INTERPRETATION OF CONTRACTS IN THE ENGLISH LAW
The English Common Law System
The world primarily features two types of legal systems: common law and civil law Countries that follow the common law system include England, Wales, the United States, Canada, Australia, New Zealand, Hong Kong, and Singapore The English common law system, which governs both England and Wales, serves as the foundation for this legal framework.
In English common law, the law is classified into civil law and criminal law There are three main sources:
In England, the United Kingdom Parliament holds the supreme authority to create or repeal laws, with its legislation being unchallengeable by the courts A proposed law, or "bill," must be approved by both Houses of Parliament—the House of Commons and the House of Lords—and receive the monarch's consent to become an "Act," thereby establishing or amending a law Acts represent primary legislation, which can be modified or supplemented by secondary legislation, also known as delegated legislation.
In English legal history, case law, particularly the judicial decisions from the Royal Courts, emerged as the primary source of law by the 12th century The writ system dictated that legal action could only be taken when a specific writ existed, leading to the establishment of the Courts of Chancery in the 14th century to address the limitations of this system The Courts of Chancery created a distinct body of law known as "equity," which operated alongside the common law This separation persisted until the late 19th century when the Supreme Court of Judicature Act of 1873-1875 unified equity and common law into a cohesive legal framework.
Customs in England refer to established behaviors and practices, such as the unique interpretation of numbers in Suffolk, where "a thousand" signifies 1,200 This particular custom has been recognized in judicial decisions, highlighting that one of the key sources of customs is legal rulings Consequently, judges often refer to these relevant judicial decisions to ascertain the customary meanings in legal contexts.
In the English court system, civil cases can be heard in various courts, including the Magistrates’ Court, County Court, High Court, Court of Appeal, and Supreme Court Conversely, criminal cases are typically processed through the Magistrates’ Court and the Crown Court.
1 See more http://www.parliament.uk/about/how/laws/
2 Peter De Cruz, Comparative Law in A Changing World, Routledge-Cavendish, 3 rd edition, 2006, p.101
In England, the judicial system includes the High Court, Court of Appeal, and Supreme Court, alongside a network of tribunals that handle civil cases These tribunals are overseen by local authorities, government departments, or agencies under the Ministry of Justice, referred to as "Her Majesty's Courts and Tribunals."
The English Law of Contract
The law of contract, a key aspect of civil law within the English common law system, focuses on the legal principles governing all contracts rather than specific contract types Its primary sources are judicial decisions and statutes, establishing a framework that is largely shaped by court rulings Notable statutes that influence contract law include the Law Reform (Frustrated Contracts) Act 1943, the Misrepresentation Act 1967, and the Contracts (Rights of Third Parties) Act 1999.
What is the definition of the term “contract” in the English law of contract?
A contract is defined as a legally enforceable agreement that establishes obligations for the parties involved To be valid, a contract must contain six essential elements: (i) intention to create legal relations, (ii) an agreement, (iii) consideration, (iv) capacity, (v) genuine consent, and (vi) legality If any of the first three elements are absent, the court will determine that no contract exists.
5 See more http://www.judiciary.gov.uk/about-the-judiciary/introduction-to-justice-system
6 See more http://www.judiciary.gov.uk/about-the-judiciary/the-judiciary-in- detail/judicial+roles/tribunals/tribunals
7 Laurence Koffman and Elizabeth Macdonald, The Law of Contract, 6 th edition, Oxford University Press, New York (2007), p 2
9 Ibid, p.1 between parties In addition, in case there is an apparent contract which lacks one of the three remaining elements, the court will decide that the contract is invalid
The intention to create legal relations is a crucial element in contract law, primarily aimed at distinguishing between casual social arrangements and enforceable agreements For instance, in a case where a mother promised her daughter £200 a month in exchange for leaving her job and completing her studies, the Court of Appeal declined to enforce the agreement due to the lack of legal intent Conversely, in commercial transactions, there is generally a presumption of intent to create legal relations, although this can be challenged A notable case involved a company that advertised a £100 guarantee for customers who used its smoke balls and still contracted influenza Despite the company's claim of no intent to create legal relations, the court ruled otherwise, citing the £1,000 deposit as evidence of the company's commitment to the advertisement.
An agreement typically emerges through a process of offer and acceptance, where an offer represents a legal commitment indicating a willingness to enter into a contract This offer must be made with legal intent, as illustrated by the case of a company that advertised its smoke balls in newspapers.
10 Hugh Collins, The Law of Contract, 4 th edition, Butterworths, London (2003), p 68
11 Ibid This was the case Jones v Padavatton [1969] 1 All ER 616
12 Laurence Koffman and Elizabeth Macdonald, The Law of Contract, 6 th edition, Oxford University Press, New York (2007), p 101 This was the case of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, CA
In contract law, certain situations are generally considered invitations to treat rather than offers, including displays of goods in stores, advertisements, auction sales, and invitations to tender An acceptance of an offer must be unconditional and cannot introduce new significant terms For an offer to be valid, it must remain open for acceptance, and the acceptance must be communicated to the offeror An offer can lapse due to a lack of acceptance within a reasonable timeframe, the expiration of a specified period, or the death of either party Additionally, an offer can be revoked at any time before acceptance, provided the revocation is communicated effectively A historical case illustrates this principle, where a landowner's solicitor attempted to accept an offer but included new terms, resulting in no valid contract, as the acceptance was not in accordance with the original offer.
Consideration is a fundamental concept in law, often defined as a valuable element that can take the form of a right, interest, profit, or benefit that is received by one party.
