7 Key Notes Before Signing an Exclusive Commercial Agency Agreement in Vietnam

“Exclusive agency” appears in most goods-distribution contracts in Vietnam — yet few businesses grasp its true legal meaning. Many principals assume exclusivity “locks” the entire market; many agents assume exclusivity means absolute protection. Both can pay dearly when disputes erupt. Here are seven core legal notes before signing an exclusive commercial agency agreement, based on Articles 166–175 of the Commercial Law 36/2005/QH11 (effective 1 January 2006, still in force).

Note 1: “Exclusivity” does not automatically bar the principal’s direct sales

This is the most common misunderstanding. Under Clause 2, Article 169 of the Commercial Law 2005, exclusive agency means the principal entrusts only one agent to buy or sell certain goods in a defined territory. But the law does not by default prohibit the principal from selling directly in that territory.

The trap: the agent invests in warehousing and staff expecting a protected market, then discovers the principal still sells directly to key accounts online. A dispute erupts, but the contract contains no clause prohibiting this.

Suggested clause: “During the term, the Principal undertakes not to sell the Products directly or indirectly within the Territory to any third party, except with the Agent’s prior written consent.” If the principal wants to keep direct-sales rights, list the exempted channels/customers expressly in the contract.

Note 2: Draw a sharp line between “agency” and “distributorship”

Legally, commercial agency (Article 166) means one party (the agent) buys or sells goods in its own name for the principal, or provides services to customers, for remuneration — ownership of the goods never passes to the agent. A distributor, by contrast, buys the goods outright (ownership transfers) and resells them for a margin.

Criterion	Commercial agency	Distributorship
Ownership of goods	Never transfers; goods remain the principal’s	Transfers to the distributor
Inventory/loss risk	Principal bears (except agent’s fault)	Distributor bears
Income	Commission/remuneration under Article 171	Buy–sell price spread
Price setting	Principal decides	Distributor decides (within competition rules)

The trap: the contract is titled “exclusive agency” but its substance is outright purchase and resale — in a dispute, courts apply the substance of the relationship, not its label, collapsing all commission and inventory clauses.

Note 3: Map the exclusivity precisely: territory + products + channels

Exclusivity has three dimensions that must be tightly defined: (a) geographic territory (provinces, regions, or nationwide); (b) products (specific SKUs or categories — avoid vague “the principal’s products”); (c) distribution channels (traditional retail, supermarkets, e-commerce, etc.).

The trap: the contract merely says “exclusive in Vietnam” without excluding online channels — the principal opens marketplace storefronts and claims they fall outside the agent’s “territory.” State expressly whether exclusivity covers e-commerce and social-media sales.

Note 4: Remuneration — calculated when, paid when, and after termination?

Article 171 of the Commercial Law 2005 provides that agents earn remuneration as agreed. In practice, four points must be clarified:

Calculation basis: commission as a % of revenue, a fixed amount, or a price spread? Revenue counted on signed orders or on cash actually collected?
Timing and payment: monthly/quarterly; reconciliation within how many days; supporting documents;
Post-termination commission: orders negotiated by the agent but delivered/paid after termination — is commission still earned, and for how long (commonly 6–12 months);
Clawback: if goods are returned or orders cancelled, must paid commission be refunded.

Suggested clause: “The Agent shall earn commission of …% on the value of orders fully paid. For orders introduced/negotiated by the Agent before termination, the Agent shall remain entitled to commission for 12 months following termination.”

Note 5: KPIs and termination rights — the “yardstick” of exclusivity

Exclusivity is a privilege and must come with sales targets (KPIs): quarterly/annual targets, by product, by channel. More important is the sanction for missing KPIs: warning and cure period, downgrade from exclusive to non-exclusive, or termination.

The trap: the contract sets KPIs but no consequences — when the agent misses targets for three straight quarters, the principal terminates unilaterally and gets sued for “termination without grounds.” Spell it out: missing KPIs for 2 consecutive quarters → the principal may convert to non-exclusive agency; missing for 12 months → unilateral termination after 60 days’ notice.

