Download this free Supplier Contracts Checklist to ensure your contracts will meet your business\u2019 needs.<\/p>\n <\/div>\n \n\nDownload Now<\/a> <\/section>\n <\/div>\n\n\n\n\n An exclusivity agreement<\/a> is a contract between businesses that prevents one or both parties from negotiating with third parties for a set period. This helps ensure the parties do not pursue competing or conflicting opportunities during that time.<\/p>\n\n\n\n It allows you to negotiate without the risk of third-party interference. In some cases, exclusivity may apply to only one party, so the agreement should clearly reflect this.<\/p>\n\n\n\n The law does not automatically grant exclusivity during negotiations. If you want exclusivity, you must expressly agree to it. <\/p>\n\n\n\n Exclusivity agreements are used across many industries. Common examples<\/a> include property transactions, mergers and acquisitions, and commercial arrangements such as agency, franchise and distribution agreements.<\/p>\n<\/div>\n\n\n\n An exclusivity agreement can give you the confidence to invest time and resources into negotiations. It also creates a more stable and focused negotiation process, particularly for high-value or strategically important deals.<\/p>\n\n\n\n You can include exclusivity terms in a standalone agreement or in another document, such as heads of terms. The right approach depends on your project and commercial objectives. In some cases, it may be simpler to include exclusivity in a preliminary document. However, whichever approach you choose, you should clearly draft the exclusivity terms.<\/p>\n\n\n\n An exclusivity agreement works by placing obligations on one or both parties not to take certain actions during a set period. For example, it can prevent you from negotiating or entering into a similar deal with a third party.<\/p>\n\n\n\n The agreement should clearly state how long the exclusivity period lasts, based on the nature of the deal or project.<\/p>\n\n\n\n Key considerations for drafting an effective agreement include the following:<\/p>\n\n\n\nWhat is an Exclusivity Agreement?<\/h2>\n\n\n\n
When Do You Need an Exclusivity Agreement?<\/h3>\n\n\n\n
Why Use an Exclusivity Agreement?<\/h3>\n\n\n\n
Is a Standalone Exclusivity Agreement Always Necessary?<\/h3>\n\n\n\n
Key Provisions and Drafting Considerations<\/h2>\n\n\n\n
You should clearly define what each party can and cannot do. For example, set out exactly which activities are restricted. This may include a requirement not to start or continue negotiations with a third party during the exclusivity period. You may also need to stop any existing discussions that relate to the same deal.<\/td><\/tr> Importantly, your agreement should be drafted as a \u2018lock-out\u2019 arrangement. This means it prevents you from negotiating with others. By contrast, a \u2018lock-in\u2019 arrangement tries to force you to continue negotiating, which is generally not enforceable.<\/td><\/tr> You should also include a clear duration clause. This should state how long the exclusivity period lasts and, if relevant, when either party can end it early. The timeframe must be reasonable for the size and complexity of the deal. Avoid vague or open-ended periods, as these may not be enforceable.<\/td><\/tr> In addition, you must consider whether there is valid consideration<\/a> (something of value exchanged). If both parties agree to exclusivity, this is usually sufficient. However, if only one party is giving that commitment, you should clearly set out what is being provided in return. If needed, you can execute the agreement as a deed.<\/td><\/tr> Finally, you may want to include remedies for a breach of exclusivity, such as indemnities. However, these clauses can be complex, so you should seek legal advice before including them.<\/td><\/tr><\/tbody><\/table>
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