Exclusivity Clause: A Guide for Australian Business Owners

Author: Ian Aldridge, Progressive Legal

Have you come across a clause or term in an Australian contract that refers to “exclusivity”? Are you wondering how you can apply it to your growing business? 

Exclusivity clauses are common in a range of commercial agreements and contracts, including franchise agreements, marketing contracts, distribution agreements and more. This guide will explain the basics of exclusivity clauses, their legal status in Australia and how they can affect you. 

What is an Exclusivity Clause?

An Exclusivity Clause is an agreement between the two parties that stipulates that only one party can provide or use certain goods or services during a certain date or period of time. It is usually set out in the contract and specifies a particular area or region where the exclusivity applies. 

What Small Business Owners Need to Know

As a small business owner, it’s important to understand the Exclusivity Clause and how it applies to your business. Let’s take a look at how the Exclusivity Clause may work in different situations: 

When entering into an agreement with a customer: Draft a contract that clearly states if you are providing exclusive access to goods or services. For example, you own a cafe and have agreed to provide exclusive catering services for an event. Your supply agreement should specify that you are the only provider of these services at the event. If you’re providing services to a number of clients in a particular area, if you want to market and provide services to others that may be competing with this client, you should make that clear in your terms that you are providing those services non-exclusively.  

When entering into contracts with suppliers: Make sure you understand who has the exclusive rights to distribute a product. For example, if you are selling a product online, does the supplier have the exclusive rights to distribute that product? Is there any other business or company that can also sell it? The market for the product should be wide enough to ensure competition and fairness for the customer. 

When hiring staff/employees or contractors: Clearly state in your employment contracts or independent contractors agreements that employees/contractors are not allowed to compete with the business or sell goods or services that are exclusive to the business. You should also consider adding a “non-compete” clause in order to protect your business from potential competition. We can advise you specifically on these clauses as they are a great way of protecting your business. 

When entering into a franchise agreement: Ensure that you’re not infringing on any existing agreements with other businesses by offering exclusive products or services. All parties must be aware of who has exclusive access to goods or services. 

Drafting an Exclusivity Clause

When drafting an Exclusivity Clause, it’s important to include clear and concise language that outlines the terms of the agreement, such as: 

• What goods or services will be provided exclusively; 
• Who has the exclusive rights to distribute or purchase a product; 
• The period of time for which the exclusivity will remain in effect; 
• The location where the exclusivity applies; 
• Any restrictions on the use of trademarks or logos; and  
• Any restrictions on competing businesses. 

It’s also important to include a clause that specifies next steps if the agreement is breached. One party may be liable for damages, or the agreement may be terminated. 

Exclusivity Clauses: Examples

Here are some examples of Exclusivity Clauses that could be considered in an agreement: 

1. The parties agree that, for the duration of this Agreement, the Supplier shall have exclusive rights to distribute the products in the State of ______. 
2. The parties agree that for the duration of this Agreement, the Franchisee shall have exclusive rights to use the Company’s logo and trademark in its marketing materials. 
3. The parties agree that for the duration of this Agreement, the Employer shall have exclusive rights to use the Employee’s expertise in order to develop new products and services. 
4. The parties agree that for the duration of this Agreement, the Client shall have exclusive access to goods or services provided by the Contractor. 

These are general examples of Exclusivity Clauses that can be included in an agreement. It’s important to tailor the language of the clause to fit the specifics of your agreement and meet legal requirements.  

Consult with A Legal Expert

Finally, remember to check with a lawyer before entering into an Exclusivity Clause or Non-Exclusivity Clause to ensure it meets legal requirements and preserve your rights.  

A word of caution: some exclusivity clauses may be considered anti-competitive, so make sure you check the Competition and Consumer Act 2010 before entering into any exclusivity agreements. A legal expert can help you understand the implications of exclusivity clauses and draft an agreement that is tailored to your needs. 

If you have any questions, Progressive Legal offers expert legal advice and assistance. Contact us today to discuss how we can help you with your Exclusivity Clauses. 

Exclusivity Clauses: FAQs