Also known as shut-out, lock-out, or no-shop, an exclusivity agreement is a type of contract that limits the ability of a seller to negotiate with or request an offer from a third-party during a specified period. It is usually contained in a confidentiality agreement and is designed to protect a buyer from being outbid by another buyer during a sale negotiation.
If you are planning to draft an exclusivity agreement, you can save on the stress and use a sample exclusivity agreement. You can find a variety of templates that you can edit and adapt for your use.
What is an Exclusivity Agreement?
An exclusive agreement is a contract between two or more parties for the purchase of goods exclusively from the seller specified in the agreement. An exclusive contract is premised on the understanding that the buyer in the agreement cannot solicit or obtain the goods offered by the seller from another person within a specified timeframe.
It is also used in a situation where a buyer and seller reach an agreement that the seller will not solicit or request an offer from a 3rd-party during the specified period of a business transaction. The exclusive clause is designed to protect both the buyer and seller.
The agreement dictates that the seller is the exclusive supplier of the specified products to the buyer. It is important to mention that this agreement usually happens in vertical seller/buyer relationships. To help make the process of drafting the contract easier and more seamless, you can use an exclusivity agreement template to develop yours.
You will find editable templates that you can customize at the online platform. You may want to consider a website that offers a digital signature, which means you can complete the drafting and signing of the contract electronically and without printing any document.
Why Do You Need an Exclusivity Agreement?
A new business relationship can often lead to increased revenue and more exciting opportunities. If you are planning to enter into a business partnership that involves the purchase and sale of goods, you will surely need an exclusivity agreement.
This contract will establish the terms and conditions of the business relationship. The contract is often used between two or more parties with an understanding and agreement to buy goods exclusively only from a specific seller. This means that the seller will be the only supplier of the goods to the buyer.
You need the exclusivity contract if you want to become an exclusive supplier of goods or services to a specified business. If someone agreed to offer exclusive products or services to your business, you should use an exclusivity agreement template.
Additionally, if you want to create a competitive edge for your business and restrict the kind or number of businesses that your partners work with, you should consider signing exclusivity agreements with them.
If you have decided to enter into an exclusive agreement with your business partner, you should consider using an exclusivity agreement sample to make the drafting of the contract an easy process for you.
The Typical Format of an Exclusivity Agreement
An exclusivity clause includes different details and it mostly depends on the terms and conditions required by each party involved in the agreement. However, the majority of the contracts will follow a similar pattern. Here is the typical format of an exclusivity contract:
- First name and last name of the parties involved in the agreement and the creation date of the agreement.
- This covers the details of the party that will provide the goods or services to the other exclusively. This section should include the timeframe for the agreement and specify that the seller is disallowed from promoting, soliciting, or selling the products or services of any other party during the agreement’s timeframe.
- Outline the products’ standards that are being exclusively offered to the other party.
- State the payment terms, including deposits, taxes, and discounts, if any.
- Specify the delivery timeline and process of delivery. If it will be provided, the contract should mention expedited shipping alternatives and outline the party that will be responsible for the payment of taxes on goods, including federal, state, and local taxes.
- Give details of the type of warranty offered on the product.
Tips for Writing an Exclusive Agreement
When drafting an exclusivity agreement, it is important to focus on specific points. This will ensure that you cover all aspects of the contract without missing out on anything. Your contract should focus on the specific timeframe that the exclusivity contract will be in effect.
Do not be ambiguous about this. Highlight the duration that the agreement will be effective in the contract. While drafting the agreement, you should consider whether you would want to name specific competitors for clarity and to narrow down the scope of the exclusivity.
If it will be necessary, you may also specify the industry that should be included in the clause. The geographical location is another consideration for your exclusivity contract. The contract must be specific about what exclusivity means in the context of the business relationship.
Do not use broad terminology that may be misinterpreted or lead to confusion for any of the parties. Whether you are the seller or buyer, review the contract and be sure that it protects your interest. Sharing the agreement with your attorney before signing it may be a very good idea.
To write an exclusive agreement can be challenging, especially if you have no prior experience in the area. However, you can use an exclusivity contract template as the base for your writing. An editable template makes the work easier as all you have to do is edit and customize the template. You can find the perfect exclusive clause sample that you can use to create your own.