Contracts

Governing Law

The choice of foreign substantive law by private contracting parties is regarded as binding and enforceable under Cambodian law.

Still, it is prudent to recognize that current judicial practice indicates that the courts of Cambodia are not familiar with the concept of applying foreign law and may insist on applying Cambodian law despite the expressed choice of foreign governing law by the parties to the contract. We are aware of no decision from a Cambodian court that provides guidance on this issue.

There is no provision under the Code of Civil Procedure of the Kingdom of Cambodia addressing the enforceability of a choice of foreign law provision in the courts of Cambodia.

Statute of Limitations

The Civil Code provides for a five year statute of limitations for bringing a contractual claim.  The five year period runs from the date of performance as defined in the contract, or five years from date of the contract if the performance date is unclear.

For damages claims based on tort actions, the limitation period is three years, from the time the cause of action arose.

For actions based on fraud, which is considered a misdemeanor, the statute of limitation is five years for bringing a criminal action under the Code of Criminal Procedure and the Penal Code).

 

Foreign Exchange

Although the Cambodian Riel is the official currency of the Kingdom of Cambodia, transactions are often denominated in U.S. dollars.  The U.S. dollar is still commonly used as a means of payment in Cambodia although the government has slowly made efforts to strengthen use of the Riel and may eventually require denomination in Riel only in the future.

Contract Execution

There are currently no execution formalities for written agreements to be enforceable. Private contracts signed by two contracting parties are legally sufficient, as notarization of documents is not yet a general practice. In place of notarization, documents are certified by Cambodian Bar lawyer as having been signed in their presence and affixed with the lawyer’s seal. Witnesses are generally not required, however, having witnesses and particularly a competent notary co-signing the agreement is still advisable and useful in the event of litigation. There is no stamp tax requirement for private documents.

One peculiarity of Cambodian legal practice is the importance of the company stamp for contracts that will be binding upon a company. It is not sufficient that it be signed by an authorized representative. In most cases, contracting parties will require that each one affix the company stamp on the document together with the signature of the authorized representative. A board resolution designating the person as the company’s authorized signatory may or may not be necessary, depending on the nature and importance of the contract and the value of the subject matter. Where the contracting party is an individual and not a company, it is generally required for that person to affix his/her thumbprint on the document alongside the signature.

There is also the issue of the language of the contracts. The Constitution recognizes Khmer as the official language of the country, and a Cambodian court will require a Khmer translation of the contract in a case regarding contract enforcement. Considering the technical nature of the terms of an agreement, it may not be easy to get an accurate translation of the terms in Khmer.  Even if one is able to obtain a satisfactory translation, it cannot be guaranteed that a court would interpret the Khmer translation in the same way that an English speaker would interpret the original version, considering the complexities of Khmer grammar, syntax and legal reasoning. It is acceptable to have only one language version of the contract (in English) and to obtain the counterparty’s express consent and signature on the English document. A Khmer translation can be obtained at a later time, in the event that it is required for a court proceeding. To start by executing a Khmer translation of the contract alongside the English original at the outset could lead to confusion of terms and is generally not recommended.

 

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