Exclusivity clause

A contract term preventing one party from working with competitors, in certain markets, or with other suppliers or customers.

Example

A startup agreeing not to sell to a partner's competitors for three years.

Important

It can restrict growth and reduce value to future acquirers.

Related terms

• Change-of-control clause — A contract term letting the counterparty terminate, renegotiate or withhold consent when the ownership of the other party changes.
• Most Favoured Nation (MFN) — A clause entitling an investor to any better terms granted to comparable investors within a defined scope.

Lessons that explain it

• A few clauses in a few contracts can decide an exit — Legal diligence reviews the company's most important customer, supplier and partner contracts for clauses that transfer risk or restrict future options: change of control, exclusivity, most-favoured pricing, uncapped liability and easy termination. (11 min)

All 578 terms in the Investing glossary