Advisory on Concluding a Domestic Distributorship Agreement with an Overseas Supplier

1. Case Overview

A domestic company specializing in the distribution of digital equipment was pursuing a domestic exclusive distributorship agreement with a well-known overseas manufacturer. The purpose of this contract was to secure exclusive sales rights for finished products and semi-finished products (assembly-type products), and it served as an important business foundation, with plans to enter the domestic public procurement market in the future. Based on an English-language draft contract received from the overseas company, the client requested a review of the legal risks of the contract, as well as the revision of unfavorable clauses and a Korean translation.

In the course of reviewing the contract, Your Legal Team identified several key issues and responded to them systematically. First, the conditions for granting exclusivity were vaguely defined, and we identified a risk that the exclusive distributorship could be lost if certain requirements were not met. Accordingly, we proposed a direction for revision so that the conditions for granting and maintaining the exclusive rights would be defined more clearly. In addition, we pointed out that the governing law and dispute resolution provisions applied a foreign law and a foreign arbitration institution, which could be unfavorable to the client as a domestic company, and we advised on the points to keep in mind during negotiations in this regard.

Problems could also arise during the assembly and registration process for semi-finished products in connection with entry into the public procurement market. In particular, even though a re-registration procedure would be required when a product was changed, there was no provision in the contract addressing responsibility for this. In response, we advised that the procurement registration and administrative-processing issues arising from changes to product specifications be clearly stipulated in advance, and we provided support so that the contract could be adjusted in a direction that minimized the client's responsibility.

Furthermore, we had key clauses that prepare for the substantive post-sale phase—such as product quality warranty, after-sales service, and returns—supplemented, as they had been omitted, and we proposed specific provisions necessary to reduce the practical risks that could arise after sales. The Korean translation of the contract, too, went beyond a simple translation task; taking into account both the legal context and actual business practice, it was revised and completed in a way that was easy for the client to understand and clear.

Thanks to Your Legal Team's careful review and measures, the client was able to complete a contract structure that secured stable exclusive rights while significantly reducing future business risks. In particular, by clarifying the requirements for maintaining exclusivity and the procedures applicable when a product is changed, the client was able to firmly establish the legal foundation needed for entry into the procurement market and the expansion of its private distribution network. This case became a good example demonstrating how important professional contract review is for a domestic operator to systematically examine legal risks in advance—even in the course of transactions with an overseas company—and thereby secure long-term business stability.

Your Legal Team provides tailored solutions that support the client's business success even in complex international contracts.