What is an Exclusivity Clause?
An exclusivity clause grants exclusive distribution rights, exclusive licenses and other exclusive rights. It can also be an obligation to purchase all of a party’s requirements for a product or service from the other party and prohibitions against selling products or services to competitors. Exclusivity clauses can appear in service, supply, distribution and intellectual property agreements.
Parties engage in exclusivity agreements for various reasons, but they often are in place to protect both parties. They can protect sellers by ensuring that buyers won’t opt out and purchase from another seller, and they can benefit the buyer by ensuring that the seller can’t make the goods available to other buyers, who might compete with the buyer.
Another common example of an exclusivity agreement is in commercial leases in shopping centers. Commercial landlords often offer a tenant the exclusive right to sell certain types of goods.