The recent high-profile stoush involving fashion designer Kym Ellery and the Australian retail giants Myer and David Jones has shone the spotlight on exclusivity arrangements. Whatever it is you do, if you’re looking at entering into an arrangement under which you’ll do that on an exclusive basis for the other side, it’s critical for you to ensure that:
- You get what’s fair in return. By granting exclusivity you are giving up your ability to provide your products or services to others, and therefore other potential sources of revenue. Are you being adequately compensated for that?
- The scope of the restriction is appropriate, both in terms of its duration and geographic reach. Are there any products, services or regions that ought to be carved out, ie: not be subject to the restriction?
- You’ve got strong-enough ‘outs’, by making the exclusivity conditional on, for example, minimum quantities being bought or used by the person you’re entering into the contract with. This way, if the arrangement isn’t working out, you’ll have the right to terminate the contract or at least convert it to being on a non-exclusive basis so that you can go elsewhere.
Granting exclusivity can have significant commercial consequences, and parties that have the benefit of exclusivity arrangements will act quickly to protect them.
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