A distribution agreement in Vietnam is, in legal terms, a framework for repeated sales: the supplier sells goods to the distributor, the distributor takes title and resells in its own name and at its own price, usually within an agreed territory and channel. The Law on Commerce 36/2005/QH11 (consolidated text 113/VBHN-VPQH) has no chapter on distribution, and the word "distribution" does not appear in it. A buy-sell distributor is therefore governed by the rules on sale of goods (Article 3(8)) and, where the Law on Commerce is silent, by the Civil Code (Article 4(3)).
For a foreign manufacturer, the practical consequence is that Vietnam has no distributor protection statute. There is no default notice period, no goodwill indemnity, no registration and no disclosure regime of the kind that applies to commercial agents and franchises. Territory, exclusivity, targets, resale pricing and what happens to unsold stock exist only if the contract says so, and several of those clauses are limited by competition law. This guide reflects the law in force on 17 October 2026 and is written for two readers: a foreign supplier appointing a Vietnamese distributor, and a foreign-invested company that wants to distribute itself.
What is a distribution agreement in Vietnam?#
The legal definition of "distribution" sits in a decree on foreign trading rights, not in the Law on Commerce. Decree 342/2026/ND-CP, which replaces Decree 09/2018/ND-CP from 18 October 2026, defines distribution as wholesale, retail, sales agency and franchising in the field of distribution (Article 3(6)). It uses the definition to decide what foreign-invested companies may do; it does not create a contract type. A "distributor" in that sense may be a buy-sell reseller, a commercial agent or a franchisee, and each model follows different rules.
This guide covers the buy-sell model. In practice a distribution agreement in Vietnam has two layers:
- The framework agreement: appointment, territory, exclusivity, targets, pricing and rebates, trademarks, term and termination. It works like a framework agreement.
- Individual purchase orders: each accepted order is a sale of goods, governed by the Law on Commerce rules on delivery, risk, title and payment, or by the CISG where the supplier is abroad (see below).
A contract for the sale of goods may be oral, written or formed by conduct (Article 24 of the Law on Commerce), and no rule requires a distribution agreement to be notarised or registered. Exclusivity, targets and termination rights are, however, almost impossible to prove without a written contract.
Distributor or agent: why the distinction matters in Vietnam#
Our guide to the commercial agency contract in Vietnam compares agency, representation, brokerage, entrustment and buy-sell distribution in detail. The deciding question is who owns the goods. Goods delivered to a commercial agent remain the principal's property (Article 170 of the Law on Commerce), and the principal may set the resale price (Article 172(1)). A buy-sell distributor acquires title on delivery unless otherwise agreed (Article 62).
The label does not decide the legal nature. A distribution agreement in Vietnam that contains the following features risks being treated as agency, or at least invites a dispute about it:
- Consignment stock, with the supplier keeping title until the distributor sells to a customer.
- A right for the distributor to return all unsold goods, so it carries no stock risk.
- End-customer prices fixed by the supplier, with a "discount" that is in substance a commission on sales.
If the relationship is agency, Articles 166 to 177 apply, including, unless otherwise agreed, termination no earlier than 60 days after notice and an indemnity of one month's average remuneration per year of agency when the principal terminates (Article 177(1) and (2)). Nothing in Vietnamese law extends Article 177 to buy-sell distributors, and we have not seen a court decision or official guidance applying it by analogy. The Civil Code does allow analogy where the parties made no agreement and the law is silent (Article 6(1)), so the possibility cannot be ruled out entirely; a clear termination clause is the simplest way to avoid the argument. The same features also have tax consequences for a foreign supplier, covered below.
Exclusive distribution agreements and Vietnamese competition law#
Almost every exclusive distribution agreement contains at least one clause on the list of restrictive agreements in Article 11 of the Competition Law 23/2018/QH14. That does not make it unlawful. The law distinguishes by the relationship between the parties and by effect on the market, and a guiding decree sets a market-share safe harbour that foreign suppliers often overlook.
Supplier and distributor are a vertical relationship. Agreements between businesses at different stages of the same production and distribution chain, covering price fixing, market or customer sharing, output limits, exclusive dealing and the other items in Article 11(1), (2), (3) and (7) to (11), are prohibited only where they have, or may have, a significant restrictive effect on the market (Article 12(4)). The National Competition Commission assesses market share, entry barriers and other factors (Article 13(1); Article 11(2) of Decree 35/2020/ND-CP).
