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The closeness of a foreign sales contract in Binh Minh Household Joint Stock Company

ACKNOWLEDGEMENT
To some extent, I can say for sure that this thesis is the end of my long journey to
obtain my degree in the National Economics University. In this journey, I did not travel
alone, but my advisor, teachers, colleagues, parents and friends have been always by
my side to give me lots of precious support. In other words, this report would not have
been possible without ongoing guidance and support provided by them during the last
time.
From the bottom of my heart, I would like to thank my advisor Pham Phuong Lan
who has been directly responsible for guiding my performance devotedly.
Special thanks are for teachers of the faculty who have been willing to contribute
their time and efforts to this report by providing necessary information and advice for
my preparation.
In addition, I would like to give my sincere obligation to my temporary colleagues
in Binh Minh Household Joint Stock Company for their dedication and enthusiasm to
help me with data collection and professional skill. They somewhat gave me numerous
opportunities to be exposed to real practice.
My appreciations are also extended to Dr. Nguyen Hong Hai - Deputy Head of
International Payment Subject, and M.A Tran Nguyen Hop Chau – Lecturer of
Finance Faculty, Banking Academy of Vietnam, for their devotion to me during the
short-term course related to import-export operation.
By the way, I also wish to express my obligation to Mrs. Vu Thanh Van for the time

when I worked as a collaborator for VinatranzPro translation office. She gave me
various chances of sharpening my knowledge of sale contract that somehow made me
come to a decision to challenge myself in such field.
Finally, I would like to thank my parents, friends who are never reluctant to do me a
favor no matter what. It is a precious encouragement for me to strive for such
finalization.
TABLE OF CONTENT
EXECUTIVE SUMMARY
The term “contract” is likely familiar with almost all of transactions, especially
cross-border ones. Depending on its appropriateness or inappropriateness, a contract
can somewhat facilitate or dispute a transaction. This, in fact, has interested me a lot
during my internship period in Binh Minh Household Joint Stock Company. Taking
pains to analyze the Company’s existing sales contract, I myself discovered several
shortcomings regarding contract’s closeness that is thought to cause transactional
disputes possibly. With a view to contributing my part to the Company and fulfilling
my graduation thesis, this paper therefore is intended to clarify problematic provisions.
Accordingly, I would like to take the chance to put forward some recommendations to
make the Company’s contract more proper in the hope of facilitating transactions
between the Company and its foreign counterparts.
ABSTRACT
Recent years, globalization is becoming a common trend worldwide. It has proved
its crucial influence on almost all economies, especially those of developing countries
and Vietnam is not an exception.
In the context of global integration, self-sufficient economic model becomes
absolutely obsolete, it should be replaced with a modern one in which an opening
mechanism is encouraged. In so doing, business transactions both domestically and
internationally are popular accordingly. Of which, it can be said that sales contracts,
especially foreign ones play an important role in almost enterprises’ carrying-out for
their normal operation. In fact, a sales contract is deemed as a legal documents by
which involved parties’ obligations and rights are preserved lawfully. Therefore, it is
strongly advised that the work of drafting a proper sales contract be paid due attention
by all businesses in general and import-export enterprises in particular.
Objectives & Scope of work
Being aware of the importance of drafting sales contract and based on a useful
internship period in Binh Minh Household Joint Stock Company, I am really interested
in a research on “The closeness of a foreign sales contract in Binh Minh Household
Joint Stock Company”. The research is intended to aim at analyzing some restrictions
in the contract form of the Company and proposing several practical measures to
sharpen the closeness of all provisions in the Company’s sale contract.
Methodology & Data Sources
To some extent, the internship period at Binh Minh Household Joint Stock
Company allows me to take such a marvelous opportunity to conduct my research as
favorably as possible. To build my data base, I myself take pains to gather all
information generated from various sources ranging from personal experience
concerning sale contract to import-export knowledge shared by my colleagues, and
some relevant publications. For the best acquisition, I have also taken part in a course
of International Payment to absorb some relevant knowledge. Such combination
between theory and real experience via various channels has enabled me to take steps to
fulfill the research.
Structure
Besides abstract, inclusion and appendix, the research is composed of four main
Chapters as follows:
Chapter 1: Introduction
Chapter 2: Literature Review
Chapter 3: Findings & Analysis
Chapter 4: Recommendation
Due to time limitation and certain knowledge, this study may not avoid some
shortcomings and inappropriateness beyond my ability. I would highly appreciate any
comments and suggestions in relation to the study from the Faculty in particular, and
any readers in general.