In the case of Jones v Daniel (1894), the court highlighted that a valid contract requires consideration, which can include a party's forbearance, detriment, loss, or responsibility For instance, in a divorce case, a husband promised to pay his wife an annual allowance of £100, but when she sued for non-payment, the court dismissed her claim due to a lack of consideration on her part Key rules of consideration include that it need not be adequate but must be sufficient, must not be past, and must originate from the promisee This means that the wife was not obligated to provide something of equal value in return for her husband's promise; even a token gesture would suffice.
Determining the sufficiency of consideration for an enforceable promise can be complex, as it is not entirely subjective Notably, if a wife performs an act prior to her husband's promise, this is regarded as past consideration and does not support the enforcement of the promise Furthermore, the fourth rule indicates that the husband's promise entails an expectation that he will utilize his funds to provide an allowance to his wife.
The law generally assumes that all individuals have the capacity to enter into contracts However, certain groups, including minors and individuals who lack mental capacity, are recognized as having varying degrees of contractual incapacity.
18 The Law of Contract, p.65 This was the case of Combe v Combe [1951] 1 KB 215, [1951] 1 All ER 767,
Individuals who lack the requisite mental capacity, including minors and those who are mentally disordered, are deemed to have personal contractual incapacity A minor is defined as anyone under the age of eighteen These individuals are unable to fully comprehend the implications of a transaction, which justifies their inability to enter into contracts.
Genuine consent is the authentic agreement between contracting parties, essential for a valid contract However, there are five scenarios that can undermine genuine consent: mistake, misrepresentation, duress, undue influence, and unconscionable conduct Mistakes can occur in several ways: a common mistake arises when both parties share a fundamental misunderstanding about the facts or law; a mutual mistake occurs when each party misinterprets the terms intended by the other; and a unilateral mistake takes place when only one party misunderstands the contract terms or the identity of the other party.
In the context of misrepresentation, there are three distinct types: fraudulent, innocent, and negligent misrepresentation Effective misrepresentation is characterized by two key factors, the first being a false statement of facts, which can be evaluated as true or false at the time it was made For instance, if a landowner claims that his property can accommodate 2,000 sheep, this statement serves as a basis for reliance.
21 Hugh Beale, Chitty on Contract, 31 st edition, Sweet and Maxwell, United Kingdom, 2012, pp.755-756
The respondent entered into a contract with the landowner, only to later discover that the land had not been used for sheep farming for an extended period, with only a small portion previously utilized for that purpose Consequently, the respondent refused to proceed with the contract, leading the landowner to file a lawsuit The court ruled in favor of the respondent, determining that the landowner's statement was false This case highlights the significance of accurate representations in contracts, as the respondent was unaware of the true condition of the land prior to entering the agreement.
In contract law, duress occurs when threats compel a person to enter into an agreement, as demonstrated in a 1979 case where a respondent demanded an additional 10% payment for completing an oil tanker, despite having no right to the extra charge The appellant, unaware of this, paid the amount and later sought recovery, leading the court to recognize economic duress Similarly, undue influence arises in relationships of trust, where one party exploits the other to secure a contract An example involves an elderly farmer who, under pressure from a bank representative, increased the charge on his house to support his financially struggling son, without being fully informed of the son's true financial condition.
The farmer relied only on the advise of the bank to increase the charge Then the
27 This was the case of Bissett v Wilkinson [1927] AC 177
In the case of 29 North Ocean Shipping Co v Hyundai Construction Co [1979] QB 705, the court determined that the bank's foreclosure of the farmer's house due to unpaid debt was influenced by the farmer's reliance on the bank's agreement to a debt increase This reliance constituted undue influence, highlighting issues of unconscionable conduct within the financial transaction.
Interpretation of Contracts in the English Law of Contract
In English contract law, judicial decisions serve as the primary sources for interpreting contracts, as the law is predominantly grounded in these rulings Notably, there is an absence of a statutory definition for the concept of contract interpretation.
The interpretation of contracts in English law is defined as determining the meaning a reasonable person would derive from the document, considering all relevant background knowledge available to the parties at the time of the contract This modern approach emphasizes that the terms "construction" and "interpretation" are interchangeable, maintaining the same meaning Additionally, this judicial definition reflects the interpretative methodology used in England today, where the interpretation is guided by the contract itself and its surrounding circumstances.
The interpretation of express terms differs significantly from that of implied terms due to the distinct methods of their formation While express terms are explicitly stated in a contract, implied terms arise from customs, statutes, or judicial decisions This thesis specifically focuses on the interpretation of express terms within written contracts.
42 This definition is given by one of the five Lords decided the landmark case Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28
43 In a judgment of the House of Lords held in 1995, Deutsche Genossenschaftsbank v Burnhope [1995] 1
In WLR 1580, a Lord emphasized that while the construction of a contract aims to reflect the parties' intentions, the law relies on an objective theory that focuses on the contextual meaning of the contractual language rather than probing the parties' true intentions Similarly, in the 2001 case HSBC Bank Plc v Liberty Mutual Insurance Co (UK) Ltd, a judge reiterated this principle, highlighting the importance of objective interpretation in contract law.
The court's approach to interpreting contracts and documents has evolved following the House of Lords' ruling in Mannai Investment Co Ltd v Eagle Star Assurance [1997].
AC 749 and Investors Compensation Scheme Ltd v West Bromwich Building Society (1998) 1 MR 896.”
The interpretation of a contract can be carried out by the contracting parties, judges, or arbitrators Initially, the parties involved strive to clarify the meaning of specific words or provisions within the contract However, if disagreements persist and the matter is escalated to a court or arbitration, it is then the responsibility of judges or arbitrators to provide an authoritative interpretation of the contract.
In English contract law, the interpretation of contracts is consistent across various contract types, as it is guided by legal principles that are universally applicable to all contracts.