The 15% safe harbour. A vertical agreement is deemed not to have a significant restrictive effect where the market share of each party is below 15% on the relevant market (Article 11(3)(b) of Decree 35/2020/ND-CP). The relevant market is defined by substitutable products within a geographic area (Article 9 of the Competition Law), not by the industry as a whole. A small brand appointing a nationwide exclusive distributor will usually be below the threshold; a distributor that controls most of the channel for a product group in one region may not be.
Where the safe harbour does not help. The threshold applies only to the effect-based categories (Article 11(1) of Decree 35/2020). Two groups are prohibited without any effects test:
- Agreements to prevent or restrain other businesses from entering the market or developing their business, or to exclude non-parties, are prohibited for all businesses (Article 12(2), referring to Article 11(5) and (6)).
- Price fixing, market sharing and output limits between businesses on the same relevant market are prohibited outright (Article 12(1)). Where several distributors of the same brand align their resale prices, including through the supplier, the distributors are competitors on the same market and, in our reading, this group applies. Dual distribution, where the supplier also sells wholesale in the distributor's territory, is unclear: the parties are at different stages of one chain (Article 12(4), effects test) and also compete directly at wholesale level (Article 12(1), outright ban). Neither the Competition Law nor Decree 35/2020/ND-CP addresses this situation, so price and territory clauses in a dual distribution model deserve a separate review.
Resale price maintenance and dominance. Resale price maintenance in a vertical relationship falls under price fixing in Article 11(1) and is assessed on effect. Separately, a business with a market share of 30% or more on the relevant market, or with substantial market power under Article 26, is dominant (Article 24(1)), and for a dominant supplier, fixing a minimum resale price that causes or may cause harm to customers is a prohibited abuse (Article 27(1)(b)), regardless of the 15% safe harbour.
| Clause | Article 11 category | Risk in a vertical relationship |
|---|---|---|
| Resale price maintenance: distributor must resell at the supplier's price; rebates cut if it discounts | Direct or indirect price fixing (clause 1) | Highest in the vertical group; a minimum resale price may also be an abuse if the supplier is dominant (Article 27(1)(b)) |
| Recommended retail price, distributor free to deviate | Usually not price fixing if genuinely non-binding, including indirectly through bonuses or penalties | Low |
| Territory, customer group or no-online-marketplace restrictions | Market or customer sharing (clause 2) | Depends on the 15% threshold and effect |
| No competing products; buy only from the supplier | Refusal to deal with non-parties (clause 9) | Depends on threshold and effect; long terms increase risk |
| Supplier will not appoint another distributor in the territory | Market sharing (clause 2) | Usually low |
| Distributorship conditional on taking unrelated products or obligations | Imposing unrelated obligations (clause 8) | Depends on threshold and effect |
A prohibited agreement may obtain a time-limited exemption under Article 14(1), on an application filed with the National Competition Commission before implementation (Article 15). The law covers foreign businesses and conduct that affects the Vietnamese market (Articles 1 and 2), so choosing a foreign governing law does not take these clauses outside it.
Sanctions. A prohibited vertical agreement attracts a fine of 1% to 5% of the turnover of each participating business on the relevant market in the preceding financial year, confiscation of profits and an order to remove the offending clause (Article 7 of Decree 75/2019/ND-CP), with turnover counted across all markets related to the violation (Article 4(4), as amended by Decree 102/2026/ND-CP). Abuse of dominance is fined at 1% to 10% (Article 8). In a commercial dispute, a restrictive clause may also be invoked by the other party to escape its obligations, so draft the agreement to keep working if one restriction falls away.
Key clauses of a distribution agreement in Vietnam#
Because the law is almost silent on distribution, the following points have to be written into a distribution agreement in Vietnam, whether the distributor in Vietnam is a local trading company or a foreign-invested one.
Territory, channels and exclusivity. Define the territory, the channels (wholesale, retail, e-commerce, public tenders) and customer groups. State which way exclusivity runs: the supplier will not appoint others, will not sell directly, or both, and whether key accounts are carved out. A non-compete on the distributor should be time-limited and tied to the exclusivity.
Exclusivity binds only the parties. A trademark owner cannot prevent others from importing or circulating products that the owner or its licensee put on the market, including a foreign market (Article 125(2)(b) of the Law on Intellectual Property, consolidated text 160/2026/VBHN-LQ-VPQH). Trademark rights therefore cannot be used to block parallel imports of genuine goods, so an exclusive distributor's protection has to come from the supplier's own contractual undertakings, within the competition limits above.
