Exclusivity clause
A clause that stops a party from dealing with others in a defined area, such as buying only from one supplier or selling through one distributor.
What it means
An exclusivity clause restricts who one or both parties can do business with. A supplier might agree to sell only to one distributor in a territory, or a customer might agree to buy all of its needs for a product from one supplier. The restriction is usually limited by product, geography, customer type, and time.
Picture a craft brewery that gives a distributor exclusive rights in three states. The distributor is protected from competitors, so it can justify spending on marketing. In return, the brewery cannot bring in a second distributor, even if sales disappoint. That is why exclusivity is often paired with minimum sales targets and a right to end exclusivity if they are missed.
Exclusivity can be valuable to either side, but it limits flexibility, sometimes for years. Very broad or long exclusive deals can raise antitrust or competition law concerns, especially for businesses with a large market share. Some industries, such as beer distribution and car dealerships in certain US states, also have special laws restricting how these relationships can be ended. These rules vary by jurisdiction.
What to watch for
- Check exactly what is exclusive: which products, territories, sales channels, and customers.
- See whether exclusivity is tied to performance targets, and what happens if they are missed.
- Look at how long the exclusivity lasts and whether any part of it survives termination.
- Confirm whether online sales, existing customers, or affiliates are carved out.
Example clause
During the Term, Supplier appoints Distributor as its exclusive distributor of the Products in the Territory. If Distributor fails to meet the Minimum Annual Purchase in any Contract Year, Supplier may make this appointment non-exclusive on 30 days’ written notice.
The distributor alone sells in the territory, but loses that protection if it misses its purchase target.