In recent years, judicial decisions have increasingly focused on the interpretation of contracts, reflecting a shift from the strictly literal approaches of the past A judge noted that while earlier interpretations adhered rigidly to the text, contemporary practices embrace a more flexible and rationalist perspective This evolution in contract interpretation within English law is characterized as a modern approach, which began to take shape with the landmark case of Prenn v Simmonds in 1971.
ER 237 This case will be later analyzed in the thesis
The English law of contract establishes universal principles applicable to all contract types, meaning that the type of contract does not alter its interpretation Judicial decisions serve as the primary source for contract interpretation, while the formalities involved can significantly influence how contracts are understood For instance, in wholly written contracts, external evidence that alters the contract's meaning is typically inadmissible, whereas in contracts that are partly written and partly oral, external evidence may be considered Furthermore, the elements that constitute a valid contract, such as distinguishing between pre-contractual statements as representations or contractual terms, also play a crucial role in interpretation It is important to note that the interpretation of express terms differs from that of implied terms This thesis focuses on the interpretation of express terms in written contracts under English contract law.
GENERAL PRINCIPLES OF INTERPRETATION OF
The Language of A Contractual Document
Lord Hoffmann outlined five principles and referenced four other cases, though this thesis focuses on only two His phrase “the principles may be summarized as follows” indicates that his statements serve to articulate the principles rather than assess their inherent value Additionally, in another House of Lords case, Lord Hoffmann noted that the principles he stated were largely consistent with earlier authorities Based on the five general principles from the 1998 case, a House of Lords judge provided a more concise restatement of these principles.
To determine the parties' intentions, the court examines the entire contract, interpreting the language in its natural and ordinary sense within the context of the agreement, the relationship between the parties, and all pertinent facts known to them at the time of the transaction.
In the case of Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, the court focuses on making an objective assessment rather than delving into the subjective intentions of the parties involved This approach relies on the evidence and materials presented, ensuring a fair judgment based on observable facts.
This thesis will address key issues related to the interpretation of contracts, focusing on three main aspects Firstly, the interpretation begins with a comprehensive analysis of the entire contract's language, including relevant words and provisions Secondly, the interpreter must adopt the perspective of a reasonable person rather than that of the contracting parties Lastly, after examining the contract's language, the interpreter should consider the surrounding circumstances and assess the significance of the available evidence.
2.1.1 The Terminology of “Contractual Document”
In the opening of the first principle, Lord Hoffmann emphasized that interpreting contracts involves understanding the meaning of a "contractual document." This raises the question of what constitutes a contractual document and whether it aligns with the definitions of "written document" and "written contracts."
Relating to the concept of “written document”, “document” is defined as
A "written document" is defined as something tangible that records words, symbols, or marks, including deeds, title papers, letters, receipts, and other written instruments used to establish a fact The term "written" refers to expressions in writing rather than speech, often taking the form of official documents In judicial contexts, "written document" is commonly understood in two ways: first, as a formal requirement for contracts, and second, as a synonym for "contractual document."
55 The Oxford Advanced Learner’s Dictionary
56 In the case of Homburg Houtimport BV v Agrosin Private Ltd and others (The Starsin) [2003] UKHL 12,
[2003] 2 All ER 785, a Lord used the term “a signed and written document”
Written documents encompass a wide range of types, including both contractual and non-contractual forms They may contain contractual statements, which are legally binding, or non-contractual statements that do not hold legal weight.
A "written contract" is defined as a contract with terms that are documented in writing There are two types of written contracts: those that are entirely in writing and those that are partially written and partially oral In the case of wholly written contracts, all terms are contained in a single written document Conversely, in partly written contracts, some terms are documented while others are communicated orally It is important to note that while a written contract is always a written document, not every written document qualifies as a written contract.
In terms of the concept of “contractual document”, “contractual” means
In 1998, Lord Hoffmann narrowed the interpretation of five principles to apply specifically to "contractual documents," although the term itself was not defined in the case He focused on construing the claim form and its explanatory note, suggesting that these documents constituted the contractual framework relevant to the case.
In summary, a contractual document should encompass specific contractual terms, and it is important to note that written terms can be found not only in formal contracts but also in various other written forms, such as claim forms, as demonstrated in the 1998 case.
57 In the case 1971, a Lord of the House mentioned the interpretation of “written document” instead of the interpretation of “contractual document”
59 Dictionary of Law, (2 nd edition), Peter Collin Publishing 1992, p 56
61 Ibid document (for example, the explanatory note in the case 1998) Therefore, the three terms “written document”, “written contract” and “contractual document” are not the same at all times
2.1.2 The Determination of the Meaning of the Language of A Contractual Document
Understanding a contract involves more than just examining its language; it requires considering the intentions behind it The concept of intention plays a crucial role in contract interpretation, which will be explored in detail in Chapter 2.
The language of a contractual document encompasses the words and provisions within it Lord Hoffman emphasizes that understanding this language involves discovering the natural and ordinary meanings of words, as these meanings reflect the commonsense notion that people typically do not make linguistic errors in formal documents To ascertain these meanings, one must recognize that the interpretation process is ongoing and not limited to immediate answers Furthermore, dictionaries and grammars play a crucial role in this process, providing popular meanings of words and contextual insights that aid in selecting the appropriate interpretation.
62 The statement is stated at the fifth principles of the case 1998
In the 1998 case, the interpretation issue arose from section 3(b) of the claim form, with both the House of Lords and the Court of Appeal concurring on the High Court judge's determination of its natural and ordinary meaning.
