on standard terms, there is much difference between Vietnamese law and English law.[46] The most important one is the lack of general control over the (un)fairness of standard terms in Vietnamese law. Both the 2014 Draft and the 2010 CPL merely provide for a list of one or a number of standard terms, which are always invalid. In principle, the decision to introduce clear rules in the form of an explicit list offers many advantages such as cutting the costs of consumers, seeking remedies or promoting self-imposed control by suppliers themselves.[47] Such detailed provisions increase the likelihood of unfair terms control having a fast, real and proactive effect without the need to wait upon courts and administrative authorities to take action.[48]

However, the lack of a general clause means the lack of an essential tool to introduce the notion of fairness in Vietnamese law and to respond to the need for flexibility. In many legal systems, the popular mechanism for controlling over unfair terms is a combination of a general clause, which establishes a fairness test and a blacklist and (or) grey list of terms.[49]

Directive 93/13/EEC on Unfair Contract Terms (the Directive) which is one of the most well-known legislations regarding the control over unfairness in B2C transactions may draw some useful inspirations for establishing a better mechanism for fairness control in Vietnamese law. It is an attempt of European Commission to regulate the whole area of consumer contracts to ensure a uniform minimum level of consumer protection in the context of the internal market. It sets an minimum harmonisation which requires all Member States to lay down unfair terms used in a contract.[50] To that end, the standard of assessment over the unfairness of terms is provided in Articles 3-4 of the Directive. Article 3 defines the general clause, which is further clarified by the Annex to the Directive which includes an indicative list of terms regarded as unfair. Article 4 lists the factors to be taken into account in order to ascertain whether a term is unfair. Furthermore, in a number of cases, the CJEU has elaborated on these general concepts to establish the criteria for evaluating the unfairness.

The heart of the Directive is Article 3(1), which defines in general the standard of fairness: “A contractual term which has not been individually negotiated, if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.”

Although, the greatest advantage of general clauses is their flexibility which helps them adapt to the changes of the society; at the same time, as the law needs to be certain, any general clause requires extensive concretising by case law or other supplementary tools. Hence, an important list of examples on unfair clauses is attached as an Annex to the Directive. According to Article 3(3) of the Directive, the Annex contains an indicative and non-exhaustive list of the terms may be regarded as unfair. Thus, a contractual term corresponding to the Annex is not automatically unfair. In this sense, the Annex to the Directive is usually called as the grey list in contrast to the black list in which terms are per se ineffective.[51]

Accordingly, the establishment of a general clause in the Vietnamese law may enhance the consumer protection by enabling the court to intervene into the concrete disputes between two parties in a wider scope beyond the listed terms. Hence, the general clause should be established as a main rule to regulate the unfair contract terms. It should only be supplemented by one or more lists of clauses, which are held or presumed to be unfair, instead of being replaced by these lists.

Interpretation of the standard terms

Where standard terms form part of a contract, there are many situations when standard terms need to be interpreted to clarify their meaning.

Article 15 of the 2010 CPL provides that if the contents of a contract can be interpreted in different ways, the organization or individual with authority to settle a dispute shall interpret the contract in favor of consumers. Whereas, Article 407 of the 2005 CC statesIn cases where a standardized contract contains ambiguous provisions, the offeror of the standardized contract shall bear adverse consequences of the interpretation of such provisions”. At first sight, this appears to be a notable difference, but it infers very similar meaning: where there is more than one plausible interpretation, it is the least favorable to the supplier that prevails.

The interpretation approach in Vietnamese law is also recognized in many other legal systems. It is traditionally called as contra proferentem doctrine of contractual interpretation providing that, where term is ambiguous, the preferred meaning should be the one that works against the interests of the party who provided the wording.[52] Its obvious aim is to deal with the inherent dangerous risk of standard contract terms pre-formulatedly drafted by the business.