Note 6: Security for performance

For high-value contracts, principals often require the agent to post a deposit or bank guarantee securing payment for goods and safekeeping obligations. Conversely, the agent may require the principal to secure stable supply and promised marketing support.

Specify: the security amount, timing of posting/refund, enforcement conditions, and any interest on deposits. Avoid vague wording like “reasonable security” — write the actual figure.

Note 7: Termination and “post-termination”

Articles 172–175 of the Commercial Law 2005 set out the parties’ rights and obligations, but the post-termination phase depends entirely on agreement. Four points that cannot be omitted:

Notice period for unilateral termination (60–90 days is customary for long-term contracts);
Remaining inventory: buyback by the principal or continued sale by the agent during transition;
Post-termination non-compete: geographic scope, duration (commonly 1–2 years), and whether compensated;
Confidentiality: customer lists, purchase prices — how long the duty survives termination.

Three advanced traps often overlooked

1. Competition Law 2018: agreements fixing minimum resale prices between principal and agent may constitute anti-competitive agreements. Pricing policies should be reviewed through a competition-law lens — this article only flags the risk; it does not advise circumvention.

2. Tax: agency commissions are subject to personal/corporate income tax and withholding obligations; with a foreign principal, contractor tax considerations arise. Have a tax advisor review the remuneration mechanics.

3. Foreign principal: verify business licenses, signing authority, and the representative’s capacity; some distribution lines are subject to market-access conditions for foreign investors.

When should you choose agency over distributorship?

The agency model suits the principal who wants market control: uniform pricing, brand-image discipline, direct customer relationships, and no inventory risk transferred to the intermediary. It is common in automobiles, luxury goods, pharmaceuticals, and franchised equipment. The distributorship model suits the principal who wants risk transfer and local investment: the distributor buys inventory, extends local credit, and invests its own capital in market development.

From the intermediary’s side, agency means lower capital requirements (no inventory purchase) but dependence on the principal’s supply and pricing decisions; distributorship means higher margins and autonomy but full inventory and credit risk. Many Vietnamese businesses sign “agency” contracts while economically operating as distributors — the mismatch only surfaces in disputes over unsold stock. Whichever model the economics dictate, the contract’s substance must match its title (Note 2).

Frequently asked questions

Can an exclusive agent appoint sub-agents? Only if the contract allows it. Under the Commercial Law, the agent may not assign its agency rights to a third party without the principal’s written consent. If sub-agency is part of the business plan, include an express authorization clause with territorial and product limits.

Does the principal have to compensate the agent on termination? Vietnamese law does not grant a statutory goodwill indemnity (unlike EU agency law). Compensation on termination exists only if the contract provides for it — another reason the post-termination section (Note 7) deserves hard negotiation, especially where the agent built the market from zero.

Can exclusivity be limited to certain customers instead of territory? Yes. Exclusivity can be defined by customer segment (e.g., only modern-trade chains) rather than geography. What matters is precise definition — ambiguity benefits no one when the relationship sours.

Pre-signing checklist

☐ Exclusivity expressly covers (or excludes) the principal’s direct sales (Note 1)
☐ The relationship’s substance — agency vs distributorship — is settled (Note 2)
☐ Exclusivity scope: territory + products + channels, including online (Note 3)
☐ Commission mechanics, timing, post-termination commission (Note 4)
☐ KPIs with concrete sanctions for misses (Note 5)
☐ Performance security: amount, timing, refund (Note 6)
☐ Termination notice, inventory, non-compete, confidentiality (Note 7)
☐ Competition, tax, and foreign-principal standing reviewed

This article provides general legal information based on the Commercial Law 2005 and the Competition Law 2018 as of October 2026 and does not substitute legal advice for a specific contract. Businesses should have counsel review or draft the clauses before signing.

This article has been reviewed by the QA Council — FLAW AI Legal Council.