Section 3(b) of the claim form was read as follows:
If you have a claim against West Bromwich Building Society, whether related to rescission for undue influence or other reasons, you may seek a reduction of the amounts owed to the Society for borrowed funds linked to the transaction in question, including any applicable interest.
The High Court interpreted section 3(b) as excluding any claims, including those for damages, contrary to the ICS's view that it only excluded rescission The judge emphasized that, based on standard syntax rules, "any claim" served as the antecedent for "that you have," and "or otherwise" functioned as an adjective parenthesis Consequently, the judge concluded that the term "any claim" was not restricted by the phrase "whether sounding in rescission for undue influence or otherwise," ultimately siding with the interpretation of the investors and WBBS.
Contractual Document to Be Interpreted to Reflect the
2.2.1 The Terminology of “Reasonable Person”
Intention is a crucial element in contract interpretation and one of the three key factors that determine the existence of a contract It is defined as the willingness to achieve a planned outcome, although this definition can be somewhat ambiguous Intention can be categorized into two types: objective intention, which reflects the perspective of a reasonable person, and subjective intention, which pertains to the actual understanding of the contracting parties In English contract law, the focus is primarily on the intention of a reasonable person If subjective intention proves insufficient, there are methods to assess the understanding based on reasonable person standards.
A "reasonable person" is a hypothetical individual used as a legal benchmark to assess negligence, characterized by sensible actions, timely decisions, and appropriate precautions Additionally, this concept represents an imaginary figure possessing average judgment and intelligence, serving as a standard for typical social behavior.
Those definitions indicate that the reasonable person is not original parties of a contract, but they do not point out clearly about his legal capacity
A book on global sales and contract law states that the interpretation standard is based on a reasonable person's perspective, though the specific traits of such a person can vary with the contract's context This highlights that the focus on English plain meaning may imply different interpretations based on situational factors.
64 See more Article 8 of the United Nations Convention on Contracts for the International Sale of Goods, and Article 4.1 of the Unidroit Principles of International Commercial Contracts
65 Bryan A Garner, The Black’s Law Dictionary, (7 th edition), West Group 1999, p.1273
The concept of the reasonable person, as defined in legal terms, refers to an individual who embodies the standards of the broader community However, a more precise interpretation suggests that the reasonable person should be identified specifically as someone relevant to the context of the contract in question.
The book then suggests the way of how Lord Hoffmann, in the case 1998, determines the reasonable person
Lord Hoffmann highlighted the importance of interpreting contracts from the perspective of a "reasonable person," as outlined in the second principles of interpretation Judges must seek the natural and ordinary meaning of words while considering the context, ensuring they approach the interpretation as a reasonable person would Although Lord Hoffmann did not provide a specific definition of a reasonable person, the cases from 1998 and 1971 serve as effective examples of this concept in practice.
2.2.2 The Determination of the Understanding of A Reasonable Person
In the ICS case, judges prioritized understanding the contractual language from the perspective of ordinary individuals rather than legal experts The claim form was designed to be accessible, avoiding excessive legal jargon to assist retired homeowners in comprehension However, it included technical terms that warranted clarification, leading to the creation of an Explanatory Note by the ICS Lord Hoffmann emphasized that section 3(b) of the claim form should be interpreted as a layman would, acknowledging the document's intended legal audience while advocating for clarity for those without specialized knowledge He began his analysis by reviewing the Explanatory Note for better understanding.
In the case from 1998, the "reasonable person" standard was defined as the individual who would typically read the explanatory note, as discussed in "Global Sales and Contract Law" by Ingeborg Schwenzer, Christopher Kee, and Pascal Hachem (1st edition, Oxford University Press, 2012, p 294).
Lord Wilberforce, who delivered the judgment of the House of Lords, considered the work and the knowledge of both Mr Prenn and Doctor Simmonds
He then put himself in the position of businessmen to construe the contract between
Mr Prenn and Doctor Simmonds Therefore, the reasonable person in the case 1971 was businessmen
Judges must seek objective intention in contract law for two main reasons Firstly, it is inherently challenging to determine the actual thoughts of the parties involved, leading to difficulties in evidential assessment of their intentions Lord Wilberforce emphasized this in 1976, stating that understanding the parties' intentions must be approached objectively, as they cannot provide direct evidence of their thoughts Instead, the focus should be on what a reasonable person would have intended in similar circumstances.
When discussing the aim or purpose of a contract, it is essential to consider what reasonable individuals would perceive in the context of the parties involved The law prioritizes certainty and stability, particularly within commercial law, which governs the rights and obligations arising from the trade of goods and services In 1965, a Lord noted that English common law primarily serves commerce, as most commercial contracts involve multiple parties and the contractual documents may change hands frequently, such as in the case of goods being resold Thus, the protection offered by common law is crucial for maintaining order in commercial transactions.
In a rapidly evolving world, comparative law, particularly in the realm of commercial law, emphasizes the significance of final documents as the sole authoritative communication to third parties This principle was reaffirmed in a 1991 House of Lords judgment, highlighting the enduring importance of written agreements in legal transactions.
When interpreting a clause in a commercial contract, it is essential to consider it within its context from the perspective of reasonable parties involved The interpretation should be sensible and take into account its practical implications Objective interpretation is crucial in commercial dealings, as businesses often need to make swift decisions Therefore, it is vital for parties to trust that courts and arbitrators will apply the same objective approach in resolving any future disputes, mirroring the approach they must take in managing their contracts daily.
The interpretation of contracts in English law hinges on the understanding of a reasonable person, a principle that has long been established This approach reflects the reality of societal expectations and norms, suggesting that the law continues to evolve in response to the changing demands of society.