CHAPTER 1: INTRODUCTION
1.1 Company’s establishment and development
Binh Minh Household Joint Stock Company was established in March 2008. For
any detail, please make reference to the table hereunder:
Name of
Company
Binh Minh Household Joint Stock Company
Head office
Address
No.5 Lane 75 Hong Ha street, Ba Dinh District Hanoi - Viet Nam
Business
Registration
No.
0103023380 issued by Hanoi Planning & Investment Department in
March 31, 2008
Tax Code 0102701149
Telephone +844.3932.8848 Fax: +844.3932.8884
Mobile
phone
+84912.146.147
Y/M: ntb_802 Skype: bmhanoi
Email bmhanoi@gmail.com
Bank
Account
11120805087010 TechcomBank-Ha Noi Branch
General
Director
Nguyen Thi Giang
The Company serves as an importer and a distributor of household appliances
labeled Midea in Vietnam.
Although the Company has just entered business for over 2 years, it has performed well
in the capacity of a prominent representative distributor for Midea branch. In other
words, it has played a crucial role in raising Vietnamese’s awareness of Midea
household appliances. Accordingly, it can build up good relationship with almost
supermarket systems nationwide as well as wholesale agents in various provinces. In so
doing, it has helped increase Midea’s reputation for its supply in Vietnam market in
general.
To some extent, the development period of the Company can be divided into two
separate parts:
Period of 2008-2009: This is the period when the Company made its debut in the
Vietnam market for the first time. At that time, Vietnam market has been riddled with
various brands of household appliance like Supor, Happy Cook, Philip, Panasonic, etc.
Conspicuously, it had to face numerous obstacles both internally and externally. In
terms of internal conditions, the Company was somewhat in the shortage of capital that
required it manage to mobilize capital from various sources. Externally, it had to cope
with a fierce competition from other counterparts. Despite these difficulties, the
Company has taken steps to penetrate each particular markets ranging from
supermarket systems to retail and wholesale agents nationwide. In more details, it
determined to pay due attention to customization services and as well as product quality
in order to meet increasing demand of the diversified customers.
Period of 2009-2010: Owing to gradually surmount such aforementioned hinders,
Binh Minh Company now can get a certain foothold in the appliances market. Based on
this achievement, it has also determined that the initial priority should be given to sales
promotion as much as possible through various exhibition, fairs, and events. So far, it
has been said that the Company’s products have been made available almost all
provinces in the whole nation. Accordingly, the mass’s awareness of the Company’s
products has been on the rise that has contributed to the revenue growth of the
Company year to year.
Today, the Government gives more and more incentives to encourage operations of
import and export enterprises. This somewhat creates various favorable conditions for
almost all domestic enterprises in general and the Company in particular to promote its
performance.
1.2 Company’s functions and obligations
1.2.1 – Functions
The main function of the Company is trading imported goods, including both retail
and wholesale through domestic supermarket systems and agents.
1.2.2 – Obligations
- Carrying out business in line with the registration.
- Registering, enumerating and paying taxation as well as performing other financial
obligations in accordance with the prevailing laws.
- Ensuring product quality in line with the registered standards, and offering
appropriate post-sale services (warranty) to customers.
It can be seen that the Company has shown a great self-control in its business,
especially in such a market-oriented economy at present. Again, it creates a lot of
precious opportunities for the Company, but poses numerous challenges at the same
time. For this reason, the Company should bear in mind researching market, especially
niche market, and improving management instruments and organization apparatus in
conformity with its scale, functions and obligations for the best performance.
1.3 Organization Structure
1.3.1. Organization structure
The Company’s management structure is subject to a direct mechanism, it means
that there is only one chief officer, and other staffs will pertain to different functional
divisions.
Diagram 1: - Organization structure of Binh Minh Household Joint Stock
Company

1.3.2. Functions and obligations of department, divisions
* Directors Board:
- Chairman of Management Board cum Director is the top leader who is responsible
for managing all operations of the Company.
- Deputy Director is in charge of assisting and controlling tasks entrusted by General
Director, and acting in the capacity of a Director whenever authorized.
- Chief Accountant cum Head of Accounting Department takes over accounting and
statistic operations, and consult Director financial operations of the Company.
* Departments:

DIRECTORS BOARD
Chairman of
Management
Board cum
Director
Deputy Director
Chief
Accountant
DEPARTMENTS
Accoun
ting &
Finance
Depart
ment
Sales
Depart
ment
Import-
Export
Depart
ment
Accounting & Finance Department: takes responsibility for directly recording
accounting manuals, dealing with figures in relation to imported and exported goods
and inventory in conformity with the regulations, supporting Director to manage
activities relating finance and monetary.
