Exclusivity Clause

A contractual provision that restricts one or both parties from making the same kind of deal with anyone else for a defined period.

Reviewed by GC AI Solutions Team•Updated August 2026

Definition

An exclusivity clause restricts one or both parties from entering the same type of arrangement with a third party during a set period and scope. It takes three distinct forms: a no-shop in an M&A letter of intent, which stops a seller from soliciting competing bids; an exclusive dealing or exclusive supply term, which ties a buyer or distributor to a single source or channel; and an exclusive license, which grants one party sole rights to use intellectual property. The enforceability and antitrust analysis differ across the three forms.

Stops a seller from soliciting or accepting competing offers during an M&A exclusivity period
Ties a buyer or distributor to a single supplier, channel, or territory in a commercial deal
Grants one licensee sole rights to use intellectual property within a defined field
Sets the duration, scope, territory, and carve-outs that define the restriction
Carries an implied best-efforts obligation under UCC Section 2-306 in exclusive dealing for goods

Exclusive dealing arrangements draw antitrust scrutiny under a rule-of-reason analysis when they foreclose a large share of a relevant market.

What It Does

Exclusivity is one word doing three jobs, and counsel get into trouble when they treat them as one. A no-shop locks a seller to your deal during diligence. An exclusive supply term locks a buyer to one source. An exclusive license hands sole IP rights to a single partner. Each carries its own duration norms and its own antitrust exposure, so the first move is naming which one you are negotiating.

When You'll See It

Exclusivity shows up across deal types: M&A letters of intent, supply and distribution agreements, licensing deals, and reseller or channel contracts. The wording varies most by purpose, since a 45-day M&A no-shop and a multi-year exclusive supply term protect different interests. It is the rare clause where antitrust law sets an outer limit beyond ordinary contract law. See also: most favored nation, right of first refusal, and change of control.

Examples

Alternus Clean Energy, Inc.

LiiON, LLC, Heads of TermsM&A no-shop · 30-day periodOne-Sided2024

"During the Exclusivity Period ... the Seller, its affiliates and its associates shall abstain from selling the Company or any of its assets to any third party and from directly or indirectly conducting any solicitations, discussions or negotiations with any other third party for the sale of the Company or any of its assets."

Source

Harvard Apparatus Regenerative Technology, Inc.

Distributor, Distribution AgreementDistribution exclusivity · Multi-yearOne-Sided2024

"for the duration of the Exclusivity Period, the Company shall sell the Products exclusively through the Distributor and shall not engage or authorize any other third-party distributor, agent, or vendor, whether within or outside the Distributor’s territory, to distribute or sell the Products globally."

Source

Arcus Biosciences, Inc.

WuXi, Amendment No. 4 to License AgreementSupply exclusivity · Backup-supplier carve-outOne-Sided2023

"Prior to the expiration of the Manufacturing Exclusivity Period, Arcus may procure supply of drug substance ... from its designated backup supplier solely in the event WuXi is not able to supply Arcus with drug substance for Licensed Products in accordance with the terms of the Manufacturing Agreement."

Source

GPM Investments, LLC

Oak Street Real Estate Capital, Third Amendment to Standby Real Estate Purchase, Designation and Lease ProgramReal-property exclusivity · Right to be offered firstOne-Sided2023

"During the ... Exclusivity Period ... Seller shall not sell or designate any Property pursuant to a sale-leaseback (or similar leasing) transaction, without first offering such Property ... in accordance with the terms and conditions of this Agreement."

Source

Aspire Global Inc.

Aspire Science and Technology Limited, Intellectual Property License AgreementExclusive IP license · Perpetual, territory-limitedOne-Sided2023

"... and wish to grant to Licensee a sole and exclusive perpetual right and license in the Territory ... to the same, including to the exclusion of Licensors, in accordance with the terms of this Agreement."

Source

TuHURA Biosciences, Inc.

Kineta, Inc., Exclusivity and Right of First Offer AgreementM&A no-shop · “Exclusivity Parties” definedOne-Sided2024

"Kineta agrees that it shall not, and shall cause its affiliates and their respective officers, directors and representatives (collectively, the “Exclusivity Parties”) not to, directly or indirectly: (a) solicit, initiate, or knowingly facilitate or knowingly encourage (including without limitation by disclosure of non-public information) ..."

Source

Negotiate

If you want exclusivity:

You gain the protected position

Define the scope precisely: the products, services, territory, and channels the other side is locked out of.
Set a duration that matches the investment you are protecting, with renewal tied to performance.
In M&A, make the no-shop binding even where the rest of the letter of intent is not, and bar both solicitation and acceptance of competing offers.
Keep the exclusivity period long enough to complete diligence, with a clear long-stop date.

If you are granting exclusivity:

You give up options

Add minimum-purchase or performance benchmarks so exclusivity converts to non-exclusive if volumes fall short.
Carve out existing customers, unsolicited inbound, and a backup supplier for when your counterparty cannot perform.
Cap the duration and add a termination right for breach or change of control.
Pressure-test the deal against antitrust exposure if either side has real market power, since exclusive dealing that forecloses a large share of a market draws rule-of-reason scrutiny.

Red Flags

Perpetual or auto-renewing exclusivity with no performance condition, which courts may treat as an unreasonable restraint.
An exclusive supply term with no minimum commitment, where UCC Section 2-306 still implies a best-efforts duty that can surprise the buyer.
Exclusivity granted by a dominant party that forecloses much of a relevant market, raising Clayton Act exposure.
An M&A no-shop with no fiduciary out in a public-company deal, which can conflict with board duties.
No carve-out for a backup supplier, leaving the buyer exposed when the exclusive source cannot deliver.

Exclusivity Clause FAQs

What is an exclusivity clause?

An exclusivity clause restricts one or both parties from making the same type of deal with a third party for a set period. It appears as an M&A no-shop, a commercial exclusive dealing or supply term, or an exclusive IP license, and each form is analyzed differently.

What is the difference between an exclusivity clause and a non-compete?

An exclusivity clause operates during the relationship, stopping a party from dealing with competitors while the agreement is active. A non-compete operates after a relationship ends, restricting a departing employee or business seller from competing for a period. The timing is the core difference.

How do you draft and negotiate an exclusivity clause?

Define four elements precisely: scope, territory, duration, and carve-outs. In exclusive supply for goods, note that UCC Section 2-306 implies a best-efforts obligation on both sides, so a party that signs an exclusive deal and then does nothing can still be in breach.

How long can an exclusivity clause last, and when is it an antitrust problem?

M&A exclusivity usually runs 30 to 90 days, and commercial exclusivity 12 to 36 months. Duration is one factor; the main antitrust concern is market foreclosure. Exclusive dealing that forecloses a large share of a relevant market faces rule-of-reason scrutiny under the Clayton Act, mostly where a party has real market power.

Is an exclusivity clause in a letter of intent binding?

Usually yes. The exclusivity or no-shop provision is typically the one binding section of an otherwise non-binding letter of intent. It obligates the seller to negotiate only with the named buyer for a set period, and breaching it can expose the seller to damages even with no final deal.

Does an exclusivity clause require the buyer to actually purchase?

In exclusive dealing for goods, effectively yes. UCC Section 2-306 implies a duty of best efforts on both sides unless the contract displaces it, so an exclusive buyer that sources elsewhere or sits idle faces breach exposure even with no express minimum.

Related Clauses

This content is for informational purposes only and does not constitute legal advice.