2.3 Contractual Document to Be Interpreted in the Light of Circumstances
The concept of "background" is crucial in the judicial interpretation of contractual documents, as it significantly influences the understanding of the language used Lord Hoffmann emphasized the importance of this term in his analysis, highlighting its role in shaping legal interpretations.
69 Lord P Devlin (1965), The Enforcement of Morals, Oxford University Press, United Kingdom, p 44
70 This is the statement of Lord Goff of Chieveley in the case President of India v Jebsen (UK) Ltd [1991] 1 Lloy’s Rep 1
“background” with Lord Wilberforce’s usage of the term “matrix of fact” in the cases 1971 and 1976 Therefore, it is essential to grasp the concept of
“background” and “matrix of fact” In terms of the terminology of “matrix of fact”, it is necessary to understand how Lord Wilberforce mentioned the term in his decisions 71
In the 1971 case, Lord Wilberforce emphasized that the interpretation of contracts should not rely solely on linguistic elements, but rather consider the broader context or "matrix of facts" surrounding the agreement This statement critiques the traditional approach in English law, which isolated contract language from its factual background Consequently, when the context suggested a meaning that differed from the contract's wording, it was often disregarded, highlighting the need for a more holistic interpretation of contractual agreements.
In a pivotal decision, Lord Wilberforce departed from previous judicial precedents, leading Lord Hoffmann to remark in the ICS case that the 1971 ruling established the modern interpretation of contracts in English law Lord Wilberforce emphasized the importance of examining the context surrounding the language used in contracts, stating, “We must, , enquire beyond the language and see what the circumstances were with reference to which the words were used.” He clarified that only evidence of the factual background known to the parties at or before the contract date would be considered in interpreting the agreement between Mr Prenn and Dr Simmonds Notably, Lord Wilberforce seemed to use the terms “matrix of facts,” “circumstances,” and “background” interchangeably.
A COMPARATIVE STUDY OF VIETNAMESE LAW AND
Applicable Law of Contract in Vietnam
Vietnamese law encompasses various branches, including constitutional, administrative, financial, banking, land, civil, labor, family and marriage, criminal, criminal procedural, civil procedural, and economic law This diverse legal framework gives rise to numerous contract types in Vietnam, such as purchase and sale agreements, service contracts, insurance contracts, consumer contracts, employment contracts, franchise agreements, agency contracts, processing contracts, mandate contracts, trader representation contracts, commercial advertising service contracts, sale promotion service contracts, technology transfer contracts, land use right donation contracts, bailment contracts, and transportation contracts Identifying the specific type of contract is crucial, as it determines the applicable legal provisions that govern the contract.
The sources of the law of contract are (i) constitution, (ii) the Civil Code, (iii) relevant laws, (iv) resolutions of the National Assembly, (v) bylaws 80 In the
79 Hanoi University of Law, Giao trinh ly luan nha nuoc va phap luat, Nha xuat ban Cong an nhan dan,
80 Hanoi University of Law, Giao trinh Luat dan su (Tap 1), Nha xuat ban Cong an nhan dan, 2009, pp.32-
42 source of relevant laws, they are Law on Credit Institutions, Law on Real Estate Business, Commercial Law, Law on Negotiable Instruments, Law on Competition, Law on Insurance Business, Law on Investment, Law on Technology Transfer, etc
In terms of bylaws, they include ordinances, decrees, decisions, circulars, directives, and resolutions of the Judicial Council of the Supreme People’s Court, the Supreme Court Annual Report and Accounts
In Vietnamese law, a "contract" is defined under Article 388 of the Civil Code as an agreement between parties to establish, change, or terminate civil rights and obligations The essence of a contract encompasses two key elements: mutual consent between the parties and an intention to create legal relations Article 122 outlines four essential factors for a valid contract, including the requirement that participants possess civil act capacity Individuals, organizations, cooperative groups, and family households can engage in contracts, with individual capacity defined in Articles 14-23 of the Civil Code Adults, defined as those aged eighteen and older, generally possess full civil act capacity, while minors, under eighteen, have limited capacity Exceptions apply to individuals who are mentally incapacitated or suffer from addictions that impair their ability to manage their affairs.
An organization is recognized as a legal person under Article 84 of the Civil Code when it fulfills four key criteria: it must be established lawfully, possess a well-organized structure, own property that is independent from individuals and other entities, and be accountable for its own liabilities.
The Ho Chi Minh City University of Law published a legal textbook in 2011 that discusses contracts and compensation for damages related to contractual agreements This resource emphasizes the significance of property rights and the ability of individuals to engage in legal relationships independently under their own name.
The validity of a civil transaction hinges on several key factors: firstly, the transaction must comply with legal prohibitions and align with social ethics, although the concept of "social ethics" can be somewhat ambiguous Secondly, all parties involved in the transaction must act voluntarily, without coercion or deception, as outlined in Articles 131 to 133 of the Civil Code, which address issues such as mistakes, fraud, intimidation, and the capacity to understand one's actions Lastly, the transaction must adhere to any legal requirements regarding its form to ensure its effectiveness.
Overview of Interpretation of Contracts in Vietnamese Law
The forms of contracts, as outlined in Article 401 of the Civil Code of 2005, include oral, written, and contracts by specific acts, with mandatory forms only when statutory provisions exist Contracts requiring written expression, notarization, or registration must adhere to these legal requirements However, Articles 126 and 409 of the Civil Code indicate that there is no difference in the interpretation of oral versus written contracts, nor between written contracts and those mandated by law to follow a specific form In summary, all forms of contracts are interpreted uniformly without distinction.
The interpretation of contract contents varies between express terms and implied terms, as outlined in Article 409 of the Civil Code, which contains eight specific clauses.
