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April 19, 2011

A Supplier’s Look at Distributorship Agreements

Bangkok Post, Corporate Counsellor Column

Under Thai law, a distributorship agreement is generally considered to be a type of sales agreement whereby a seller sells products to a distributor and the distributor resells the products for his own account and at his own risk to his customers. Unless the parties agree otherwise, this type of agreement is governed principally by the general principles of contract and sales provisions under the Thai Civil and Commercial Code. Does a supplier need to enter into a distributorship agreement? Looking at the business practice of most local companies in Thailand, sale and purchase transactions are normally made by way of issuing quotations, purchase orders, invoices and/or receipts without entering into long-term or substantial sale and purchase agreements or supply/distributorship/agency agreements. This article examines the potential pitfalls of this approach.

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