Minimum purchase targets. Define the measure (value or volume, quarterly or annual), whether returns are deducted and whether a supplier's short delivery reduces the target. Tier the consequences: loss of exclusivity, a smaller territory, then termination. First decide whether the target is an obligation (missing it is a breach) or only a condition for keeping exclusivity (missing it costs exclusivity but triggers no penalty). If it is an obligation, a contractual penalty applies only if agreed (Article 300 of the Law on Commerce) and is capped at 8% of the value of the breached part of the obligation (Article 301). The law does not say whether, for a target, that part is the shortfall or the whole target; our cautious reading is to calculate the penalty on the shortfall, because any amount above the cap risks being rejected by a court or arbitral tribunal. Where a penalty is agreed, the injured party may claim both the penalty and damages (Article 307(2)). See penalty for breach of contract in Vietnam.
Prices, rebates and marketing support. Price list and adjustment notice; volume rebates, target bonuses, display and marketing funds, with conditions and settlement dates. Avoid tying bonuses to the distributor holding a resale price, which can be indirect price fixing. Agree the invoicing of each payment with both finance teams before signing.
Delivery, risk and title. Absent agreement, risk passes on delivery at the agreed place, or on handover to the first carrier where no place is fixed (Articles 57 and 58), and title passes on delivery (Article 62). The supplier must ensure the goods are lawful and do not infringe intellectual property rights (Articles 45 and 46(1)). Add order and confirmation procedures, inspection, claims for shortages and defects, and minimum remaining shelf life.
Payment and security. Payment terms, credit limits and late interest. If no rate is agreed, the creditor may claim interest at the average market rate for overdue debt (Article 306). Common security is a bank guarantee, a deposit or retention of title. Retention of title must be in writing and is effective against third parties only from registration (Article 331(2) and (3) of the Civil Code). In our reading, it is of limited use for goods the distributor may resell immediately and most useful for stock still in the warehouse if the distributor becomes insolvent.
Trademarks. Use of the brand on signage, domains, social media accounts and advertising should be expressly permitted, limited and revoked on termination. Since 1 April 2026, a trademark licence no longer needs to be registered to be effective against third parties (Article 148(3) of the Law on Intellectual Property, as amended by Law 131/2025/QH15); a licence may not contain the unreasonable restrictions listed in Article 144(2). A foreign supplier should register its trademark in Vietnam in its own name before appointing a distributor and prohibit the distributor from registering identical or similar marks or domain names.
Warranty, recalls and product liability. Where goods carry a warranty, the seller bears the warranty and its costs unless otherwise agreed (Article 49 of the Law on Commerce); set out how the distributor is reimbursed for warranty work. When a defect is found, the business must recall and handle the goods, report to the authorities before and after the recall and bear the recall costs (Article 32(1) of the Law on Protection of Consumer Rights 19/2023/QH15). Goods that may harm life or health (group A) also require public notices in the media for at least five consecutive issues or days (Article 33(2)). Liability for damage caused by defective goods applies to the manufacturer, the importer, the business whose brand appears on the goods, commercial intermediaries and the seller to the consumer, even where they did not know of or were not at fault for the defect, subject to the defences in Article 35, and jointly where they all contributed (Article 34(1), (2) and (4)). An importing distributor is squarely within that list. The contract should allocate who decides on a recall, who deals with the authorities, who bears the cost and indemnifies whom, and whether product liability insurance is required.
Customer data. If the supplier wants access to customer data collected by the distributor, the contract must identify the controller and processor of personal data (Article 2(7) to (9) of the Law on Personal Data Protection 91/2025/QH15), who keeps the data on termination, and how access from abroad complies with the cross-border transfer rules (Article 20). See controller vs processor.
Ending a distribution agreement in Vietnam: no statutory indemnity, no free exit#
A buy-sell distributor is not entitled to the 60-day notice and indemnity of Article 177, which apply to commercial agents. The flip side, in our reading, is that the supplier has no right to terminate at will unless the contract gives one.
- Termination for breach. A party may suspend or cancel the contract where a breach agreed as a ground for suspension or cancellation occurs, or where the other party commits a fundamental breach (Article 310; Article 312(4)). "Fundamental breach" is easily disputed, so list the triggers: missed targets in two consecutive periods, payment overdue beyond a set number of days, sales outside the territory, counterfeit goods, change of control.
- Termination for convenience. The remedies chapter of the Law on Commerce allows suspension or cancellation only for breach and, apart from specific rules such as Article 177 for agency, has no general rule on termination by notice. In our reading, the Civil Code fills the gap (Article 4(3) of the Law on Commerce): a party may terminate unilaterally without compensation where the other party seriously breaches, where the parties so agreed or where the law provides; termination without such a ground makes the terminating party the party in breach (Article 428(1) and (5) of the Civil Code). The Civil Code has no general rule allowing an open-ended contract to be ended on reasonable notice, and we have seen no guidance or precedent for distribution agreements. An open-ended distribution agreement with no termination-on-notice clause is therefore a risk for both sides.
