Exclusivity in contract negotiations

The following Commercial practice note provides comprehensive and up to date legal information covering:

  • Exclusivity in contract negotiations
  • Negotiations and agreements to agree
  • Exclusivity or lock-out agreements
  • Consideration
  • Lock-out obligations
  • Exclusivity period
  • No obligation to proceed
  • Effect of expiry or termination
  • Remedies for breach
  • Confidentiality
  • More...

Exclusivity in contract negotiations

This Practice Note considers exclusivity in the context of contract negotiations. It examines negotiations and agreements to agree, exclusivity or lock-out agreements, the duty to negotiate in good faith, options, rights of first refusal or pre-emption, and break fees.

For a template exclusivity agreement, see Precedent: Exclusivity agreement—commercial contracts.

Negotiations and agreements to agree

Negotiations between parties to agree and conclude a deal can be long-winded, difficult and with many changes to terms. There is often a significant investment of time and cost, including legal and accounting fees, that may prove to be wasted if the parties are unable to agree and finalise the deal.

Conditions can change due to external factors, and the results of investigations may change the value of the subject of the deal as well as the negotiating positions of the parties. Where parties are considering a collaboration or joint venture project or a joint tender situation, there may be a period of due diligence where the parties explore how they may work together and agree roles and responsibilities. This is understandable and usually seen as reasonable.

However, a negotiating party may be less sympathetic at finding that the deal they have been negotiating has been usurped by another arrangement made by the other side with a third party. The unpopular practice of gazumping in the property market was a well-publicised example

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