What should be noted when purchasing and sale of goods through the Goods Exchange in Viet Nam?

Purchase and sale goods is a diversified commercial activity from parties, trading methods to contents of purchase and sale, … Of which, purchase and sale of goods through the Goods Exchange is a commercial activity specified under the law. So when implementing these activities, what should be noted in terms of legal aspects? Join Lawyer X to find out through the following situation: “Hi, Lawyer! Recently I have known about purchase and sale of goods through the Goods Exchange in Viet Nam. This kind of activities is quite new to me because I usually only see the purchase and sale of goods between business man or to retail buyers. So what are goods exchanges? Can I establish my own goods  exchange? What does the purchase and sale of goods through the Goods Exchange mean? And is there anything that needs to be noted? Hope you will answer to help me understand deeply. Thank you very much, lawyer! “

Legal grounds

Viet Nam’s Commercial law

What is purchase and sale of goods through the Goods Exchange?

Purchase and sale of goods through the Goods Exchange mean commercial activities whereby the parties agree to purchase and sell a defined quantity of goods of a defined type through the Goods Exchange under the standards of the Goods Exchange, at a price agreed upon at the time the contract is entered into, and with the time of goods delivery determined to be a specific point of time in the future.

Goods permitted to be purchased and sold through the Goods Exchange, defined in the list of specific goods permitted to be traded through the Goods Exchange in each time, shall be stipulated by the Minister of Industry and Trade. The Goods Exchange may organize only the purchase and sale of goods on this list. The quality, unit of measure and other standards of the goods announced by the Goods Exchange must be consistent with the current law on standards and measurement.

Legal status of the Commodity Exchange

Goods Exchange is an enterprise established and operating under the provisions of the Law on Enterprise and Decree 158/2006/NĐ-CP. The Minister of Industry and Trade has authority to issue, re-issue, amend and supplement a license for the establishment of the Goods Exchange; to approve the regulation on operation of the Goods Exchange.

The Goods Exchange has the following functions:

– Providing the material – technical conditions necessary for transactions of purchasing or selling goods;

– Running trading operations;

– Listing specific prices formed at the Goods Exchange at each specific time.

 The Government shall specify the conditions for the establishment of the Goods Exchange, the powers and tasks of the Goods Exchange, and the approval of the operation charter of the Goods Exchange.

A Goods Exchange shall be established if the following conditions are satisfied:

– Charter capital from one hundred fifty (150) billion Viet Nam dong or more;

– Having an information technology system meeting the requirements for technological and technical solutions in goods trading through the Goods Exchange, specifically:

+ The server system works stably and has at least one backup server available at all times in case the main system crashes;

+ The server system ensures data backup of business applications, transaction data, and data recovery in case of incidents;

+ Application software must comply with intellectual property rights in accordance with the law;

+ The software system must have an operation log function to keep track of all goods transactions, payments and delivery in the professional process for at least 5 years;

+ The information technology system meets the technical regulations on network information security, if any.

– The operation charter is not contrary to the law, especially the provisions in Decree 158/2006/NĐ-CP

Rights and obligations of the parties to contract for purchase and sale of goods through the Goods Exchange

Types of contracts for purchase and sale of goods through the Goods Exchange

Contracts for purchase and sale of goods through the Goods Exchange includd:

– forward contracts

– and option contracts.

 Forward contract means an agreement whereby the seller undertakes to deliver and the purchaser undertakes to receive the goods at a specific point of time in the future under the contract.

Call option or put option contract means an agreement whereby the purchaser has the right to purchase or sell a specific goods at a pre-fixed price level (executed price) and must pay a certain sum of money to buy this right (option money). The option purchaser may opt to effect or not to effect such purchase or sale of goods.

 Rights and obligations of parties to forward contracts

– Where the seller delivers the goods under the contract, the purchaser is obliged to receive the goods and pay for them.

– Where the parties agree that the purchaser may make cash payment and reject the goods, the purchaser shall have to pay to the seller a sum of money equal to the difference between the price agreed upon in the contract and the market price announced by the Goods Exchange at the time the contract is performed.

