What Is Exclusivity in a Sales Agreement?

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An exclusivity clause in a sales agreement can get a business arrangement moving.
An exclusivity clause in a sales agreement can get a business arrangement moving. (Image: George Doyle/Stockbyte/Getty Images)

People who want to sell something with the help of someone else generally spell out the terms of the arrangement in a sales contract. Many contracts include exclusivity. Exclusivity in a sales agreement gives rights to only the sellers or agents named in the contract. It has advantages for both the owner and the seller or agent.

Definition

Exclusivity in a sales agreement generally refers to one or more clauses in the sales contract. These clauses grant the seller or agent the exclusive right to sell the owner's goods or services but restrict the seller or agent from selling similar items for anyone else. In essence, exclusivity establishes a one-on-one relationship in which no other owner or seller may be involved.

Exclusivity in a sales agreement also sometimes refers to a clause stipulating that the owner who is working with the seller or agent has full or exclusive ownership of whatever is to be sold. Sellers and agents usually prefer these clauses in sales contracts to protect themselves against legal problems arising from the unauthorized sale of someone else's property.

Purpose

Without an exclusivity agreement, a seller or agent is free to work for the owner's competition. The owner also would be free to find other sellers or agents, which would lower the sales the primary seller or agent can complete; this would limit commissions or general sales profits. The purpose of the exclusivity agreement thus is not so much to restrict the owner and seller as it is to protect the interests of both parties.

Requirements

Exclusivity clauses may be worded slightly differently depending on the needs of the parties involved, but the clauses all have the same basic requirements. The first is good faith. The owner must do his best to provide the seller or agent with something to sell, and the seller or agent has to try to turn that merchandise on the owner's behalf. The second requirement is ownership of the goods. Owners cannot ask sellers or agents to sell something for which they have no rights. Third, exclusivity requires an expression of quantity. The agreement doesn't need to give a specific number, but it does need to state that the seller or agent is expected to sell the quantity of goods the owner provides.

Termination of Exclusivity

Exclusivity is part of the general sales agreement. When the sales agreement ends, exclusivity also ends. This can be advantageous if the seller or agent hasn't done a good job and the owner wants to try someone new. However, some owners find that people become accustomed to the original seller or agent. It can take some time for consumers to adjust to the new representative.

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