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What Is an Exclusive Agency Agreement?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 18 August 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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An exclusive agency agreement is a type of business contract that establishes a working relationship between a client and a provider in which the client will only purchase certain goods or services from that provider. Sometimes known as an exclusive dealership agreement, the terms of the contract are designed to ensure that the provider is the sole supplier for the type of products specifically mentioned in the body of the agreement. In return for making this type of exclusive commitment, the customer normally receives discounts off standard pricing that remain in effect for the duration of the contract.

The purpose of an exclusive agency agreement is to create a contractual arrangement between the two parties that ultimately benefits everyone involved. For the vendor or provider, becoming the sole supplier of specific goods and services to the client means there is less potential for competitors to step in and take away all or part of that business volume, at least for the duration of the contract. This in turn provides the vendor with a certain degree of financial security, since a certain level of revenue can be reasonably anticipated from the purchases of that client.

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A client will also benefit from entering into an exclusive agency agreement. Providers will usually extend some sort of special pricing in regard for this type of commitment. That pricing may be a set discount off each unit purchased, without necessarily involving any type of volume purchasing activity required. A different arrangement is to include a sliding scale of pricing that offers discounts based on the number of units purchased on a monthly basis or cumulatively over the life of the agreement. In either scenario, the customer is able to secure products needed for the business operation at rates below standard retail costs.

While the intent of an exclusive agency agreement is to establish an ongoing relationship between a customer and a supplier that prohibits the client from purchasing similar goods and services from other sources, most contracts of this type will include provisions that allow the customer to declare the contract null and void. For example, if the provider is unable to supply the volume of units ordered in a timely manner, or otherwise does not live up to the contract terms, the exclusive agency agreement can be considered breached and the client is free to do business with the provider’s competitors. In like manner, the contract terms will also allow the provider to declare the agreement voided if the customer defaults on payments for past orders, or fails to comply with other provisions within the contract.

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