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Saigon Co.op Mart brings Vietnamese goods to rural consumers __Photo: Thanh Vu/VNA

However, in some cases where the parties have negotiated individual terms and those terms contradict the provisions of standard terms, the question is which terms should prevail? The Vietnamese law seems to be silent in regard to this question. In many countries, for example Germany, it is likely to expect that the individual terms will prevail.[53] It seems to be an obvious rule which reflects the priority of common will of contract parties over the intend of one party, thus one may doubt the need for an express legislation. However, it might be very useful in the future if the court reaches a determination whether oral agreement can prevail standard terms.

Conclusion

In the modern mass production economy, it is a frequent phenomenon that contracts for the manufacturing and delivery of products and services are governed by the standard terms and conditions of one of the parties. The contents of the contracts may contain not only the part specifically negotiated and agreed on by the parties but also by reference to standard terms used by one of the parties, framework contracts, standard industry contracts or a combination of the above. On the one hand, standard terms provide a useful tool for suppliers. On the other hand, the recipients of these terms may face an unfair agreement since they do not have any influence on the standard terms. This is particularly true in the case of consumers who lack bargaining power and knowledge in relative to the traders. As a consequence, the legislative control should be established to remedy the problems posed by the standard terms.

From the best international practice, the legislative control usually applies a three-step control mechanism: (i) The incorporation control over whether the standard terms have been validly incorporated into the agreement; (ii) The fairness control over whether the substantive content of these terms is unfair to the recipients; and (iii) The interpretation control over whether the standard terms have been interpreted in the least favorable to the suppliers. The Vietnamese law has explicitly or implicitly introduced all three kinds of control. However, the problems posed by using standard terms could have been far better addressed through a number of strategies employed above. It is time for the Drafting Committee of the proposed draft amendments to the 2005 Civil Code to make some further research on the basis of comparative approach to draw a better regulation on standard terms in the new Civil Code.-



[1] The proposed draft amendments to the 2005 Civil Code, available at http://www.moj.gov.vn/dtvbpl/Lists/Danh%20sch%20d%20tho/View_Detail.aspx?ItemID=216 accessed 4 July 2014.

[2] Collins, H. “Standard Contract Terms in Europe.” A Basis for and a Challenge to European Contract Law (2008).

[3] Thomas Wilhelmsson, Standard Form Conditions; in Arthur S. Hartkamp, Towards a European Civil Code, Kluwer Law (2011); pp. 571-586.

[4] F. Kessler, ‘Contracts of Adhesion-some Thoughts about Freedom of Contract’, 1943 Colum.L.Rev., p. 629.

[5] See more at Atiyah, P.S. The Rise and Fall of Freedom of Contract (Oxford: Oxford University Press, (1979).

[6] Basedow, Jürgen. “Freedom of contract in the European Union.” European Review of Private Law 16, no. 6 (2008): 901-923.

[7] See more at Radin, Margaret Jane. Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law. Princeton University Press, 2012.

[8] Weatherill Stephen. EU Consumer Law and Policy. Cheltenham, UK: Edward Elgar, (2005); REICH, Norbert; MICKLITZ, Hans-W. Economic law, consumer interests and EU integration. Understanding EU consumer law. Intersentia, Antwerp, 2009, 1-60; Nguyen Van Cuong. The Drafting of Vietnam’s Consumer Protection Law: An Analysis from Legal Transplantation Theories. PhD thesis (2011). Faculty of Law. University of Victoria http://www.law.unimelb.edu.au/files/dmfile/CuongEnglish2.pdf.

[9] Government, Report No. 28/TTr-CP dated April 8, 2010, on the draft Law on Protection of Consumers’ Rights and Interests (To trinh so 28/TTr-CP ngay 8/4/2010 ve Du an Luat bao ve quyen loi nguoi tieu dung) at 4-5.

[10] Hesselink, Martijn W. “Unfair Terms in Contracts between Businesses.”TOWARDS A EUROPEAN CONTRACT LAW (2011): 131-148.

