Drafting Distribution Agreements in Thailand

Updated on Thursday 14th February 2019

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The supplier agreement in Thailand or the distribution convention refers to the resale of the goods and services offered by a manufacturer or vendor to a distributor under an exclusive or non-exclusive contract. The entire procedure can be explained by our lawyers in Thailand. Besides that, you can receive legal services for your company in Thailand or for personal matters.

With a vast experience in corporate law matters, our Thai attorneys can help foreign entrepreneurs interested in starting a business in this country.
 

Legislation to be respected when signing distribution contracts in Thailand


There are several types of agreements which can be signed by Thai companies, among these, distribution contracts being some of the most common, as many businesses are involved in various trading activities which imply the distribution of goods and services. This is why, companies entering a commercial relationship with other businesses need to respect several laws, among which:
 
  •           the Civil Code which provides for the type of contracts which can be signed by companies and individuals;
  •           the Commercial Code which provides for the contracts signed by companies in Thailand;
  •           the Trade Competition Law which distinguishes between vertical and horizontal contracts between companies;
  •           the Foreign Trade Business Law which provides for the commercial relationship between local and foreign companies;
  •           the Consumer Protection Law which provides for respecting consumers’ rights when purchasing a good or a service.

Another important law which needs to be respected by those entering distribution agreements is the Unfair Contract Terms Law which provides for specific clauses which need to be found in such contracts.

Our lawyers in Thailand can offer more information about the laws which need to be respected by companies when signing distribution agreements
 

What you need to know about the distribution agreements in Thailand


A company which deals with goods to sell has the possibility to choose different distributors for their services or products under the non-exclusive agreement in Thailand, according to the Company Law Code in the country. A single distributor for goods in the markets in Thailand can be designated under the exclusive contract, where the specific number of products need to be mentioned. Such contracts need to be supervised by a Thailand lawyer and the following aspects need to be considered and mentioned in the agreement:

•    details about the intellectual property rights over the goods of the company;
•    information about the reason for the agreement and the period of it;
•    details about the territory in which the distribution of the products will be made;
•    information about the cessation of the distribution contract

You may solicit proper information about drafting the Thai distribution agreements and the conditions implied in this important process from our lawyers.
 

The content of a Thai distribution agreement 


Just like any other contract, a distribution agreement must contain a few elements which define it. Among these elements are the identities of the distributor and the recipient of goods or services (it should be noted that most of the times distribution agreements are signed by companies), information about the goods and services to be distributed, and here we mention the fact that these must be subject to an offer and the acceptance of the conditions imposed by the distributor, the price of the goods or services, and the rights and obligations of the parties signing the contract.

It is good to ask for the support of a Thai lawyer when drafting and signing any type of contract, including a distribution agreement.
 

The parties in a distribution agreement in Thailand


Most of the times, a distribution agreement is signed between a company which the party which delivers the goods or services and one or more companies which deliver these goods or services. The deliverer is required to communicate and negotiate with the distributor on the goods or services to be sold, receiving the purchase orders and forwarding the goods or services to the distributor. Then, the distributor must deliver the goods or services to the final buyer and receive the payment for the products delivered. The payment must be split between the distributor and the deliverer as agreed in the distribution agreement.
 

Consider the commitments of a distribution agreement in Thailand


The seller and the distributor need to consider the important obligations when signing a distribution agreement in Thailand and here we refer to the quality of products or services if the vendor has legal documents which contain details about the ownership and if they respect the reason they were designed for. The company that wants to have its products distributed needs to offer samples to the distributor before closing any distribution contract in Thailand.
 

Distribution contracts under the Thai Unfair Contract Terms Law


As mentioned earlier, distribution agreements are usually signed by companies, which can be local or foreign. There is also the possibility for a Thai company to enter a distribution agreement with a foreign company, especially when it comes to importing goods which are later sold on the local market. For this reason, Thai companies entering distribution contracts need to consider the following:
 
  •           they are not allowed to fix specific prices for the goods and services they sell which can lead to an unstable market;
  •           they are not allowed to limit the quantity of goods and services put on the market;
  •           they are not allowed to distribute their products only in certain regions of the country;
  •           they are not allowed to enter any exclusivity relation with a particular distributor;
  •           they are not allowed to fix conditions or practices related to the sale of goods and services.

Any distribution agreement which contains such elements which can be considered abusive can be denounced with a Thai court.

It is also important to know that in 2017, the Thai government has created the Office of the Trade Competition Commission which is in charge of the verification of distribution agreements.
When it comes to foreign companies entering distribution agreements with local companies, their activities will also be supervised by the Thai Department of Business Development. Also, foreign companies distributing good or services on the Thai market are required to obtain a special license in this sense first.

You are invited to get in touch with our Thailand law firm if you have any other questions about the distribution agreements and about how to prepare such an important contract. You can also rely on the specialized services of our attorneys in Thailand if you need help in registering a company in this country.