🟦 What you need to know before granting an agent exclusivity 🟦
A principal may give an agent the exclusive right to carry out agency activities in a particular territory or for a particular customer group. The territory can be defined freely, for example as a province, district or the whole country. A customer group can be identified by name or category, such as wholesalers, retailers or customers in a particular profession. If exclusivity is granted, the principal should not assign the same market to other agents.
⚠️ This arrangement primarily benefits the agent.
It assures the agent that they will not compete with the principal’s other agents in the assigned market. In any event, even if another agent or the principal itself concludes a contract with a customer covered by the exclusivity, the exclusive agent will still be entitled to commission on that contract.
❗ The last point deserves emphasis. The principal must pay commission to the exclusive agent even on contracts which it or another agent concludes. What does the principal gain in return?
👉 a greater commitment by the agent to developing sales and customer relationships in the assigned market;
👉 more room to negotiate other contractual terms.
🟦 When establishing exclusivity, the key points are: 🟦
➡️ defining the territory or customer group precisely, so that it is easy to establish which contracts generate commission and are therefore covered by the principal’s information obligations;
➡️ specifying whether the principal must guarantee that its other agents do not conclude contracts in the assigned market;
➡️ specifying whether the principal must itself refrain from concluding contracts in that market, or may contract directly with customers while remaining obliged to pay commission to the agent;
➡️ determining the obligations the agent assumes in connection with being assigned the market.
These provisions are crucial to establishing whether either party has a damages claim for breach of contractual obligations. They may also determine whether either party was entitled to terminate the agreement extraordinarily, with immediate effect.
⚠️ Contractual exclusivity and exclusivity in practice
The fact that an agent is the only one operating in a territory does not itself establish contractual exclusivity. Unless the agreement obliges the principal to ensure exclusivity, the situation is merely one of exclusivity in practice. This does not guarantee commission on every contract concluded in that market.
