30-second answer
May a distributor sell competing products during the relationship or after exit? For how long, where, and to which customers? Such restrictions protect brands but may be limited by mandatory local law and competition rules.
Applied situation (illustrative)
Consider a China-facing distribution scenario: A distributor wants to carry a competing line after the agreement ends, while the brand relies on a broad restraint. The product scope, duration, territory and customer relationships should be separated before either side assumes enforceability.
Classify the problem before calling everything “breach”
What the brand should focus on
Brands should define competing products or markets rather than using unlimited language such as “any similar business.” Duration, geography and customer scope should match a legitimate protection need.
What the distributor/agent should focus on
Distributors should test restrictions against their existing portfolio and post-exit business plan before signing, rather than discovering later that one agreement blocks the whole company.
Clauses and records to check
- Product scope
- Restricted customers
- Territory
- Duration
- Lawful business interest
Assess the restraint by product, customer, territory and duration; each dimension may need a different justification. For a China-facing chain, reconcile the Chinese and English versions with orders, seals, invoices and the receiving account. Identify any gap between the brand owner and the supplier.
Additional point for China-Related Cross-Border
Match Chinese and English contract versions, signatures or seals, purchase-order terms, invoice entity and payment recipient. If the brand owner, supplier, exporter and payee differ, document each entity’s authority and responsibility before escalating.
Financial exposure and response options
Assess the business restrained, duration and demonstrable customer diversion rather than multiplying a broad estimate by the contract term.
Settlement terms worth writing down
For this China-facing arrangement, write down how product scope, territory and lawful business interest will be handled. Set dates and responsibilities for payment or handover, and state what happens if an agreed step is missed.