What are exclusivity agreements and how can they help my business?

An exclusivity agreement is a contract between two businesses to deal exclusively with each other in a specific area.

Typically the agreement restricts only one of the parties, such as a purchaser agreeing to buy exclusively from the seller. Alternatively, a manufacturer might agree to market its products only through a certain distributor.

Exclusivity agreements are also used for corporate acquisitions. Before the potential purchaser commits significant time and money on investigating the target company, it will expect the seller to sign an exclusivity agreement preventing it from marketing it to other potential purchasers, or from accepting competing bids.

Exclusivity agreements are useful because they create stability in business relationships. As a result, resources can be allocated more effectively and operations carried out more productively.

Exclusivity agreements frequently contain extra conditions, such as confidentiality clauses, restrictions relating to sensitive data, and termination terms.

This is because collaboration between businesses involves them becoming aware of information that could be useful to a competitor. However, a level of mutual insight into each other’s activities is essential to make the most of the synergies that drove the relationship in the first place.

An exclusivity agreement can be tailored to the needs of the moment while taking into account future requirements. Some agreements can be cancelled at any time, but only if one side pays compensation. In other cases, the agreement can be renegotiated at set periods, or terminated depending on specified conditions.

If you would like to discuss this, or any other commercial legal matter, please contact David Filmer on 01772 258321, or at david.filmer@harrison-drury.com