Exclusive Vendor Agreement: Everything You Need to Know
An exclusive vendor agreement protects vendors and their customers from working with a competitor and both sells a service or product in a specified market.3 min read
An exclusive vendor agreement protects vendors and their customers from working with a competitor. By signing this agreement, both parties agree to work together to sell a service or product in a specified market.
Exclusive Vendor Agreement: Overview
A great way to generate new revenue for your business is to exclusively feature a vendor's product or products at your store. An exclusive vendor agreement may provide you with a monetary fee or distribution rights. The first step in establishing a prosperous legal relationship is to negotiate a partnership agreement that is mutually agreeable for all parties involved.
Many hotels, small venues, and large convention centers have decided to set up exclusive vendor agreements. These contractual agreements have made it challenging for meeting planners to hire their preferred vendors because they are only allowed to work with a certain number of exclusive vendors.
Not only do exclusive vendor agreements provide additional revenue for the buyer, but they also force the vendor to meet certain agreed-upon standards. Most meeting organizers agree it's important that vendors are consistent with the services they provide and meet budget expectations. On the other hand, there may be legitimate reasons to negotiate an exclusive agreement, such as security protocols.
The venue may have an exclusive agreement with a supplier that has not partnered with the organizer. When this occurs, it may lead to disruptions and disputes between the two parties. Part of the responsibility of a meeting organizer is to scout out venues that will provide the most flexibility in the selection of vendors. Organizers should also add specific language into the contract stating that exclusive vendors may be used as long as they meet the stated expectations and budget limits. Adding this statement to the contract will add some flexibility when working with an exclusive vendor.
Cities known for having large union contracts may require you to use a union member to shadow your vendor's activities.
This will increase the cost of using the venue, but it may lead to a more positive experience since the union employee may be more familiar with the facility than your own employees/vendors. Even if you need to work with an exclusive vendor, remember the overall goal is to have a positive outcome. Adding some flexibility in the agreement should help bring this to fruition.
Significance and Goals
The goal of partnering with a vendor is to increase the profitability of both businesses. Even though both organizations are responsible for meeting the same goal, they are still separate entities. Consequently, an official partnership agreement form should be completed to preserve the legal structure of the two companies. The agreement should address the responsibilities and roles of both parties.
New partnerships often lead to increased revenue and other exciting opportunities. An exclusive vendor agreement should be created to outline the terms for the buying and selling of the product between the two establishments. Exclusivity authorizes the buyer to be the sole provider of the vendor's product.
The agreement forces the seller and the buyer to work exclusively with each other when regarding a specified product or products.
Through this arrangement, the buyer receives a complete advantage because no other businesses have access to this product or product line. An exclusive vendor agreement should be created if the following is true:
- You're the exclusive seller of a service or product
- A business has agreed to provide you with exclusive products or services
- You're looking to gain a competitive advantage by being the sole provider of a specific product or product line.
Partnership Terms and Conditions
Brainstorming the ideal terms and negotiating these terms with the vendor will come before finalizing an exclusive vendor agreement. Generally, the overall goal is for both businesses to make a profit, but each company may also have other specific objectives that they'd like to meet. The completed agreement should address the following:
- Both individual and shared goals.
- Payment terms.
- Sales conditions and expectations.
- The exclusivity of the agreement.
- The steps in making joint decisions.
- Any disputes in the resolution.
- How to measure the strength of the pact.
- Any clauses that protect the businesses.
- Who is responsible for paying and managing employees, taxes, and other expenses.
- The length or term of the partnership with any options for renewal.
If you need help creating an exclusive vendor agreement, you can post your job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.