Exclusivity Clause in UK Contracts: What It Means & Example Wording
An exclusivity clause grants one party the exclusive right to provide specified goods or services to the other, or restricts one party from dealing with competitors. These clauses are found in distribution agreements (exclusive distribution), supply agreements (exclusive supply), agency agreements (exclusive agency), and service contracts. In the UK, exclusivity arrangements must comply with competition law, particularly the Competition Act 1998 and the retained EU Vertical Agreements Block Exemption Regulation.
Last updated: February 2025
When to Include a Exclusivity Clause
- In distribution agreements where a manufacturer wants to appoint a single distributor for a defined territory or customer group
- In supply agreements where a buyer commits to purchasing exclusively from one supplier in exchange for preferential pricing or priority supply
- In service agreements where a client wants a consultant or agency to work exclusively for them and not for competitors during the engagement
Example Wording
This example wording is illustrative only. Customise it to your specific circumstances and consider seeking legal advice.
Is a Exclusivity Clause Enforceable in the UK?
Exclusivity clauses are enforceable in the UK, subject to competition law. The Competition Act 1998 prohibits agreements that have as their object or effect the prevention, restriction, or distortion of competition. Exclusive dealing arrangements may fall within this prohibition if they foreclose a significant portion of the market. However, many exclusivity agreements benefit from the Vertical Agreements Block Exemption (retained in UK law), which exempts vertical agreements where neither party has a market share exceeding 30%. Non-compete obligations in vertical agreements are generally exempt for up to 5 years. For agreements outside the exemption, an individual assessment under the competition rules is required.
Common Mistakes
- Granting exclusivity without a competition law assessment — exclusive arrangements can infringe the Competition Act 1998 if they foreclose a significant part of the market
- Not defining the scope of exclusivity precisely — vague descriptions of what is exclusive can lead to disputes about whether particular products or services are covered
- Failing to include performance obligations alongside exclusivity — an exclusive distributor or supplier who underperforms can block access to the market. Minimum purchase/supply obligations and termination rights for underperformance should be included
FAQ
Are exclusivity clauses legal in the UK?
Yes, exclusivity clauses are legal and commonly used. However, they must comply with competition law. The Competition Act 1998 prohibits anti-competitive agreements, and exclusive dealing arrangements that foreclose a significant part of the market may be unlawful. Most vertical exclusivity agreements between parties with less than 30% market share benefit from the block exemption.
How long can an exclusivity clause last?
Under the UK Vertical Agreements Block Exemption, non-compete obligations (including exclusive purchasing) in vertical agreements are exempt for up to 5 years. Beyond 5 years, the exemption may not apply and an individual competition law assessment is needed. The appropriate duration depends on the investment required and the nature of the relationship.
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Get Started FreeThis is guidance for UK businesses, not legal advice. Example wording is illustrative. Consult a solicitor for complex matters.
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