Under the Commercial Law 2005, a commercial contract refers to a legally binding agreement between parties involving at least a party is trader or organization, individual having commercial activities in which parties agree on their rights and obligations in relation to the commercial activities between them.
Pursuant to Article 6 of the Commercial Law 2005, traders includes economic organizations and individuals who conduct commercial activities independently and regularly with business registrations. Pursuant to Article 3.1 of the Commercial Law 2005, the commercial activities mean “activities for the profit purposes, including the activities of selling and purchasing goods, providing services, investment, commercial promotion and activities for other profit purposes”.
To ensure the validity of a commercial contract and the full protection of rights and interests of parties, the following matters should be carefully noticed:
- The Commercial Law 2005 should be the first governing laws of commercial contract in relation to the commercial activities. Contracting parties should be aware of the difference between the Commercial Law 2005 to the Civil Code, such as: the scope of applicability, the threshold for penalty for violations of contract etc. For example, in accordance with the Commercial Law 2005, the maximum penalty level shall not exceed 8% the value of the breach of contractual obligations while there is no limitation on the amount of penalty in Civil Code.
- Subject to the commercial activities parties engaging in, the formality of a commercial contract shall be in writing or other forms having the equivalent validity as regulated in the applicable laws. For example, the formality of a sale and purchase goods contract may be made in words, in writing or by specific acts. The formality of a commercial advertising service contract shall be made in writing or other equivalent forms, such as telex, tax, telegraph, data message.
- The statutory limitation for initiating a lawsuit to settle a dispute arising from a commercial contract is only 02 years as from the time of violation of the legitimate rights and interests of a party.