Exclusive Supply Agreements also known as Exclusivity Agreements are written agreements in which two or more parties agree to have business dealings only with one another, to the exclusion of third parties. Exclusive Supply Agreements aka Exclusivity Agreements can be either bilateral or unilateral in their rights and restrictions, while their duration depends in large part on the type of transaction. Most of today’s exclusivity agreements focus on three areas of interest-the relationship between buyer and seller; mergers and acquisitions; and real estate. While an exclusivity agreement can occur in any number of scenarios and fields, these three are where it is most likely to be found. Likewise, they most often occur only between two parties.

In the area of commerce, Exclusive Supply Agreements aka Exclusivity agreements are quite common. As the name suggests, they restrict the parties’ rights to deal with third parties. An exclusivity agreement between, for example, Ford and US Steel, might prevent Ford from buying steel any other seller besides US Steel. This is the most frequently seen scenario of this type of exclusivity agreement-that is, the buyer is obliged to buy all of its materials from only one seller. However, it does happen, albeit with less regularity, that a seller is obliged to sell to only one buyer. These exclusivity agreements can span months or even years.

Exclusivity agreements and Exclusive Supply Agreementsare also seen in mergers and acquisitions. Here, the agreement states that one or both parties will refrain from seeking other merger targets or partners during the exclusion period. These agreements are generally shorter, lasting only a few weeks or months, while the companies negotiate and perform their due diligence. There are several important clauses in this exclusivity agreement: 1) access-the parties grant one another access to their files, subject to confidentiality provisions, of course; 2) no agreement-in spite of their decision to cooperate and to exclude third parties, they acknowledge no duty to consummate a merger; and 3) termination-the agreement usually expires after a certain period, or is terminated by one of the parties. The heart of the document is the exclusivity provision, which, in addition to defining the relationship between the parties, may also define to a degree their behavior. That is, certain agreements oblige parties to carry on business as usual and to refrain from making any material changes to the business during the exclusion period.

Lastly, exclusivity agreements are found in the sale of real estate, where they are called exclusive listing agreements. A homeowner in the market to sell his house signs an agreement to the effect that only one realtor may list, show, and sell the house. No other realtor may interfere with the transaction. In exchange for exclusive rights over the sale, the realtor ideally offers the homeowner certain benefits, such as a broad selection of buyers. One catch to the agreement is that while the homeowner may cancel it at any time, the realtor may still be owed a commission if a sale is consummated within a certain time frame.

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An exclusivity agreement is a written agreement in which two or more parties agree to have business dealings only with one another, to the exclusion of third parties. Exclusivity agreements can span days or years, depending on the area of law involved. They can also be bilateral or unilateral.The majority of exclusivity agreements are found in the commercial buyer-seller relationship, in mergers and acquisitions, and in real estate.

In commerce:
• Usually used to restrict the buyer from buying from only one seller, such as Ford having to buy all its steel from only US Steel.
• Can happen in reverse, where US Steel must sell all its steel only to Ford, but less common.
• Agreements can last months, even years.

In mergers and acquisitions:
• Used to focus two parties on their potential merger, to exclude other partners/targets.
• Span the discussion phase, usually a few weeks or months.
• Allow for access to files, so due diligence can occur.
• Parties are exclusive with one another, but no agreement to consummate a deal.
• Termination-expiration or one party terminates early, when deal is not likely.
• Includes provisions to refrain from making decisions that materially change business during the exclusion period.

In real estate:
• Called Exclusive Listing Agreements.
• Homeowner grants only one realtor (or company) access to home and sale-homeowner “locked in.”
• One catch-homeowner can cancel agreement, but realtor may still get commission if house sells within 30 days of cancellation.

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Exclusivity agreements, because they are present in a number of different areas of the law, come in a variety of forms and are designed to meet a range of goals. The overriding purpose of each exclusivity agreement is, however, to define a relationship in which (generally) two parties agree to deal only with one another, to the exclusion of third parties. The duration of the agreement; whether it is bilateral or unilateral in its rights and restrictions; if it includes only two parties or perhaps more-all such matters are dependent to a large degree on the area of law from which the agreement springs.Today, one is most apt to find exclusivity agreements in three different areas of the law-in the commercial world, in mergers and acquisitions, and in real estate.

When two commercial parties deal with one another, they may sign an exclusivity agreement to solidify the economic relationship between them and to prevent third parties from interfering. The nature of this sort of exclusivity agreement-and the desire to build stability into the relationship-means that such agreements can endure months or years-until the bargaining power of one or the other party materially changes. Often, the relationship is one between buyer and seller, and the seller obliges the buyer to purchase its goods only from this seller and not from the seller’s competitors. An example of this situation would be Del Monte obliging Whole Foods grocery stores to buy all of its bananas only from Del Monte and not from Chiquita or another grower. Certainly, the opposite situation can occur, as well: Whole Foods could lock in Del Monte such that the latter could sell its bananas only to the former. This scenario is much less common, however.

Two companies contemplating a merger sign an exclusivity agreement to prevent one or both of the parties from seeking other third party targets or partners. Shorter in length, these agreements keep the parties’ attention focused during the discussion phase. Inherent to these agreements are certain provisions, such as articles on access, no agreement, termination, and changes. The parties allow one another access to files and pertinent data. The parties are of course bound by confidentiality provisions, especially if the deal is not consummated. Just such a scenario is dealt with in the “no agreement” provision, which states that even though the parties are dealing exclusively with one another, they under no duty to conclude a deal. They can walk away, in other words. A termination provision talks about the natural expiration of the agreement or early termination by one of the parties. And finally, certain provisions in the agreement may well forbid parties from making material changes to the way the business is run during the exclusion period.

Realtors use exclusivity agreements-called exclusive listing agreements-throughout their business. When a homeowner signs an exclusivity agreement, he is agreeing to use only one realtor-or that realtor’s company-to sell his home, including listing it, showing it, and closing the sale on it. No other realtor may interfere with the transaction, and the homeowner is “locked in,” as they say. The homeowner, for his part, receives the benefit from the realtor’s resources, such as the latter’s business acumen or large register of buyers. The homeowner is free at any time to cancel the exclusive listing agreement. However, to do so can carry a penalty. If the home is sold to a buyer within (usually) 30 days of the agreement’s cancellation and the buyer was brought in by the realtor, then the realtor in question is still entitled to collect a commission on the sale.

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