[11] Article 407.- Standardized contracts : 1. A standardized contract is a contract which contains provisions prepared by one party according to a standard contract and given to the other party for reply within a reasonable period of time; if the offeree gives its reply of acceptance, he/she/it shall be considered having accepted the entire content of the standardized contract offered by the offeror. 2. In cases where a standardized contract contains ambiguous provisions, the offeror of the standardized contract shall bear adverse consequences of the interpretation of such provisions. 3. In cases where a standardized contract contains provisions exempting the liability of the offeror of the standardized contract, while increasing the responsibility or abolishing legitimate interests of the other party, such provisions shall not be valid, unless otherwise agreed upon.

(This English version of Article 407 can be accessed from an unofficial translation version of the 2005 CC which is available at Ministry of Justice’s website) http://vbqppl.moj.gov.vn/vbpq/en/Lists/Vn%20bn%20php%20lut/View_Detail.aspx?ItemID=6595 Accessed July 4, 2007.

[12] Government, Submission Report No. 28/TTr-CP dated April 8, 2010, on the draft Law on Protection of Consumers’ Rights and Interests (To trinh so 28/TTr-CP ngay 8/4/2010 ve Du an Luat bao ve quyen loi nguoi tieu dung) at 4-5.

[13] Article 15 of the 2010 CPL.

[14] Article 16 of the 2010 CPL.

[15] See Article 19 of the 2010 CPL as well as Decision 02/2012/QD-TTg dated January 13, 2012, of the Prime Minister, promulgating the list of essential goods and services for which contract forms and general trading conditions must be registered.

[17] Article 415 of the Draft provides that a general trading condition is rules which are announced by the offeror and generally applicable to the offeree; if the offeree gives its reply of acceptance, he/she/it shall be considered having accepted the entire content of the standardized contract offered by the offeror.

[18] Article 407.3 of the 2005 CC states that “In cases where a standardized contract contains provisions exempting the liability of the offeror of the standardized contract, while increasing the responsibility or abolishing legitimate interests of the other party, such provisions shall not be valid, unless otherwise agreed upon”. Whereas the Draft omits the words “ unless otherwise agreed upon’’ which implies that the parties no longer may can exclude the application of this rule or derogate from or vary its effect.

[19] Articles 392, 395, 395 of the 2005 CC.

[20] Nguyễn Như Phát, Some Theoretical Issues for The Consumer Protection Law (Một số vấn đề lý luận xung quanh Luật bảo vệ quyền lợi người tiêu dùng), available at http://www.vca.gov.vn/NewsDetail.aspx?ID=1289&CateID=80 accessed July 4, 2014.

[21] For example, in Article 305 of German Civil Code (BGB), Standard business terms are defined as “all those contractual terms which are formulated in advance for a multitude of contracts which one party presents to the other party upon entering into a contract” Available at http://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb.html#p0907 accessed July 4, 2014.  Article 2.1.19 of the UNIDROIT Principles of International Commercial Contracts also provides an example of such a definition : Standard terms are provisions which are prepared in advance for general and repeated use by one party and which are actually used without negotiation with the other party. Available at http://www.unidroit.org/instruments/commercial-contracts/unidroit-principles-2010/415-chapter-2-formation-and-authority-of-agents-section-1-formation/897-article-2-1-19-contracting-under-standard-terms accessed July 4, 2014. Comment 2 to Art 2.1.19 of the UNIDROIT Principles of International Commercial Contracts properly describes this feature of standard terms as follows:

“What is decisive is not their formal presentation (e.g. whether they are contained in a separate document or in the contract document itself; whether they have been issued on pre-printed forms or are only contained in an electronic file, etc.), nor who prepared them (the party itself, a trade or professional association, etc.), nor their volume (whether they consist of a comprehensive set of provisions covering almost all the relevant aspects of the contract, or of only one or two provisions regarding, for instance, exclusion of liability and arbitration). What is decisive is the fact that they are drafted in advance for general and repeated use and that they are actually used in a given case by one of the parties without negotiation with the other party.”

