Distribution agreements are among the most commonly used contracts in commercial operations. Many businesses consider them straightforward: one party supplies products, the other distributes them, and both share the benefits of market expansion.
Yet in practice, distribution agreements are one of the most dispute-prone contract types—especially in Vietnam. Conflicts over territory, pricing, exclusivity, termination, and liability frequently arise, even when both parties initially cooperate in good faith.
This article explains why distribution agreements that appear simple often lead to disputes, where the hidden legal risks lie, and how ongoing legal consultancy helps businesses prevent conflicts before they disrupt operations.
Unlike one-off sales contracts, distribution agreements govern long-term commercial relationships. They shape how products are sold, priced, promoted, and supported in the market over time.
Because these agreements must balance:
Commercial incentives
Market control
Legal compliance
Risk allocation
small drafting weaknesses can have long-term consequences. Problems often do not appear immediately, but surface once sales grow, markets change, or relationships deteriorate.
Territory is one of the most common sources of dispute.
Many distribution agreements:
Define territories unclearly
Fail to address online sales or cross-border customers
Allow overlapping channels without clear rules
As a result, disputes arise when distributors accuse principals—or other distributors—of encroaching on “their” market.
Without precise legal drafting, territory disputes are almost inevitable.
Exclusivity is often granted casually to incentivize distributors, but the legal consequences are not always considered.
Common problems include:
Exclusivity granted without clear performance thresholds
No objective criteria to measure distributor performance
No mechanism to revoke exclusivity if targets are not met
When sales underperform, principals may want to appoint additional distributors—triggering disputes over exclusivity rights.
Pricing is a sensitive issue in distribution relationships.
Many agreements fail to clearly regulate:
Recommended vs fixed resale prices
Discount authority
Promotional pricing
Responsibility for price compliance
When market conditions change, disagreements over pricing control often escalate into accusations of contract breach or unfair competition.
Termination is where many distribution disputes explode.
Distribution agreements often include:
Vague termination rights
Insufficient notice provisions
No clear handling of inventory, customers, or outstanding payments
When one party decides to exit the relationship, the lack of structured termination procedures creates chaos—and legal conflict.
In Vietnam, distribution activities may trigger obligations related to:
Product labeling and circulation
Advertising and promotion
Consumer protection
Import and customs compliance
Many agreements fail to clearly allocate responsibility for regulatory compliance between principal and distributor.
When authorities impose penalties, disputes arise over who is legally responsible.
Distribution involves multiple risks: defective products, delayed delivery, customer claims, and regulatory sanctions.
Poorly drafted agreements often:
Do not cap liability clearly
Fail to align liability with insurance coverage
Place excessive risk on one party
When incidents occur, financial exposure becomes a major source of conflict.
As relationships evolve, parties often modify commercial terms informally through emails or verbal agreements.
Over time, this creates:
Conflicting versions of obligations
Disputes over which terms apply
Difficulty enforcing original agreements
Without proper legal control, informal changes undermine contract certainty.
Many distribution relationships—especially those involving foreign principals—are built on trust and long-term expectations rather than strict legal interpretation.
Problems arise when:
One party treats the agreement as flexible
The other treats it as legally binding
Expectations are not aligned with written terms
When disputes arise, courts and tribunals rely on written contracts—not commercial assumptions.
Distribution disputes often escalate because:
The relationship affects ongoing revenue
Termination impacts market access
Multiple stakeholders are involved
Emotions run high after long cooperation
Without clear legal frameworks, even small disagreements can turn into costly disputes.
Many businesses only ask lawyers to:
Draft the initial agreement
Review termination notices
Handle disputes after they arise
By then, structural weaknesses are already embedded in the contract.
Distribution agreements require ongoing legal oversight, not just one-off drafting.
With ongoing legal consultancy, businesses manage distribution agreements proactively rather than reactively.
Ongoing legal support helps businesses:
Structure distribution models correctly from the start
Update agreements as markets and strategies change
Standardize terms across distributors
Control amendments and side agreements
Identify dispute risks early
Legal support becomes part of commercial strategy—not a crisis response.
FDI companies distributing products in Vietnam face additional challenges:
Use of foreign contract templates incompatible with Vietnamese law
Differences between headquarters policies and local enforcement
Language barriers in contract interpretation
Higher scrutiny from authorities and partners
Without local legal oversight, distribution disputes are more likely and harder to resolve.
DEDICA provides ongoing legal consultancy services to help businesses manage distribution relationships safely and effectively.
As an outsourced legal department, DEDICA supports clients by:
Structuring and reviewing distribution agreements
Clarifying territory, exclusivity, and termination clauses
Advising on regulatory compliance in distribution
Supporting negotiation, amendment, and termination
Preventing disputes before they escalate
DEDICA’s approach is practical, commercially aware, and prevention-focused, designed to protect long-term business relationships.
Distribution agreements may appear simple on the surface, but they govern complex, long-term commercial relationships. When legal structure does not keep pace with commercial reality, disputes become almost inevitable.
For businesses operating in Vietnam, the real risk is not signing a distribution agreement—it is signing one without continuous legal oversight.
By engaging ongoing legal consultancy, businesses can turn distribution agreements into tools for growth rather than sources of conflict.
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Contact us today for a free initial consultation with our experienced lawyers!
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