Article 409 of the Civil Code addresses the interpretation of implied terms, yet only one clause specifically outlines this process Both express and implied terms are interpreted based on the customary practices of the location where the contract was formed However, this thesis does not delve into the interpretation of implied terms, leaving Clause 5 of Article 409 unexamined Ultimately, it can be inferred that the content of a contract significantly influences its interpretation.
Under Vietnamese law, the term "interpretation" of contracts lacks a statutory definition but is generally understood as the process of clarifying meanings While everyday statements are interpreted in a familiar context, contract interpretation requires a more nuanced approach The definition of "interpretation of civil transactions" focuses on determining the meanings of vague contractual provisions However, it does not specify interpretative criteria or methodologies An expert elaborates that contract interpretation involves logical reasoning to clarify imprecise or ambiguous terms, ensuring accurate fulfillment of contractual obligations This highlights the importance of addressing ambiguity in contract language for effective legal outcomes.
82 Tu dien luat hoc, Bo Tu phap, p.288
The article discusses the concept of "vague" in legal interpretation, emphasizing that interpretation is a complex process of logical reasoning that demands significant skill from the interpreter While the author acknowledges the expert's insights, they highlight the absence of specific details regarding the methodology of contract interpretation and the criteria used Furthermore, the article points out that interpretation is not solely the responsibility of arbitrators or judges; it plays a crucial role in determining the rights and obligations of the parties involved, as well as the validity of contracts This essential function of interpretation, however, is not fully addressed by the expert, suggesting that their definition may overlook key aspects of contract interpretation.
The interpretation of contracts was initially governed by the Civil Code of 1995, which was later supplemented by two provisions in the Civil Code of 2005 after a decade Despite these additions, the overall changes to the Codes were minimal, with the new provisions becoming clauses 7 and 8 of Article.
Article 409 of the Civil Code indicates that the interpretative methodology in Vietnamese law remains largely consistent, particularly in clauses 1-4, which each present a single interpretative criterion This limitation prevents judges from selecting among various interpretative options, leading to a consistent application of Article 409 in judicial practice.
Clauses 1-4 of Article 409 of the Civil Code outline the objects of interpretation, which encompass vague provisions (Clause 1), ambiguous words and provisions (Clauses 2 and 3), and difficult-to-understand terms (Clause 4) This framework indicates that clarity is essential, leaving no space for unclear language in legal documents.
Clear and obvious provisions in a contract play a crucial role in its interpretation According to Clause 6 of Article 409 of the Civil Code, these explicit terms serve as aids in the interpretation process rather than the primary focus While judges may have the authority to interpret such provisions, doing so can potentially alter the original meaning of the contract Understanding the significance of clear and obvious language is essential for maintaining the integrity of contractual agreements.
The terms "vague," "ambiguous," and "difficult to understand" are often confused, but they have distinct meanings According to Article 409 of the Civil Code, "vague" encompasses both "ambiguous" and "difficult to understand," and even includes "self-contradictory" terms A notable case illustrates this concept: on March 1, 2010, a contract for the sale of an apartment included a provision stating the house transfer would occur in "July 2009," highlighting the potential for confusion in contractual language.
On 23 April 2011, the appellant received the house transfer from the respondent company Due to such a late transfer, the appellant decided to bring an action against the respondent company and claimed fines for the late house transfer from July 2009 to 23 April 2011 The respondent argued that (i) the nature of their contract was not to sale an apartment, but to contribute capital for the house project, and (ii) the transfer date of their contract was a mistake Therefore, the respondent company requested the court to invalidate their contract The court held that the transfer date was “difficult to understand” Therefore, it relied on another provision of the contract, in which the respondent company was obligated to transfer the apartment right after the appellant transmitted 95% of the apartment payment, paid land use tax and all other necessary expenses In fact, on 1 st March 2010, the
In the case documented by Pham Duy Nghia in 2011, the court determined that the appellant fulfilled all her obligations Consequently, the respondent company was ordered to pay fines due to its failure to transfer the house by March 1, 2010 It was clarified that the fines would be calculated starting from March 1, 2010, rather than from July.
2009 The author think that the provision of the house transfer date was “self- contradictory”, which was a more accurate description of the provision’s language
The methodology for interpreting contracts under the Civil Code focuses on uncovering the common intention of the parties involved A valid contract is defined by the alignment of the subjective intents of the parties, making it essential for judges to seek this intent during contractual disputes The term "common intention," as outlined in Clause 1(a) of Article 126 of the Civil Code, refers to the actual intention of the parties However, challenges arise when judges are unable to determine this common intention, a situation not explicitly addressed by Article 409 of the Civil Code To resolve this issue, reference can be made to the Unidroit Principles of International Commercial Contracts and the United Nations Convention on Contracts for the International Sale of Goods, which advocate for interpreting contracts based on the reasonable person's intention.
86 Article 4.1 of the Unidroit Principles of International Commercial Contracts provides that:
“Article 4.1 – Intention of the parties
(1) A contract shall be interpreted according to the common intention of the parties
In the absence of a clear intention, the contract will be interpreted based on how reasonable individuals, similar to the parties involved, would understand it under the same conditions.
Clauses 1 and 2 of Article 8 of the United Nations Convention on Contracts for the International Sale of Goods provides that:
The Convention stipulates that statements and actions by a party should be interpreted based on their intent, provided the other party was aware or should have been aware of that intent This approach aligns with the Civil Code and two key international conventions, which emphasize uncovering the actual intentions of contracting parties during interpretation The Unidroit Principles of International Commercial Contracts and the United Nations Convention on Contracts for the International Sale of Goods have garnered significant approval from the international community for their flexibility and effectiveness.
