In business, some products are sold in just a certain store or distributed by a company. They can’t be found anywhere else. When we hear the term “exclusive”, it applies to business practicing this kind of principle. Some business agreement to partner with each other and sells products in their own way.
An exclusivity agreement is written to strengthen the relationship between the buyer and seller. There is a list of terms that accompany the agreement and should be agreed upon. This agreement ensures a good relationship between the parties.
An exclusivity agreement is a contract between two business which deals with transactions and certain aspects of the business. The relationship between the parties revolve only around the contract and it’s nothing beyond that. This is commitment of another kind. The exclusivity agreement can still be made when two businesses embark on another venture together. You may also see distribution agreement templates.
One thing about this kind of agreement is it is more binding than others. One party is not allowed to make business opportunities with other companies. This helps in blocking out the competition. It also works for only a certain period of time as well. You may also see sample distribution agreements.
A big advantage an exclusivity agreement can give is a stable business relationship. This relationship can help in predicting future costs and planning the next move. Since the agreement blocks competition, the resources are allocated properly. It also results in higher selling price because the agreeing party has time to negotiate and turn down other offers. You may also see concession agreement templates.
Exclusivity agreements allow both parties to invest more in advertising. The investment is safe and advertising is one of the key factors to promoting a product. With an effective advertising, the product will surely generate higher sales. Lastly, negotiations are faster when you use this agreement. It makes everything smooth and the terms are agreed immediately. You may also see sample agreement templates.
A relationship bound by exclusivity should be put in writing. It has its own rules and restrictions, and agreeing to those is pretty crucial. Here are some basics in writing an exclusivity agreement:
What makes both parties legal in participating in an exclusivity agreement is that both parties are running a business and must be of legal age (18 years old and above). Both parties must also understand what they are getting into before venturing into this agreement. You may also see work agreement templates.
Write the names of the parties entering into the agreement, the company they are working in, and the date the document will be signed. Other significant information to include are the designations of both parties. Do not forget to put a start and ending date to the contract to know how long it is valid. You may also see business agreement templates.
Write down the terms of the agreement that you have come up with your business partner. State what products can be sold and where it should be sold. List the terms about the product’s promotion, prohibition of doing business with other entities, and other matters relating to the agreement. Keep the writing tone formal and professional. Make the language easy to understand for both of you.
This is a must for every agreement. A confidentiality clause ensures that any process, information, data and output made within the validity of the agreement should be kept undisclosed by both parties. A breach happens when one party discloses confidential information. The clause helps protect every single thing made out of the agreement. You may also see director agreement templates.
All agreements are bound by law, and this one is not an exception. Hire a lawyer to review the draft of the agreement. There are some parts that need to be backed up by some sections of the law to make it more binding. He may also ask you to remove some parts of the agreement for they might be useless. You may also see sales agreement templates.
Trim down unnecessary words in the agreement after writing the draft. Tone it down and rewrite some phrases if they don’t fit. Spelling and grammar errors should be meticulously checked and rechecked before printing the whole agreement. You may also see exchange agreement templates.
As with any contract, an exclusivity agreement goes with perks and sweats. Think long and hard upon signing this kind of agreement. Know what you are getting yourself into. Below are the pros and cons of signing an exclusivity agreement:
The exclusivity agreement has a definite time period of validity. Usually, it spans from a year to two years. Within that time, every product or output that you have is solely dedicated to your business partner. Once the contract ends, it really ends. You may also see concession agreement templates.
A guarantee means a minimum amount of money being paid to you regardless of what sells. For example, you enter an exclusivity agreement with an art gallery to display your artwork. When an artwork gains interest, it can be bought by anybody. Even if your artwork does not sell, you still get money as payment based on the contract. You may also see acquisition agreement templates.
In an exclusivity agreement, it is important to specify the location where the product can be sold. There is a narrower geographical location for the potential market of the product. For example, a product may be sold in the United Kingdom but not in the United States. The location on where the product can be sold depends on the contract. You may also see sample employment agreement samples.
Since the contract is all about exclusivity, there are only specific items to be sold by the other party. Nothing else comes close to the products being sold. There is a strict rule to this part of the contract and both parties must adhere to it. You may also see employment agreement samples.
In an exclusivity agreement, you are not allowed to do other business ventures with other companies. You are tied to your business partner alone. You are bound by law to do transactions with your business partner as long as the contract is valid. This is fairly common in buyer and seller relationships. You may also see sample partnership agreement templates.
In case the product or project fails, you are not getting money out of it even if you’re still tied to the exclusive. What’s worse is not being paid at all when the other party declares bankruptcy. Null and void of the contract is not honored when it comes to this kind of agreement. You may also see sample loan agreements.
Once you get into an exclusivity agreement, make the most out of it and always have a backup plan. Moreover, being bound to this type of agreement helps you in doing better in your simple business.