[22] Furthermore, Article 14 of the CPL provides that the language of contract must be expressed clearly and must be easy for consumers to understand. The Decree 99/2011/ND-CP dated October 27, 2011, of the Government, making detailed provisions and providing guidelines for the implementation of a number of articles of the Law on Protection of Consumers’ Rights explains that language of contract must be Vietnamese; contents must be “clear and simple to understand” font size must be at least 12pt; readability of the print (paper and ink used must ensure sufficient contrast).

[23] Apsey, Lawrence S. “Battle of the Forms.” Notre Dame L. 34 (1958): 556; Ruhl, Giesela. «Battle of the Forms: Comparative and Economic Observations,.» U. Pa. J. Int’l Econ. L. 24 (2003): 189.

[24] See Butler Machine Tool Co. v. Ex-Cell-O Corporation(England) Ltd  [1979] 1 WLR 811, 817, C.A. and Treitel, The Law of Contract, paras. 2-019-2-020.

[25] Dutch Civil Code Article 6:225(3), available at http://www.dutchcivillaw.com/legislation/dcctitle6655.htm Accessed 4 July 2014.

[26] Von Bar, Christian, Eric Clive, and Hans Schulte-Nölke. Principles, definitions and model rules of European private law: draft common frame of reference (DCFR). Walter de Gruyter, 2009, at page 358.

[27] Article 2.1.22 states that “Where both parties use standard terms and reach agreement except on those terms, a contract is concluded on the basis of the agreed terms and of any standard terms which are common in substance unless one party clearly indicates in advance, or later and without undue delay informs the other party, that it does not intend to be bound by such a contract.”

[28] Article II.–4:209 of DCFR provides that if the parties have reached agreement except that the offer and acceptance refer to conflicting standard terms, a contract is nonetheless formed. The standard terms form part of the contract to the extent that they are common in substance.

[29] See more at Von Bar, Christian, Eric Clive, and Hans Schulte-Nölke. Principles, definitions and model rules of European private law: draft common frame of reference (DCFR). Walter de Gruyter, 2009. At page 354-358.

[30] See Martin Ebers, Unfair Contract Terms Directive (93/13), in: H. Schulte-Nölke et al., EC Consumer Law Compendium, 2008 at page 351.

[31] See P. Nebbia, Unfair Contract Terms in European Law: A Study in Comparative and EC Law, Vol. 15, 2007.

[32] Furthermore, this process can result in a “market for lemons” that information asymmetry leads to a race to bottom. This phenomenon could be briefly explained that if no consumers read the small print, a firm cannot attract customers by offering efficient contracts and if all firms offer the same terms, it is not worth any consumer spending time to discover this. The result is that the fair terms are withdrawn; the average quality of term would fall. See more detail at M. Schillig, ‘Inequality of Bargaining Power Versus Market for Lemons: Legal Paradigm Change and the Court of Justice’s Jurisprudence on Directive 93/13 on Unfair Contract Terms’, 2008 Eur.Law Rev., pp. 336-358.

[33] P. Nebbia, Unfair Contract Terms in European Law: A Study in Comparative and EC Law, Vol. 15, 2007.

[34] Martijn Hesselink, Marco Loos, Unfair Terms in B2C Contracts, CSECL Working Paper no. 7, 2012.

[35] Ewoud Hondius, The Protection of the Weaker Party in Harmonized European Contract Law: A Synthesis, Journal of Consumer Policy 27 : 245-251, 2004.

