Exclusivity Contracts/Clauses

Ok, i can;t sleep with this howling hurricane force wind outside and the restlessness of my dogs… so i have turned to the computer and decided to research something that i see popping up here and there in contracts with galleries.  that clause is the “exclusivity” clause.  Some people are straight forward in stating that if they will sell your product noone else can… others set a geographic boundry… “you cannot sell to other galleries in a 200 mile radius”.  Every time we have encountered this in a contract something of an alarm sounds in my very core. 

Why would someone choose to add an exclusivity clause?  Are they trying to create a unique gallery or shop of destinction, offering what noone around them have.  I get that.  I understand the desire to differentiate a specific shop from others… have that special touch, that unique artist’s work, or that “must have” good that you just can;t buy anywhere.  I so understand that desire to stand out from the crowd. 

So on this stormy night i turned to the internet to do some reading… and found an interesting overview article… helpful to just walk through why anyone would add an exclusivity clause:

An Exclusivity Clause is part of a larger legal document and is often overlooked by many who are eager to get started in business. In addition, many don’t take this part of the document as seriously as it should be taken, and don’t truly understand the meaning after signing the legal document.

The legal and basic definition of an Exclusivity Clause is that the signer is totally restricted in selling and/or promoting only the merchandise and/or services provided by the parent company–period. In many cases, you are required to purchase from the parent company, system, product and/or service that you buy into no matter if it is a Business Opportunity, Distributorship or Franchise.

If you later decide that you want to sell for the competition at any point during that agreement the penalties can be harsh. In the best-case scenario, the parent company that you sign up with will simply cancel your agreement and most likely you’ll be stuck with the products that you’ve purchased resulting in some additional fees. In extreme cases, they can sue you and ultimately limit you from buying from other sources, which is especially true of their competitors. Also, they can limit you for a certain period of time even despite after you are no longer working and/or selling for that parent company. Franchise exclusivity clauses can be even more stringent.

You need to negotiate the terms that you’re comfortable with before you sign and know what you are getting yourself into. My advice would be that before you sign anything think of the absolute worst-case scenarios and then assess what your exposure might be. Think positively and begin to work from that point of reference.

But, in this tight economy an exclusivity clause cuts the artist at the knees.  Now if i were visiting from Pittsburgh, or Detroit I could see this as appropriate, but i am local, and the galleries are local… and the idea of local is to support the economy here…. I cannot afford to put product into a store and not be permitted to put that product anywhere else.   Bottom line is that before you sign anything know what you a re signing… educate, prepare yourself, think it through.  And if you choose to sign, know that you have limited your ability to sell your own goods, whether at all or limited by region.

So that was my soap box… it came from reviewing a contract tonight for a small shop that has been asking us to bring in our goods.  Location was good, demographics of the neighborhood fits with our products, and it is not crazy far away to drive to restock.  But… that little clause jumped from the page… and that was it.  Business is tough enough… i choose to maintain my rights to freedom to do business with whoever and wherever the opportunity exists.  For now we will not be embracing that exclusivity contract.