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Applying Tao Te Ching in drafting contracts

The article with the title: “Applying Tao Te Ching in drafting contracts” written by Lawyer Tran Thanh Tung & Lawyer Cao Thi Ha Giang – Partner of Phuoc & Partners is published on Doanh Nhan Saigon issued 131 dated 23/02/2010.


There will be not a contract perfect for a transaction as each contract is a unique one for the respective transaction. So, what is the basis to determine which contract suitable for each transaction? Through thousands of years, multi-side value of Tao Te Ching is defined, but are Tao Te Ching and drafting contracts related? The answer is “yes”.

From Tao Te Ching…

Tao Te Ching is the basic moral book of Taoism including two parts: the Book of Way (Tao) and the Book of Virtue (Te). Being an original philosophic work, Tao Te Ching is not only about the nature of philosophy, but also profoundly about the issues of human, social, politics, etc. Tao Te Ching gives prominence to the depth and the silence. In the relationship with “acting”- “the state of being”, “non-acting” – “not being” is considered as the root and is brought to a higher level. “Being” and “not being”is the foundation of each other, showing the miraculousness, the skill of the Way. That relationship is especially symbolized by an example: “30 spokes are connected in one wheel and thanks to the space in wheel, the bike can work. Potteries are made from modeling clay, but we just use the space inside of them. We also use the space of the door, the windows. We thought that the “being” – wheel, pottery, house” is useful for us, but actually the “not being – the space” make the “being” useful. The example seems unreasonable, illogical at first, turning out extremely deep, profound, making readers to be startled, then to nod and applaud.

To a contract – the anticipations of “being” and “not being”

A contract is the agreement of relevant parties, pointing out each party’s wish. It states the defined or definable anticipation (thing, event, time, figure, wish) – the “being”. The more accurate and detailed the anticipation is, the more obvious and firm the contract is. For example, a house in a house purchase contract must be a real and specific house with specific area, location, possessed by a specific owner.

These defined anticipations are not enough for a perfect contract. As contract is today’s anticipation for the performance in the future, without the acknowledgment of how the future will be and whether it is the same as today’s anticipation. Meanwhile, all the anticipation in a contract is closely related and they together form a network which will be broken and become meaningless if any of them is absent. At this time, the role of the “not being” in the anticipation when the “being” does not happen shows itself clearly. What will happen when the seller is just the representative, not the house owner? If this premise (the seller must be the property’s owner) is wrong, then all the other anticipation such as price, payment, notarizing contract will be wrong and unable to be performed. Then, it is necessary to have a commitment from the seller confirming that he/she is not the representative and will do the compensation if the seller violates this agreement.

So far we have partly understood the value of the “not being” in contracts. Listing the “beings” just settles only one side of the matter, that is to make the contract clear. We need the “not beings” to make the contract perfect. Disputes do not arise from things stated in the contract, but from ones not anticipated. A foreign trading contract without defining governing law will lead to continuous arguments between both parties. As an issue will be differently considered in the laws of different countries, the rights of parties will be different.

The most logical way in drafting contracts is fully listing the “beings”, then stating the anticipations when the “beings” do not happen based on each “being”. The contract will be perfect when there is a harmony between such “beings” and “not beings”.

Normally, people base themselves on their experience in drafting contracts. Experience is important, but if you base yourself too much on it, you will be unable to overcome your current thought. Then, it is necessary to put aside the experience and refresh the mind to draft a contract, because sometimes experience is the reoccurrence of mistakes without our realization. You may absolutely feel free to state as much anticipation as possible, even though some anticipation is of the least possibility of happening, or the most ridiculous.

Another remarkable point is that we should not fully rely on contract since the may be appropriate for the previous transactions, but not for the current ones. And we should only use these when they are really necessary.

A contract is the anticipation of future happenings; therefore, it is necessary to leave reasonable tolerance for the parties when implementing the contract, as well as to forecast the unexpected events (terms of force majeure), or future difficulties (terms of predicament). Normally, to reduce the risk of non-anticipation of present or future events, people often include the terms of declaration and commitments in the contract as the “bags” binding the parties to events which they are not able to test.

It is not the length and the complicatedness of a contract to measure its perfection. A perfect contract is the one that after signing the parties implement and finish it naturally as if the contract has not existed. Then, the contract itself perfectly conveys all parties’ desires when signing it – that is the highest criterion of a perfect contract.

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