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Today is all about exclusivity in your contracts. An exclusivity provision places restrictions on one of the parties so that certain aspects of the relationship will be exclusive between the parties. Not every contract includes this type of provision, but a handful of industries use them regularly.
Exclusivity clauses are extremely common for bloggers and influencers, particularly in sponsored content agreements. Exclusivity is often a heavily-negotiated area so you need to know how to read these provisions and evaluate if they’re a good fit.
In this episode, I cover several areas typically included in exclusivity clauses within contracts, providing examples along the way. I also touch on what you must do to ensure you’re working with good exclusivity clauses, before wrapping it up with a couple of action steps.
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In this episode:
[02:49] – Exclusivity clauses can include these considerations. Danielle takes a look at each.
[03:08] – An exclusivity clause needs to be specific about when it’s in effect.
[04:01] – This type of timing stipulation has become pretty common in contracts for bloggers and influencers.
[04:44] – Why should you be aware of the duration of the exclusivity period?
[06:06] – Danielle discusses exclusivity provisions covering different geographic areas with some examples.
[06:47] – Concerning the type of services, some exclusivity provisions will be broad while others are more specific.
[07:16] – Service providers may be contracted to provide their services exclusively for a partner in certain business categories.
[07:52] – Danielle talks about why you should be aware of vague definitions regarding exclusivity in business categories.
[08:56] – Which extremely common clause in exclusivity contracts is also often poorly drafted?
[10:32] – What makes a good exclusivity provision? Danielle covers two important aspects of one.
[11:25] – