A distribution or supply agreement in Vietnam can usually be ended in the way the contract allows, such as expiry, termination for convenience with notice, or termination for a defined breach, and otherwise only where the Commercial Law permits, typically for a fundamental breach. Vietnam has no general statute giving distributors goodwill compensation on termination, but the Commercial Law does contain default rules for commercial agents, and a badly handled exit can still lead to a damages claim.
This guide explains how to classify the relationship, what the law and contract allow, and a practical exit plan covering notice, stock, customer data, registrations and the last invoices. It is written for foreign brand owners and manufacturers, but the same points help a Vietnamese distributor understand its position.
First, classify the relationship correctly
Foreign companies use "distributor", "agent" and "reseller" loosely. Vietnamese commercial law draws sharper lines. A distributor in the ordinary sense buys goods from the supplier and resells them in its own name and for its own account, carrying the risk of unsold stock and setting its own resale prices within the limits of competition law. That relationship is mainly governed by the sale contract and general Commercial Law rules on contracts.
A commercial agent (dai ly thuong mai) is different. It sells or buys goods in its own name but for the account of the principal, and receives remuneration. The Commercial Law contains a set of rules specific to commercial agency, including on termination. A commercial representative or a broker is different again. The label in the contract is a starting point, but a court or tribunal will look at how the relationship actually worked: who owned the goods, who set prices, who bore the risk and how the intermediary was paid.
Getting the classification right matters because the consequences of termination differ. A buy-sell distributor relies mainly on the contract. A commercial agent may be entitled to default compensation if the principal ends the agency, unless the contract provides otherwise. Before you plan the exit, ask a lawyer which category your arrangement falls into.
Termination routes compared
The route available depends on what the contract says and on the facts. Most terminations use one of these.
| Route | When it applies | Main risk |
|---|---|---|
| Expiry without renewal | Fixed-term contract reaches its end; you give any notice of non-renewal the contract requires | Missing the notice deadline can trigger automatic renewal |
| Termination for convenience | Contract allows either party to terminate on notice without cause | Notice period and post-termination obligations must be followed exactly |
| Termination for breach | The other side commits a breach listed in the contract as a termination event | You must prove the breach and follow cure-period procedures |
| Termination for fundamental breach | Under the Commercial Law, a breach so serious that the purpose of the contract cannot be achieved | High threshold; if not met, you become the party in breach |
| Mutual termination | Both parties sign a termination agreement | Requires negotiation, but gives the cleanest result |
Indefinite-term agreements without a termination clause are the hardest to exit. If you have one, consider negotiating an amendment or mutual termination rather than relying on general principles.
Commercial agency: the default compensation rule
The Commercial Law includes a default rule that, unless the parties agree otherwise, a commercial agent is entitled to compensation when the principal unilaterally terminates the agency contract. The formula in the law is linked to the agent's remuneration and the length of the agency relationship. Because the rule applies "unless otherwise agreed", many principals address it expressly in the contract, either by excluding it or by setting a different formula.
If your arrangement is a commercial agency and the contract is silent, budget for this compensation when planning termination. If the contract excludes it, make sure the exclusion is clear in both language versions. A court is unlikely to extend agency compensation to a genuine buy-sell distributor, but an arrangement labelled distribution that in substance works as agency may be recharacterised.
Principals sometimes ask whether they can avoid the issue by structuring every intermediary as a buy-sell distributor. That is a legitimate commercial choice, but the structure has to be real: the distributor must actually take title, bear inventory risk and resell on its own account. An arrangement in which the supplier sets every resale price, bears the risk of unsold goods and pays the intermediary a percentage looks much more like agency, whatever the contract is called.
The exact wording of the rule and how courts apply it should be checked against the current text of the Commercial Law, which has been under review. Do not rely on a figure from an old memo.
A practical exit plan
Most termination disputes arise from the handover, not from the decision to terminate. A plan that addresses the practical points reduces the room for conflict:
- Review the agreement: term, renewal, termination rights, notice period and method, cure periods, exclusivity, non-compete and post-termination obligations.
- Check whether any regulatory registrations are held in the distributor's name, such as product registrations, import licences or marketing authorisations, and how they can be transferred.
- Decide the date and content of the notice, and serve it in the form the contract requires, keeping proof of delivery.
- Agree how remaining stock will be handled: buy-back by the supplier, sell-off period for the distributor, or transfer to the new distributor.
- Collect outstanding receivables and settle final accounts, including any rebates or marketing contributions owed.
- Arrange the return of confidential information, marketing materials and access to systems.
- Notify customers and the new distributor in a coordinated way, avoiding statements that could be seen as defamatory toward the old partner.
- Document the handover in signed minutes.
Where the relationship has lasted many years, a short transition period and a fair stock arrangement often cost less than the dispute they prevent.
Trademarks, registrations and customer data
Trademarks. If your trademark is registered in Vietnam in your own name, the distributor has no right to keep using it after termination unless a licence survives. If the distributor registered your mark in its own name, recovering it may require proceedings with the intellectual property office or a court, which is why brand owners should register first.
Product registrations. Some products require registration or a marketing authorisation that may be held by a local entity. Plan the transfer or new application early, because the gap can halt sales.
Customer and sales data. Who owns customer lists and sales data depends on the contract and on personal data protection rules. Spell out data handover and deletion obligations.
Domain names and social media. Local websites and pages run by the distributor under your brand should be addressed in the agreement and in the exit plan.
Non-compete. Post-termination non-compete clauses binding a distributor are assessed under general contract and competition principles. Keep them reasonable in scope and duration.
A hypothetical termination timeline
Hypothetical example: a European cosmetics brand has used an exclusive distributor in Ho Chi Minh City for six years under a buy-sell agreement that allows termination for convenience on six months' notice. Sales have flattened, and the brand wants to appoint a new distributor covering the whole country. The product notifications needed to sell cosmetics are held in the distributor's name.
Month one: the brand's lawyer reviews the agreement, confirms it is a buy-sell distribution rather than agency, and maps the registrations. The brand prepares its own local entity or the new distributor to file fresh notifications. Month two: the brand serves the termination notice by the method in the contract and proposes a meeting to agree the handover. Months three to six: the parties agree a sell-off period for existing stock, a buy-back of slow-moving items at landed cost, a handover of customer contacts for key accounts and a joint announcement to retailers.
At the end of the notice period, signed handover minutes record the stock position, final invoices and the return of marketing materials. The brand pays the last rebates owed; the distributor pays its outstanding invoices. Nothing in this sequence is dramatic, which is the point. The same facts handled with a short email and an immediate switch to a new distributor would likely have produced a claim for lost profit and stranded stock.
What the distributor may argue
Termination disputes are rarely one-sided. A distributor that built a market for your brand may argue that the termination was invalid because the notice was defective, the alleged breach was not proved, or the contract did not allow termination for convenience. It may claim compensation for lost profit during the notice period, the value of stock it cannot sell, or investments made at the supplier's request such as showrooms, staff training or advertising.
Some of these claims can be anticipated in the contract: a clause stating that investments are at the distributor's risk, a stock buy-back formula, or a clear termination for convenience right with reasonable notice. Others depend on conduct, such as promises made in emails about renewal or exclusivity.
From the distributor's side, the advice is the mirror image: keep records of investments made at the supplier's request, read the termination clause carefully and respond in writing to any notice you dispute. Both parties benefit from a negotiated exit when the contract is unclear.
When you need a Vietnamese lawyer
A licensed Vietnamese lawyer should review your agreement before you send any termination notice, particularly if the relationship is long, exclusive or involves product registrations held locally. The lawyer can classify the relationship, check whether agency compensation could apply, review notice requirements and draft a notice that does not hand the other side an argument. Where breach is the ground, they will check the evidence and any cure period.
If you are appointing a new distributor, the same lawyer can help you sequence the change so that registrations, stock and customer communications move without gaps. If the old distributor responds with a claim, a lawyer can advise on negotiation, mediation or the arbitration route in your contract. You can ask a lawyer on AI Co Van for an initial reading of your termination clause before committing to a timeline.
Timing the lawyer's involvement well also helps commercially. A lawyer brought in after the notice has gone out can only defend the position you created. One brought in while you are still choosing the new partner can shape the notice, the transition terms and the new agreement together, so the next relationship starts with clearer exit terms than the last.
Commercial agency rules and related provisions of the Commercial Law are under legislative review. Check the current rules with a licensed lawyer before relying on any specific formula.
Frequently asked questions
Do I have to pay a distributor compensation when I terminate in Vietnam?
Not automatically. Vietnam has no general goodwill indemnity for distributors. A buy-sell distributor relies on its contract. A commercial agent may be entitled to default compensation under the Commercial Law unless the contract provides otherwise.
Can I terminate an exclusive distribution agreement early?
Only if the contract allows it, for example termination for convenience with notice or for listed breaches, or if the distributor commits a fundamental breach. Otherwise early termination may itself be a breach giving the distributor a claim for damages.
What happens to the distributor's remaining stock?
It depends on the contract. Common options are a buy-back by the supplier at an agreed price, a sell-off period for the distributor, or a transfer to the new distributor. If the contract is silent, negotiate an arrangement as part of the exit.
The distributor registered my trademark in its name. What can I do?
You may be able to challenge the registration or recover the mark through proceedings with the intellectual property office or a court, depending on the facts and timing. This is specialist work; consult a licensed lawyer quickly.
How much notice should I give?
Follow the notice period in the contract. If the contract allows termination without specifying notice, give a reasonable period considering the length of the relationship and the distributor's investments, and put the notice in writing with proof of delivery.
Can a distributor keep selling my products after termination?
It may sell remaining stock it legitimately bought if the contract allows a sell-off period or is silent on this. It cannot keep using your trademark beyond what is needed to sell that stock, and it cannot present itself as your authorised distributor.