Distributorship and the liability nobody sees
Thai businesses taking on a foreign brand tend to assume they are only an intermediary and that liability sits with the brand owner. Thai law provides otherwise in several situations, and it is rarely pointed out before signature.
Agency can arise without the word
Section 797 of the Civil and Commercial Code provides that agency is a contract by which one person, the agent, is given authority to act for another, the principal, and agrees to do so, and that agency may be created expressly or by implication. What is written at the head of the document is therefore not decisive; what decides is the authority actually conferred and how the parties in fact behaved.
Liability where the principal is abroad
Section 824 provides that an agent who contracts for a principal residing and domiciled abroad is personally liable on that contract, even though both the principal and their name were disclosed, unless the terms of the contract are inconsistent with the agent's liability. That matters greatly to a Thai distributor of a foreign brand, because telling customers whom one represents does not by itself displace liability.
The answer lies in the wording
Section 824 ends with the exception where the terms of the contract are inconsistent with the agent's liability. That is a real opening, and it is why drafting clearly who contracts with the end customer, who bears what, and how far the distributor's authority runs is worth more than negotiating discounts or sales targets, which is where most of the negotiating time actually goes.
Restrictions after the agreement ends
Distribution and franchise agreements commonly restrain competing after termination. Those clauses sit under section 5 of the Unfair Contract Terms Act B.E. 2540 (1997), which provides that a term restricting freedom to work or to enter transactions relating to trade or a profession, where it places a greater burden on the restricted party than could normally be expected, has effect only so far as is fair and reasonable in the circumstances.
What to read before signing
What deserves reading before the numbers is the governing law and the forum, since a foreign brand's agreement usually chooses both from its own country; the termination provisions and what becomes of remaining stock; how far the distributor's authority binds the brand owner; and any minimum-purchase target tied to the right of renewal.
PREPARE
What to bring
- The full draft with every schedule and annex
- Where the principal is resident and domiciled
- How contracts with end customers are actually made now
- The investment and stock the agreement requires you to carry
- The termination and renewal provisions
QUESTIONS
Questions this raises
I told customers plainly that I am only the agent.
Section 824 says in terms that an agent contracting for a principal resident and domiciled abroad is personally liable even though the principal and their name were disclosed. Disclosure is therefore not the answer in itself. What works is the exception at the end of the section, terms of the contract inconsistent with the agent's liability, and those have to be written in from the start.
The agreement bars me from competing nationwide for five years.
Section 5 of the Unfair Contract Terms Act B.E. 2540 (1997) gives such a term effect only so far as is fair and reasonable, and its second paragraph directs attention to the geographic and temporal scope of the restriction, the restricted party's ability and opportunity to work, and all the lawful interests of both parties. A clause broad in both area and time is therefore one there is something to argue about.
LAW
The legislation
- Civil and Commercial Code, sections 797 and 824
- Unfair Contract Terms Act B.E. 2540 (1997), section 5
ENQUIRIES
