The Andres Lopez Law Firm

What is an exclusive supplier contract?

A previous post talked about how a farmer in another state recently won over $20 million in a suit over an exclusive supplier agreement. To take a step back from this post, and as the name implies, an exclusive supplier agreement is one in which an entity which needs products, like chili peppers, enters in to an agreement with another business to provide them on an exclusive basis.

In other words, the supplier of the product will sell or all of the product to the business needing it, and the business will likewise agree not to purchase from other providers. This ensures that the supplier has a relatively reliable source of income and that the purchaser can lock in a decent price for their goods.

Normally, exclusive agreements of this nature are perfectly legal business arrangements that are mutually beneficial to both sides. However, those negotiating these types of agreements do need to be aware that they can run afoul of federal anti-trust laws.

For instance, a large company can use these agreements to crowd out competition by preventing startups from finding a supply source for goods that they need to carry on business. In the event of a contract dispute, anti-trust issues can lead to a supplier agreement being declared unenforceable.

Perhaps more importantly, though, the terms of these sorts of agreements need to be carefully spelled out. Unclear terms or a lack of detail generally can mean that down the road, the rights of each party will not be clear should their relationship sour and conflict develop.

Still, even the most thoroughly drafted contract will not prevent all litigation. In the event of a dispute, a South Florida business is often well-served by getting the help of an experienced attorney.

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