- Expiry. A fixed-term agreement ends on expiry; with automatic renewal, set a deadline for notice of non-renewal.
Illustrative scenario. A foreign brand appoints a Vietnamese company as exclusive distributor for the southern region under an open-ended agreement without a termination-on-notice clause. After three years the brand decides to set up its own subsidiary and gives 30 days' notice. The distributor is not in breach, holds stock bought from the brand and has invested in a warehouse and sales team. The brand risks being treated as the party in breach (Article 428(5) of the Civil Code) and liable for the losses the distributor can prove (Article 302 of the Law on Commerce), which are hard to predict because there is no statutory formula. A clause such as "either party may terminate on 90 days' written notice; the supplier will repurchase saleable stock at the purchase price less rebates received" would have removed most of the dispute.
Post-termination clauses every distribution agreement in Vietnam should have:
- Stock. Supplier's right or obligation to repurchase, the repurchase price and minimum remaining shelf life; or a sell-off period and the right to use the trademark during it.
- Accounts. Settlement of rebates and target bonuses for the open period; set-off of receivables.
- Handover. Sub-dealer contracts, any licences or product dossiers held in the distributor's name, and customer data in line with data protection rules.
- Brand. Removal of signage and transfer of domain names and social media accounts by a set date.
- Post-term non-compete, if any, short and narrow; there is no specific statutory rule, and the limits come from competition law.
Distribution agreements with a foreign supplier#
Governing law, CISG and arbitration. Parties to a transaction with a foreign element may choose foreign law, provided it does not conflict with the fundamental principles of Vietnamese law (Article 5(2) of the Law on Commerce). Vietnam has been a party to the CISG since 1 January 2017. The prevailing international view is that the CISG governs individual sales made under a distribution agreement but not the framework itself (exclusivity, targets, termination), which is not a sale of goods. State whether the CISG applies to orders; see international sale of goods contract in Vietnam. Disputes may go to arbitration under a written arbitration agreement (Articles 2 and 16 of the Law on Commercial Arbitration); see commercial arbitration in Vietnam.
Foreign contractor tax: how the model changes the answer. A plain sale to a Vietnamese distributor, delivered at a foreign or Vietnamese border gate without services performed in Vietnam, is outside corporate income tax under the foreign contractor rules (Article 7(2)(a) and (b) of Circular 20/2026/TT-BTC). A foreign supplier is within scope where it supplies and distributes goods in Vietnam, including by engaging a Vietnamese party for part of the distribution, while still owning the goods delivered to the Vietnamese party, or bearing distribution, advertising, marketing or quality costs, or fixing the selling price (Article 7(1)(b)); or where the delivery point is inside Vietnam or the goods come with services in Vietnam such as marketing, after-sales, installation, warranty or maintenance (Article 7(1)(c)). On warranty specifically, a warranty clause that is the seller's obligation does not by itself remove the border-gate exclusion (Article 7(2)(a) and (b)), but warranty services performed in Vietnam fall under Article 7(1)(c); in our reading, a model where the distributor performs warranty work and is reimbursed by the supplier should be reviewed on that basis. Consignment stock, marketing funds paid by the foreign supplier and mandatory resale prices therefore need a tax review as well as a legal one. See foreign contractor tax in Vietnam.
A foreign-invested company that distributes itself. A foreign-invested company acting as distributor, or a manufacturer's Vietnamese subsidiary that imports and sells, needs distribution rights, meaning the right to carry out distribution directly (Article 3(7) of Decree 342/2026/ND-CP, applicable from 18 October 2026). Import rights alone cover importing goods to sell to traders that hold distribution rights and do not include organising or taking part in a distribution network (Article 3(5)); the replaced Decree 09/2018/ND-CP drew the same line between the two rights. Wholesale of most goods only needs to be registered in the investment and enterprise registration documents (Article 6(1)). Retail requires a Business Licence, and retail through a store also requires a Retail Outlet Licence (Article 5(1)(a) and (2)). For scope, exceptions and filings, see our business licences service. Some products, such as pharmaceuticals, are also subject to sector-specific rules that should be checked before choosing a model.
If you are appointing a distributor in Vietnam, converting an agency network to buy-sell distribution, or reviewing an exclusive distribution agreement drafted under another country's law, our commercial contracts service covers drafting and review of a distribution agreement in Vietnam.