[36] Government, Report No. 28/TTr-CP dated April 8, 2010, on the draft Law on Protection of Consumers’ Rights and Interests (To trinh so 28/TTr-CP ngay 8/4/2010 ve Du an Luat bao ve quyen loi nguoi tieu dung) at 4-5; Nguyen Van Cuong. The Drafting of Vietnam’s Consumer Protection Law: An Analysis from Legal Transplantation Theories. PhD thesis (2011). Faculty of Law. University of Victoria http://www.law.unimelb.edu.au/files/dmfile/CuongEnglish2.pdf.

[37] It includes (a) terms that exclude the responsibilities of the trader towards consumers as stipulated by law; (b) terms that exclude or limit the right of a consumer to lodge complaints or file lawsuits; (c) terms that allow the trader to unilaterally modify other terms of the contract already made with the consumer or to unilaterally modify terms and conditions of sale and provision of services that are not concretely stipulated in the contract; (d) terms that allow the trader to unilaterally determine that the consumer has to perform an obligation; (e) terms that allow the trader to determine or change the price at the time of delivery of goods or provision of services; (f) terms that allow the trader to unilaterally interpret the terms of the contract when there are different interpretations of the contract; (g) terms that exclude the liability of the trader in the event that the trader deals in goods and/or services through a third party; (h) terms that coerce the consumer to perform his/her obligations even when the trader does not perform his/her obligations; and (i) terms that allow the trader to transfer his/her rights and obligations to a third party without the consent of the consumer.

[38] Ministry of Justice, Report on the proposed draft amendments to the 2005 Civil Code , available at http://www.moj.gov.vn/dtvbpl/Lists/Danh%20sch%20d%20tho/View_Detail.aspx?ItemID=216. assessed 4.7.2014.

[39] Article 1 of 2005 CC states that the Civil Code provides the legal status, legal standards for the conduct of individuals, legal persons, other subjects; the rights and obligations of subjects regarding personal identities and property in civil, marriage and family, business, trade, labour relations (hereinafter referred collectively to as civil relations).

[40] Article 415 of the Draft.

[41] Hugh Beale, ‘Unfair Contract Terms Act 1977 [comments]’ (1978) 5 Brit J Law & Soc 114, 114.

[42] Ibid.

[44] Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L95/29 Available at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:31993L0013 Accessed July 4, 2014.

[46] It should also note that the current dual regulations on unfair contract terms which is covered by two pieces of legislation: the Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999 is sharply criticised in England. A single, unified piece of legislation, which preserves the existing level of consumer protection is widely supported. See http://lawcommission.justice.gov.uk/areas/unfair-terms-in-contracts.htm assessed July 4, 2014.

[47] Tjakie Naudé ‘The use of black and grey lists in unfair contract terms legislation in comparative perspective’ 124 (2007) South African Law Journal 128-164.

[48] Ibid.

[49] For example in Germany, BGB provides for regulation of standard terms by a general rule (section 307 BGB) as well as by a list of prohibited terms (sections 309 and 308 BGB).

[50] H. Schulte-Nölke et al., ‘EC Consumer Law Compendium’, 2008 Sellier, München.

[51] The Annex of the Directive contains a list of 17 potentially unfair contract terms. The structure of the Annex does not seem to be based on any systematic principle and can be classified under 4 groups: Group 1: Terms conferring unfair unilateral decision-making power upon the business; Group 2: Terms preventing the parties from having equal rights; Group 3: Terms governing the duration of contract; Group 4: Terms excluding or restricting liability normally imposed by law.  R. Brownsword et al., Welfarism in Contract Law, 1994, T. Naude, ‘The use of Black and Grey Lists in Unfair Contract Terms Legislation: A Comparative Perspective’, 2007 South African Law Journal, no. 1, pp. 128-164.

[52] Claus - Wilhelm Canaris & Hans Christoph Grigoleit, Interpretation of Contracts in Arthur S. Hartkamp, Towards a European Civil Code, Kluwer Law, 2011.

[53] Reinhard Zimmermann, The New German Law of Obligations: Historical and Comparative Perspectives, Oxford, 2005, at 159-229.


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