Let’s learn about the property purchase and sale contract applicable to elevator products and the provisions on the rights and obligations of the parties in the purchase and sale contract. Along with that are notes on possible legal risks.

Based on standards and regulations for product acceptance

Product quality is an agreement between the seller and the buyer of the elevator, but in order to check and take over the product to see if the product is of the right quality, consumers need to be based on the following grounds:

– The parties’ agreement on the quality of elevator products must not be lower than the national technical regulations (NTR). Accordingly, consumers can compare data and information provided by enterprises with NTR for comparison.

– The seller must ensure that the products sold conform to the description on the package, the trademark or the model selected by the buyer. Products must meet the technical standards committed by the enterprise.

– Technical inspection of elevator safety from licensed units (required for the first time before operation) will help determine product quality according to NTR, confirm records and background of origin and origin. … In addition, the buyer can also ask the inspection unit to confirm the quality against the technical standards committed by the seller.

– Buyers need to learn about technical regulations and standards related to elevator safety to ensure that their product selection is appropriate. Along with that is strictly complying with regulations on inspection to verify product quality. Buyers should not, because of the price and cost, choose an elevator supplier that does not comply with regulations.

Terms of penalty and compensation

When entering into a contract, breach and damages clauses are important but often overlooked. The parties need to anticipate the risks and clearly define the liability to compensate for damage, if any.

Accordingly, the buyer should propose the following terms of violation and compensation to the seller for the two parties to discuss and agree:

– Time limit for contract performance and penalty for late progress.

– The seller’s responsibility to deliver synchronous products, the right type and the right quantity, according to the terms of exchange – return – compensation for damage caused by the violation of the above terms.

– Obligation to warranty, repair products within the warranty period and compensate for damage within the warranty period. The buyer has the right to require the seller to provide a warranty for the product, that is, if the buyer discovers a defect in the product, it has the right to request the seller to repair it free of charge, reduce the price, exchange the defective product for a replacement another product or return the product and get a refund. In addition, the buyer has the right to request the seller to compensate for damage caused by technical defects of the product during the warranty period.

– The seller is obliged to provide the buyer with necessary information about the property for sale and instructions on how to use that property. If the seller fails to perform, causing the buyer to fail to achieve the purpose of entering into the contract, the buyer has the right to cancel the contract and demand compensation for damage.

From the above terms of penalty and compensation, we can see the necessity of financial guarantee.

Financial guarantee – a measure to avoid financial risks with sales contracts

A Financial Guarantee is a contract by a third party (the guarantor) to repay a debt owed by a second party (the creditor) for their payments to the final drawee (the investor).

Accordingly, between the seller and the buyer, there should be a competent and legal third party to provide financial guarantee. This ensures benefits for both parties.

There was a situation where, after the consumer signed the contract and paid the first deposit to the elevator supplier, that unit “evaporated” from the market. Even when the buyer has received the product and installed it and put it into operation, although the product warranty period is still 2-3 years long, the business has disappeared, the products are of poor quality, and the operation is not stable. A set of elevators is like a house, not easy to replace or major repair. Money lost, handicapped, the buyer has no “log” to cling to.

There are also many cases where enterprises operate in a “hand-to-mouth” fashion, not having enough financial capacity – which is part of the field capacity that enterprises need – leading to delay in progress, appropriation capital,…

In such situations, if there is a guarantor, the buyer can rest assured, just providing information about the seller’s breach of contract can get his money back or if the seller does not. When properly performing its responsibilities, the guarantor will perform alternative obligations to ensure the interests of the customer. It can be said that choosing more guarantors is the optimal measure to avoid financial risks.

Elevator is a special product that both needs to comply with the provisions of the normal purchase and sale contract and also needs to comply with the construction contract due to the long-term installation and construction elements. Therefore, the buyer can agree with the seller on the following types of guarantees:

Contract performance guarantee:

Contract performance guarantee is a security measure in the course of contract performance by a credit institution that commits to the guarantee recipient for the correct and complete replacement of debts according to the part of the obligee’s obligations recognized in the contract with the guarantor.

The guarantor may undertake to guarantee part or all of the obligations to the obligee.

– Guarantee obligation including interest on principal, fines, compensation for damage, interest on late payment, etc.

– The value of performance guarantee is agreed upon by the parties, is specified as from 2% – 10% of the contract value, but according to Circular No. 11/2015/TT-BKHĐT, in the form of Contract Performance Guarantee for the form of competitive offer, stated that the contract performance guarantee value is from 2% to 3% of the contract value.

Advance guarantee:

Contract advance guarantee is a legally binding form so that the seller does not violate the contract, does not violate the contract performance schedule and ensures that the seller uses the advance for the right purpose with the right time. advance by the contract performance period.

The level of advance guarantee is also agreed upon by the parties themselves, the lowest level being equal to:

– 10% of the contract price for construction work contracts valued at over VND 50 billion;

– 15% of the contract price for consulting contracts valued at over 10 billion VND, construction work contracts valued at between 10 billion VND and 50 billion VND;

– 20% of the contract price for consulting contracts worth up to 10 billion VND, construction work contracts valued at less than 10 billion VND.

The seller must use the advance guarantee money for the right purposes and objects, effectively as agreed in the contract, it is strictly forbidden to specify the advance without using it or using it for improper purposes and the subject of the contract.

Warranty guarantee:

Warranty guarantee is the preferred guarantee measure applied in the process of applying construction contracts. The contract performance guarantee, which is specifically the content of the warranty guarantee, must be submitted by the contractor to the principal before the effective date of the contract in accordance with the content agreed upon by the parties.

The warranty guarantee must be made according to a form approved by the principal and is valid until the contractor fully performs its obligations under the contract.

When a construction contract has taken effect but the contractor fails to perform the contract or commits violations of the contract’s contents, the contractor will not be refunded the amount guaranteed for the performance of the contract. This is money back guarantee, warranty.

The contract performance guarantee is usually determined between 2% and 10% of the value of the contract. The value of the contract guarantee, in case it is necessary to minimize risks, can be increased but not more than 30% of the contract’s price but must be approved by the person competent to decide on the investment.

Payment guarantee:

Not only buyers are at risk, but sellers often encounter unscrupulous customers.

Many businesses also often encounter the irony situation when customers are unable to pay the contract. Especially for elevator products, which are often divided into payment stages, but rarely pay 100% at the beginning, there are even businesses that accept the condition of paying the entire contract value after completing the contract.

With an elevator product, in addition to the deposit the buyer has paid for the first time, the costs of production, transportation, etc. are invested in advance by the enterprise. Situations where products have been delivered but cannot be settled with customers, backlog of capital, and difficulty in developing subsequent projects and contracts are quite common among small and medium enterprises.

In that situation, the two parties can negotiate with each other on a unit of financial guarantee or property guarantee, a third party can guarantee or collect in advance the value of the purchase and sale contract. Then, according to the stages of the contract, the seller can ensure the correct contract payment according to the schedule and value. Although this form of guarantee in favor of the seller is not yet popular, businesses can refer to it to ensure their interests.

Both the seller and the buyer also need to verify the credibility of the guarantor, to avoid both parties being exposed to financial risks from third parties or non-transparent legal procedures.

With products of high value and directly related to technical and occupational safety such as elevators, both consumers and businesses should learn detailed legal information, along with reference to consult technical and financial experts to ensure the rights and responsibilities of each party.