Sales Department: directly makes schedules for different orders, and sign contract
with both domestic and foreign counterparts, conduct promotion programs, work out
sales plans, and carry out market research.
Import-Export Department: Based on orders delivered by Sales Department, it
makes orders to the suppliers, and engages in signing foreign contracts, works with
customs agencies, appoints people to conduct the import and enters transactions with
foreign counterparts.
1.4 Company’s counterparts
1.4.1 Suppliers
* ZHEJIANG TIANXI INDUSTRY GROUP CO.,LTD
No.7 Baoan Road, Huzhen Town, Jinyun County, Zhejiang, China
Tel: +86578-3559996 Fax: +86578-3156000
Zhejiang Tianxi Industry Group co., Ltd. is a key enterprise specialized in
production of pressure-lid type explosion-proof pressure cookers, non-stick cookware
pots and aluminum wares of complete series. It boasts production bases of aluminum
ware and materials and advanced equipment. Based on its powerful economic and
technical strength, and scientific and perfect management system, the company was
appointed in 1999 one of the five large enterprises responsible for drafting out
the"2000 national standard of pressure coolers" and passed the authentications of CE
and GS safe quality and ISO9001 quality system, Seizing the opportunity of the reform,
it has established stable business relationship with over 20 regions and countries such
as Europe ,South America, Middle East ,Japan etc, with numerous trading partners and
market channels. Its products are gaining popularity for its elaborate workmanship.
* MIDEA CONSUMER & INDUSTRIAL GROUP
Beijiao Town,Shunde District, Foshan City Guangdong Province, China
Tel: +86-757-26605280 Fax: +86-757-26339469
Midea Group is a comprehensive and modern business conglomeration that
engages mainly in the industry of household appliances, as well as the domains of real
estate and logistics. The group is also one of the largest manufacturing and exportation
bases of electric appliances in China. Major products by Midea Group include
household and commercial air-conditioners, large central air-conditioners, electric fans,
electric cookers, refrigerators, microwave ovens, water dispensers, washing machines,
electric heaters, dishwashers, induction cookers, water heaters, cooking stoves,
sterilizers, electric chafing pots, electric ovens, vacuum cleaners, and small electric
appliances, as well as related products such as compressors, motors, magnetrons,
transformers, and enameled wires.
1.4.2 Existing customers
In order to obtain optimal revenue, the Company has adopted both methods of
retailing and wholesaling nationwide. Consequently, its products have been distributed
various supermarket systems and agents mentioned hereunder:
- Fivimart supermarket system
- Marko supermarket system
- Intimex supermarket system
- Big C supermarket system
- Metro supermarket system
- Hapro Mart supermarket system
- ….
- Agents in Provinces such as: Hanoi, Nam Dinh, Thanh Hoa, Ninh Binh, Hai
Phong, Thai Nguyen, Hung Yen, Bac Ninh, etc.
1.5 Features of Company’s revenue
It can be clearly seen that Company’s revenue comes from different sources,
including revenue from sales of goods, revenue from financial operation, and other
incomes. Of which, revenue from financial operation mainly stems from:
deductions for advance payments, commercial discounts, etc. Therefore, revenue
from financial operation is much smaller than gross profit from sales of goods.
Deductible items of the Company are comprised of: sale returns, sale discounts
offered to the customers.
At present, the Company’s Charter Capital is: 3.000.000.000 VND
1.6 Mode of transactions with Suppliers and potential risks
As mentioned above, the two main Suppliers of the Company come from China.
Accordingly, its transactions with Suppliers are characterized by foreign sales
contracts in writing by fax, email, or skype. So far, the Company has entered
various contracts with counterparts and it is deemed as a manner in which the
Company can make orders to manufacturers effectively and lawfully. To some
extent, most contracts are based on the reliability amongst parties involved that
somehow helps avoid several trivial procedures. Nevertheless, such conduct also
reveals highly potential risks for both parties in case of any disputes arising along.
As such, the Company in general and the Import-Export Department which is
directly in charge of import operations in particular should pay due attention to the
work of drafting contracts. In other words, it is necessary to terms and conditions
included in such agreements to ensure successful transactions for mutual benefits.
CHAPTER 2: LITERATURE REVIEW
2.1 Basic knowledge of foreign sales contract
2.1.1 Definition of foreign sales contract
A foreign sales contract is a legal contract an exchange of goods, services or
property to be exchanged from seller (or vendor) to buyer (or purchaser) for an
agreed upon value in money (or money equivalent) paid or the promise to pay same.
It involves at least two countries which represent separate Parties entering the
contract.
