Korean Distribution Agreements: So you Want to Work with a Korean Distributor

We have noted, on a number of occasions, that the drafting of a Korea-centric distribution agreement and a good deal of due diligence of the anticipated distributor/agent is necessary for avoiding the issues that will require our litigation services.  Some of the articles on Due Diligence matters may be found below:

• Doing Business in Asia: Due Diligence, Agreements, Attorneys and Street Smarts
• Listen to My Mother: JVs in Korea (Translated from Korean)
• Debt Collection Cases in Korea on the Rise: Due Diligence Brother

I have been informed by one of my more frugal of clients that his company would appreciate a basic rundown of a decent distribution agreement (I know you will be drafting this on your own – don’t) – so here we go.

The basic clauses we include in most of our Korean Distribution Agreements are as follows:

• Exclusivity:  Exclusive/Non-exclusive
• Territory & Products
• Term of Agreement
• Renewal/Termination
• Pricing & Payment Terms
• Report Requirments
• End-User Disclosure
• Sales Methods Allowed
• Sales Performance
• Legal Compliance (FCPA etc.)
• Competition
• Warranty/Defects
• Technical & Sales Support
• Marketing Materials
• Intellectual Property – protection of trademarks, copyrights, trade secrets, patents etc.
• Damages – Liquidated Damages
• Breach – Material Breach
• Dispute Resolution -Venue, Arbitration, Choice of Law
• Standard Clauses related to integration, language etc.

This is a decent start.  Please, however, don’t take this as enough to just start drafting on your own or picking a draft off the internet.  I know many lawyers that screw this up – please get the basics done at the start and you can avoid the hourly rates of my retired judge partner. 

Other articles that may be of interest

• Distribution Agreements in Korea: Crawl Before you Walk
• Finding a Distributor or Agent to Sell your Products in the Korean Market
• Beware the Grey Market Trap in Korea: Due Diligence, Agreements & Street Smarts
• Finding a Korean Distributor: Top Ten Musts
• Entering into a Joint Venture/Partnership in Korea
• Independent Contractor Obligations in Korea: Amcham Speech

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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.