Some Notes on Contracts Prone to Disputes
A contract is an important legal instrument that records the agreement between the parties. In daily transactions, we often encounter contracts such as house/office/shop lease agreements, contracts for the purchase and sale of assets, or business cooperation contracts. To ensure legal precision and enforceability, clients usually engage a law firm, legal office, or lawyer to provide consultation, drafting, and review of contract terms.
At present, the development of Artificial Intelligence (AI) applications has provided useful tools for self-drafting contracts. However, many of these are merely simple templates lacking binding clauses, with vague language that may lead to inconsistent interpretation. Most importantly, contracts still require review to ensure compliance with the actual business context and the intended transaction. AI cannot fully replace human expertise.
Common deficiencies and issues that may give rise to disputes include:
- “Package” Contracts: The contract may stipulate that the seller supplies goods and performs installation. However, when additional tools are required for completion, the buyer may refuse to pay, claiming it is a “Package” contract and that the seller should have anticipated all necessary items. Disputes then arise over the interpretation of “Package”. Another example concerns a “Package” transfer of a coffee shop or premises: if the contract does not specify the logo or brand name, the buyer may continue using the old brand after the transfer. In many cases, both parties rely on online templates containing the word “Package” without paying attention to its actual implications.
- Excessive Interest Rates for Late Payment: According to Article 468 of the Civil Code 2005, “Where the parties agree on interest, the agreed interest rate shall not exceed 20% per annum of the loan amount.” Any higher rate is unlawful.
- Excessive Penalties for Breach: Some parties impose disproportionately high penalties to intimidate the other side. However, pursuant to Article 301 of the Commercial Law 2005, the penalty for breach (or the total penalty for multiple breaches) shall not exceed 8% of the value of the contractual obligation breached.
- Omission of Remedies: Some self-drafted contracts omit provisions on both “penalties for breach” and “compensation for damages.”
- Dispute Resolution Clause: Contracts designate only one dispute resolution forum – either the Court or Commercial Arbitration. The choice should be made carefully depending on the enterprise’s needs.
- Other Essential Provisions: Matters such as warranty periods, notice requirements, force majeure, applicable law (especially where a foreign element exists) must be stipulated clearly, specifically, and in detail.
In practice, many parties only seek legal advice after a dispute has arisen, believing initially that legal services are unnecessary or too costly, as businesses aim to cut expenses. However, the cost of retaining a lawyer/legal expert at the outset is far lower than the expenses required to resolve disputes later. A competent lawyer can help clients identify and mitigate risks from the beginning.
Nowadays, enterprises increasingly value this, with some even establishing in-house legal departments. This reflects a progressive mindset in business operations – ensuring commercial objectives are met while maintaining compliance with the law.