Interpretation of Contracts in Comparison
There are some similarities between two legal systems:
In contract disputes, competent interpreters such as the parties involved, judges, or arbitrators play a crucial role in resolving disagreements over the meaning of specific words or provisions Initially, the parties attempt to clarify their differing interpretations; however, if they cannot reach an agreement, legal action may ensue, leading to judicial intervention to interpret the contested terms.
In accordance with Article 94 of the Law on Contracts and Compensation for Non-Contractual Damages, arbitrators possess the authority to adjudicate disputes Consequently, all parties involved are required to adhere to the interpretations provided by the judges or arbitrators.
Secondly, as to the objects of interpretation, both Vietnamese law and
English law concern with vague or ambiguous words or provisions
Thirdly, with respect to the function of interpretation, such a task is aimed at determining the meaning of vague or ambiguous words or provisions
Fourthly, in relation to interpretative criterion for interpretation, the interpreter of both legal systems have to rely on both the language of the contract and its surrounding circumstances
In English law, judicial decisions serve as the primary source for contract interpretation, whereas Vietnamese law relies mainly on statutory provisions This distinction arises from the inherent differences between the two legal systems, with English law being predominantly based on case law Consequently, this provides researchers with greater opportunities to explore contract interpretation within the framework of English law.
3.3.2.2 The Role of A Reasonable Person
Vietnamese law views contracts as a reflection of the private intentions of the parties involved, allowing them the freedom to choose whether to engage in a contract and to determine its content In contrast, English law adopts a distinct approach to contract theory.
Vietnamese judges may benefit from interpreting contracts through the lens of a reasonable person's understanding when they struggle to determine the common intentions of the parties involved This approach could enhance their ability to make fair and informed decisions in contract disputes.
Vietnamese judges should consider adopting the English approach to contract interpretation, which has been established for over a century and is based on the reasonable person's intention The author advocates for the integration of this objective method into Vietnamese law, emphasizing that while the discussion is not new, it has not received adequate attention from lawmakers and legal experts.
Vietnamese judges often consider various sources of evidence, including prior negotiations, to interpret contracts, despite the lack of clearly defined surrounding circumstances in the contractual language This approach highlights the importance of understanding the intentions of the contracting parties or a reasonable person Similarly, English law is continually reassessing the exclusionary rule regarding previous negotiations Therefore, the author suggests the need for a statutory definition of the term "background" to enhance clarity in contract interpretation.
“surrounding circumstances” in Article 409 of the Civil Code of 2005 In this way, Article 409 of the Civil Code
A notable distinction between Vietnamese law and English law lies in the treatment of previous negotiations, as each legal system employs different approaches to interpreting intent While English law excludes prior negotiations, it still incorporates interpretive principles that reflect societal demands In contrast, Vietnamese law permits arbitrators and judges to consider previous negotiations as valuable tools for discerning the mutual intentions of the parties involved Consequently, there is no compelling reason for either legal system to alter its current stance on this matter.
95 Che dinh hop dong trong Bo luat dan su, p.266
The interpretation of various contract types does not significantly impact the interpretative methodology in Vietnamese law, which is hindered by unclear legal language Distinguishing between different objects of interpretation proves challenging, as even ordinary meanings from Vietnamese dictionaries can be vague This ambiguity complicates how a reasonable person comprehends these issues Nonetheless, it is unconvincing to assert that the interpretation of contracts in Vietnam is underdeveloped.
The interpretation of contracts is a significant aspect of both English and Vietnamese law, serving a crucial role in contract law in each country The primary objective of interpretation is to determine the most accurate and persuasive meaning of contractual language Additionally, the type of contract does not influence the method of interpreting written agreements Consequently, it can be confidently stated that Vietnamese law is on par with international standards in this regard.
The interpretation of written contracts involves a comprehensive approach where the interpreter first reads the entire document to understand the transaction's purpose and the reasonable expectations of the parties involved This initial understanding is supplemented by examining surrounding circumstances, as relying solely on the contract's language may not resolve disputes effectively The scope of evidence considered is influenced by both legal standards and the interpreter's intuition Ultimately, the interpreter's role extends beyond mere interpretation; they must also address the legal implications of the chosen meaning.
Under English contract law, the principles of contract interpretation differ significantly from the foundational principles of Vietnamese law As such, it is unconvincing to propose that Vietnamese law should incorporate the exclusionary rule concerning prior negotiations or subjective declarations of intent Furthermore, recommending that Vietnamese law should assess the intention of a reasonable person at the outset of interpretation lacks persuasiveness.
The thesis recommends that lawmakers focus on the methodology for identifying the objective intention of a reasonable person when the common intention of contracting parties cannot be established This recommendation aligns with the global trend of prioritizing the determination of common intention before assessing the objective intention of a reasonable individual.
The thesis also recommend that Vietnamese law should stipulate the term
“background” or “surrounding circumstances” as one of an interpretative criterion Such a stipulation should be set out at Article 409 of the Civil Code.
