Are you having difficulties in a dispute of a product distribution contract? In the article below, NPLaw analyzes the applicable legal regulations and proposes effective dispute resolution solutions for product distribution disputes, helping enterprises maximize the protection of their lawful rights and interests.
I. Current situation of product distribution disputes
In the context of deep economic integration, Vietnamese enterprises have increasingly focused on developing distribution systems to expand their consumer markets. However, alongside such a strong development, disputes related to product distribution activities have increased both in number and in complexity.
Common types of disputes include breaches of exclusive distribution commitments, late or non-payment for goods, delivery of goods of improper quality or quantity, and unlawful unilateral termination of distribution contracts. These disputes not only cause direct financial losses to the parties but also adversely affect reputation, brand value, and long-term cooperative relationships.
In practice, the primary causes of such disputes often arise from inadequately drafted distribution contracts, unclear provisions, or contractual terms that are not fully aligned with current legal regulations. In an increasingly competitive environment, identifying legal risks in distribution contracts and establishing effective dispute resolution mechanisms is an urgent necessity for enterprises.
II. What are product distribution disputes?
1. Concept of product distribution disputes
Pursuant to Clause 4, Article 3 of Decree No. 09/2018/ND-CP, distribution is defined as wholesale activities, retail activities, sales agency activities, and commercial franchising. Accordingly, a distributor is understood to be an entity engaging in wholesale, retail, sales agency, or commercial franchising activities.
Accordingly, a product distribution dispute may be understood as a conflict, disagreement, or conflict of interests between parties involved in the distribution of goods (typically between manufacturers or suppliers and distributors, agents, or commercial intermediaries) arising from the execution of rights and obligations under a distribution contract.
Product distribution activities fall within the scope of commercial activities; therefore, such disputes are generally considered commercial disputes and are governed by commercial law, civil law, and regulations relating to contracts.
2. Circumstances resulting in product distribution disputes
Common situations leading to product distribution disputes include:
- Breach of payment obligations: The distributor delays payment, makes insufficient payment, or refuses to pay.
- Breach of delivery obligations: The manufacturer or supplier delivers goods of incorrect quantity or quality, delivers late, or fails to deliver.
- Breach of exclusive distribution agreements: A party independently enters into distribution agreements with other partners in violation of exclusivity commitments.
- Disputes over distribution territory: Failure to comply with the geographical scope or customer segments stipulated in the contract.
- Unlawful unilateral termination of the distribution contract: A party terminates the contract without complying with the agreed conditions or termination procedures.
- Other disputes: Relating to warranties, product returns or exchanges, sharing of marketing costs, and legal liability arising from defective products causing damage to consumers.
III. Legal regulations governing product distribution disputes
1. Applicable regulations in resolving product distribution disputes
Main legal instruments applicable to the resolution of product distribution disputes include:
- The Law on Commerce 2005: Governing contracts for the sale of goods, agency contracts, commercial franchising, exclusive distribution, and related matters.
- The Civil Code 2015: Stipulating general principles on contracts, conditions for validity, rights and obligations of the parties, and liability for damages arising from contractual breaches.
- The Law on Competition 2018: Applicable in cases involving abuse of dominant position or anti-competitive practices in distribution.
- International treaties or international commercial practices (where foreign elements are involved, such as distribution contracts with FDI enterprises or foreign distributors).
2. Competent authorities for resolving product distribution disputes
Upon arising a dispute, the parties may choose one of the following dispute resolution methods:
Negotiation and mediation
- The parties may negotiate and reach agreements to amend or adjust contractual terms.
- Such a method is cost-effective and helps preserve business relationships.
Commercial arbitration
- Where the contract contains an arbitration agreement, disputes may be resolved by arbitration institutions (e.g., VIAC – Vietnam International Arbitration Centre) pursuant to Article 5 of the Law on Commercial Arbitration 2010.
- Such a method is favored by many enterprises due to its efficiency and the final and binding nature of arbitral awards.
People’s Court
- In the absence of an arbitration agreement, disputes shall be resolved by a competent court in accordance with Articles 35 and 37 of the Civil Procedure Code 2015, as amended in 2025.
- Jurisdiction is determined based on the value of the dispute and the residence or headquarters of the defendant.
3. Consequences if product distribution disputes are not effectively resolved
If disputes are not promptly and thoroughly resolved, enterprises may face various adverse consequences:
- Economic losses: Due to contract suspension, interruption of product distribution, reduced revenue, and increased costs.
- Loss of reputation and brand value: Particularly in exclusive distribution arrangements, delayed dispute resolution may lose the trust of partners and customers.
- Legal risks: Prolonged disputes may result in litigation, contractual fines, compensation for damages, or even contract termination.
- Disruption of supply chains: Unresolved disputes may interrupt distribution activities, negatively affecting market share and long-term cooperation.
Therefore, seeking legal advice and applying appropriate dispute resolution mechanisms at an early stage is a main factor in safeguarding enterprise interests.
IV. Questions regarding product distribution disputes
1. What are the responsibilities of manufacturers in product distribution disputes?
Manufacturers’ responsibilities include:
- Ensuring the quality of products supplied to distributors.
- Properly fulfilling commitments regarding pricing, quantity, and delivery schedules.
- Compensating for damages if breaches of obligations cause losses to distributors or consumers.
- Cooperating with distributors in dispute resolution to prevent broader market impact.
2. Is it possible to claim compensation for damages when a partner breaches obligations leading to a product distribution dispute?
Pursuant to Article 303 of the Law on Commerce 2005, liability for damages arises when the following conditions are satisfied: A contractual breach occurs; actual damage is incurred; and the breach is the direct cause of such damage.
Accordingly, where these conditions are met, the injured party may claim compensation for damages arising from a partner’s breach leading to a product distribution dispute.
3. How can product distribution disputes create a chain effect on other contracts?
Even a minor dispute in the distribution stage may result in a chain reaction:
- Delays or interruptions in supply to other agents or retailers.
- Breach of contracts with third-party customers, leading to additional disputes.
- Negative impact on credit relationships with banks and investors due to declining revenue.
- Disruption of supply chains affecting international cooperation agreements.
4. What steps should enterprises prepare when participating in court proceedings for product distribution disputes?
To protect their interests in court, enterprises should:
- Collect evidence: Distribution contracts, appendices, invoices, delivery records, emails, and payment documents.
- Clearly determine litigation claims: Contractual fines, compensation for damages, contract termination, or compulsory execution.
- Prepare complete litigation dossiers in accordance with the Civil Procedure Code 2015.
- Consult legal counsel to develop an appropriate litigation strategy.
- Comply strictly with procedural requirements to avoid dismissal of claims or unnecessary delays.
5. What is the role of exclusive distribution clauses in preventing product distribution disputes?
Exclusive distribution clauses help to:
- Allocate distribution rights exclusively to one or several designated distributors.
- Prevent direct competition among distributors of the same products.
- Protect the interests of exclusive distributors while enabling manufacturers to control the market.
However, if not clearly drafted, exclusivity clauses may themselves become sources of dispute, particularly in relation to compliance with the Law on Competition 2018 concerning restrictive trade practices.
V. Are you looking for a reputable lawyer to resolve product distribution disputes?
Product distribution disputes are often complex and involve multiple legal frameworks, including civil law, commercial law, competition law, and even international regulations. Therefore, engaging a reputable lawyer to provide consultation and representation in negotiations, arbitration, or court proceedings is of critical importance.
Should you require consultation on resolving issues related to product distribution disputes, please contact NPLaw for direct legal advice and guidance from our professional team.