2.1.2. Characteristics & role of foreign sales contract
2.1.2.1. Role of foreign sales contract
Business contracts are legally binding written agreements between two or more
parties. They are an important part of business and such agreements need to be
created and/or reviewed carefully. While smaller companies often conduct business
based on informal handshake agreements or unspoken understandings, the more that
is at stake, the more essential it is to have a signed contract. A contract serves as a
guide and a memorial of the agreement that must be followed by both parties.
2.1.2.2. Characteristics of foreign sales contract
Basically, a foreign sales contract shares much common with a domestic one.
However, there are also some points by which we can be aware of differences
between them. Amongst the others, we hereby intend to refer three distinguished
characteristics as follows:
Objects of the contract: include Seller and Buyer from at least two different
countries. Nevertheless, it is noted that the factor of nationality shall not make non-
sense in case the Buyer and Seller have different nationalities but their trading is
conducted in only one territory or country.
Type of currency: can be a foreign currency to one or both Parties.
Goods – under the contract: shall be delivered from the Seller’s country to the
Buyer’s country or somewhere else required by the Buyer.
2.1.3. Contract Content
In reality, a contract is a rather self-determined business document. In other
words, the parties can make contract with provisions in their sole discretion; Of
course, such provisions must be agreed by both Parties to become the binding ones.
Despite this fact, it is possible to divide them into three separate categories as
mentioned hereunder:
2.1.3.1. Key provisions:
These provisions are deemed to form integral parts of a contract. They are
constituted of six provisions as follows:
- Commodity
- Quantity
- Quality and specifications
- Term of price
- Term of delivery
- Term of payment
2.1.3.2. Common provisions:
In addition to the aforementioned provisions, depending on real situations and
requirements of both Seller and Buyer, a contract may cover some other terms such
as:
- Packing and Marking
- Warranty
- Inspection and Claim
- Penalty
- Force Majeure
- Arbitration
2.1.3.3. Free provisions:
These provisions, to some extent, are not compulsory ones. However, they can
contribute to increase the closeness of the contract. To put in another way, such
terms together with those aforesaid ones help minimize any dispute arising between
the Buyer and Seller during their transactions. They may be provisions in relation to
amendment, notice, contract termination, etc.
Generally, owing to freedom of sales contracts, based on the real context and
mutual agreement, involved Parties can draft provisions in the support themselves.
By carefully drafting “reasonable” terms, Parties shall be relieved from potential
risks and disputes that can act as a basis for a long-term business relationship.
2.2. How to draft precise contract provisions
It can be said that you will not able to cover every gap and fill all loopholes in
your contract provisions. Also, you can not make a perfect contract. However, it is
reasonable to draft it as clearly as you possibly can. The illustrative clauses hereby
are intended to give you some practice in finding ambiguities and tightening up
phrases.
2.2.1 Effective date:
The contract or agreement should have a date stated as the contract date or
effective date. This date is not necessarily the date when the contract was signed but
rather the date from which all the contractual rights and obligations begin and from
which point any term of time, usually commences. To determine a sound effective
date, it is strongly advised to consider when goods should be delivered and what
warranty or maintenance period should apply to work or goods
Poor provision : “This contract becomes binding on both parties when it is
signed”
It can be seen that this provision is aimed to provide a designated time and
means of contract formation. In other words, it intends to stipulate when the
contract will come into effect. However, in the event, the contract is somehow
signed by only one party, does it become binding on both, or must both parties sign
to determine a common effective date? If the parties sign on different dates, which
shall be effective one? If the last party to sign the contract is deemed to change a
provision in it before signing, has a contract formed? These hereby can lead to any
potential dispute during contract performance.
Better provision : “This contract will be binding on both parties as of the date
on which it is signed by the Seller/Buyer, provided that the Seller/Buyer does not
alter, delete, or add to the terms of the contract.”
2.2.2 Effective date:
Poor provision : “This contract will become binding on the parties at the time
the Seller accepts the order that is detailed in the attached specification.”
This clause fails to define a particular date of acceptance – it is entirely opened-
ended. To some extent, it can cause discrepancies in parties’ interpretation of this
clause that may lead to the situation that the Buyer may make another same order
with other supplier, whereas the Seller continues to fulfill order without
notification/acceptance. Consequenly, both parties get no benefits only because of
no contact, no information. The general rule is that acceptance must be within a
“reasonable time” to ensure a smooth transaction.
Better provision : “This contract will become binding on the parties as of the
date the Seller signs it, provided that the Seller does not alter, delete, or add to the
terms of the contract and provided that the Seller signs the contract by [date],
transmit a copy of the signed contract by facsimile to the buyer by [date], and sends
the original signed contract by post.”
2.2.3 Insurance

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