1 The Vietnamese Civil Code of 2005;
2 The Vietnamese Commercial Law of 2005;
3 The Law on Consumer Rights Protection of 2010;
4 The Law on Business Insurance of 2000 (amended in 2010);
5 The Unidroit Principles of International Commercial Contracts
6 The United Nations Convention on Contracts for the International Sale of
7 Giáo trình lý luận nhà nước và pháp luật, Trường Đại học Luật Hà Nội,
Nhà xuất bản công dân nhân dân, 2009;
8 Giáo trình Luật dân sự Việt Nam (tập 1, 2), Trường Đại học Luật Hà Nội,
9 Tập bài giảng pháp luật về hợp đồng và bồi thường thiệt hại ngoài hợp đồng, Trường Đại học Luật Thành phố Hồ Chí Minh, 2011;
10 Nguyễn Ngọc Khánh, Chế định hợp đồng trong Bộ luật dân sự, Nhà xuất bản Tư pháp, 2007;
11 Phạm Duy Nghĩa, Giáo trình Luật kinh tế, Nhà xuất bản công an nhân dân, 2010;
12 Phạm Duy Nghĩa, Pháp luật đại cương, Nhà xuất bản công an nhân dân,
13 Từ điển luật học, Bộ Tư pháp, Viện Khoa học pháp lý, Nhà xuất bản Tư pháp – Nhà xuất bản từ điển bách khoa, 2006;
14 Từ điển tiếng Việt phổ thông, Nhà xuất bản thành phố Hồ Chí Minh,
15 Aharon Barak, Purposive Interpretation in Law, Princeton University
16 Hugh Collins, The Law of Contract, 4 th edition, Butterworths, London,
17 Peter De Cruz, Comparative Law in A Changing World, Routledge-
18 Lord P Devlin, The Enforcement of Morals, Oxford University Press,
19 Professor Guest, Chitty on Contracts, 31 st edition, Sweet and Maxwell,
20 Sir Kim Lewison, The Interpretation of Contracts, 5 th edition, Sweet and
21 David Oughton and Martin Davis, Sourcebook on Contract Law, 2 nd edition, Cavendish Publishing, 2000;
22 Ingeborg Schwenzer, Christopher Kee, and Pascal Hachem, Global Sales and Contract Law, 1 st edition, Oxford University Press, 2012
23 Laurence Koffman and Elizabeth Macdonald, The Law of Contract, 6 th edition, Oxford University Press, New York ,2007;
24 Jill Poole, Textbook on Contract Law, 11 th edition, Oxford University
25 M Chen-Wishart, Contract Law, 2 nd edition, Oxford University Press,
26 Dictionary of Law, 2 nd edition, Peter Collin Publishing 1992;
27 Oxford Advanced Learner’ Dictionary (8 th edition);
28 Nguyen Ngoc Khanh, Giai thich hop dong dan su: so sanh nuoc ngoai va lien he Dieu 408 Bo luat dan su, Tap chi Nghien cuu lap phap, No.45,
In English (Last assessed on 10 th July 2013)
29 Stefan Vogenauer, Interpretation of Contracts: Concluding Comparative
Observations, May 2007; http://papers.ssrn.com/sol3/papers.cfm?abstract_id4074
30 Discussion Paper 147 – Review of Contract Law: Discussion Paper on
31 http://ec.europa.eu/eu_law/index_en.htm
32 http://www.parliament.uk/about/how/laws/
33 http://www.judiciary.gov.uk/about-the-judiciary/introduction-to-justice- system
34 http://www.judiciary.gov.uk/about-the-judiciary/the-judiciary-in- detail/judicial+roles/tribunals/tribunals
35 http://www3.worldlii.org/cgi-bin/LawCite?cit=[1997]%20UKHL%2028
36 http://www3.worldlii.org/cgi-bin/LawCite?cit=[1997]%20UKHL%2028,
37 http://www3.worldlii.org/cgi- bin/LawCite?cit=[1976]%203%20All%20ER%20570
38 http://www3.worldlii.org/cgi- bin/LawCite?cit=[1971]%203%20All%20ER%20237
39 http://www.lexisnexis.com/uk/lexispsl/disputeresolution/document/39375
0/58C3-WYJ1-F18B-825X-00000-00/Pre- contractual%20negotiations%20and%20statements
JUDICIAL DECISIONS (Last assessed on 10 July 2013)
40 http://tuoitre.vn/Chinh-tri-xa-hoi/Phap-luat/554471/cham-giao-can-ho- quoc-cuong-gia-lai-phai-boi-thuong.html#ad-image-0
41 http://tuoitrenews.vn/business/10840/more-to-come-after-1st-case-of- housebuyer-getting-payout
42 http://www.vibonline.com.vn/Banan/82/Cong-ty-TNHH-dich-vu-thuong- mai-san-xuat-Viet-A-Chau-va-Cong-ty-TNHH-Connell-Bros-tranh- chap.aspx
43 http://www.vibonline.com.vn/Banan/131/Cong-ty-TNHH-SXTM-Ruc-
Nhat-yeu-cau-duoc-tiep-tuc-thue-mat-bang-cua-Cong-ty-kho-bai-
44 BCCI v Ali, [2001] UKHL 8 [2001] 1 All ER 961 http://www.lexisnexis.com/uk/lexispsl/disputeresolution/document/27466 8/4CSP-4J90-TWP1-60MX/Bank-of-Credit-and-Commerce-
International-SA-%28in-liquidation%29-v-Ali-and-others -
45 Chartbrook Homes Ltd v Persimmon Homes Ltd, [2009] UKHL
38 [2009] 4 All ER 677 http://www.lexisnexis.com/uk/lexispsl/disputeresolution/document/27466 8/7X34-8VC0-Y96Y-G2BY/Chartbrook-Ltd-v-Persimmon-Homes-Ltd- and-another-%28Chartbrook-Ltd-and-another%2C-Part-20- defendants%29 -%5B2009%5D-4-All-ER-677
46 Investors Compensation Scheme v West Bromwich Building
I don't know!
Bromwich-Building-Society-and-others -%5B1998%5D-1-All-ER-98
47 Prenn v Simmonds [1971] 3 All ER 237 http://www.lexisnexis.com/uk/lexispsl/disputeresolution/document/274668/4DD8-PJW0-TWP1-6099/Prenn-v-Simmonds -%5B1971%5D-3-All-ER-237