– Where the parties agree that the purchaser may make cash payment and refuse to deliver the goods, the seller shall have to pay to the purchaser a sum of money equal to the difference between the market price announced by the Goods Exchange at the time the contract is performed and the price agreed upon in the contract.

Rights and obligations of parties to option contracts

– The call option or put option purchaser shall have to pay for option purchase in order to become call option or put option holder. The sum of money to be paid for option purchase shall be agreed upon by the parties.

– The call option holder has the right to purchase but is not obliged to purchase goods ascertained in the contract. Where the call option holder decides to perform the contract, the seller shall be obliged to sell goods to the call option holder. The seller that has no goods to deliver shall have to pay to the call option holder a sum of money equal to the difference between the price agreed upon in the contract and the market price announced by the Goods Exchange at the time the contract is performed.

– The put option holder has the right to sell but is not obliged to sell goods ascertained in the contract. Where the put option holder decides to perform the contract, the purchaser shall be obliged to purchase goods from the put option holder. Where the purchaser does not purchase goods, it shall have to pay to the put option holder a sum of money equal to the difference between the market price announced by the Goods Exchange at the time the contract is performed and the price agreed upon in the contract.

– Where the call option or put option holder decides not to perform the contract within the valid duration of the contract, the contract shall automatically be invalidated.

Goods traded at the Goods Exchange Brokers for purchase and sale of goods through the Goods Exchange

 – Brokers for purchase and sale of goods through the Goods Exchange shall be allowed to operate at the Goods Exchange only when they fully satisfy the conditions provided for by law. The Government shall specify the conditions for operation of brokers for the purchase and sale of goods through the Goods Exchange.

– Brokers for purchase and sale of goods through the Goods Exchange shall be allowed to conduct only activities of brokerage for purchase and sale of goods through the Goods Exchange and must not be a party to a contract for purchase and sale of goods through the Goods Exchange.

– Brokers for purchase and sale of goods through the Goods Exchange shall be obliged to deposit money at the Goods Exchange to secure the performance of their obligations arising in the course of goods purchase and sale brokerage activities. The deposit level shall be set by the Goods Exchange.

*Prohibited acts of brokers for purchase and sale of goods through the Goods Exchange

– Enticing customers to enter into contracts by promising to compensate the whole or part of loss incurred or to guarantee profits for them.

– Offering or conducting brokerage for goods without entering into contracts with customers.

– Using sham prices or other fraudulent measures in the course of brokerage.

– Refusing or unreasonably delaying the brokerage for contracts in accordance with contents agreed upon with customers.

 – Other prohibited acts specified in Clause 2, Article 71 of Law on Enterprise

Prohibited acts in activities of purchase and sale of goods through the Goods Exchange

– Staff members of the Goods Exchange shall not be allowed to conduct the brokerage for, purchase or sale of goods through the Goods Exchange.

– Parties involved in the purchase and sale of goods through the Goods Exchange must not conduct the following acts:

+ Committing fraudulences or deceits about volumes of goods in forward or option contracts which are transacted or may be transacted, and fraudulences and deceits about real prices of goods in forward or option contracts;

+ Supplying false information on transactions, the market or prices of goods purchased or sold through the Goods Exchange;

+ Applying illegal measures to cause disorder of the goods market at the Goods Exchange;

+ Committing other prohibited acts provided for by law.

Application of management measures in emergency cases

– Emergency cases mean circumstances where the disorder of the goods market occurs, making transactions through the Goods Exchange unable to accurately reflect the goods supply and demand relation.

– In emergency cases, the Trade Minister shall be entitled to apply the following measures:

+ Temporarily suspending transactions through the Goods Exchange;

+ Limiting transactions within a price bracket or a specific quantity of goods;

+ Changing the schedule of transactions;

+ Adjusting the operation charter of the Goods Exchange;

+ Other necessary measures as provided for by the Government.

Right to conduct the purchase and sale of goods through overseas Goods Exchanges Vietnamese traders are entitled to conduct purchase and sale of goods through overseas Goods Exchanges according to regulations of the Government.

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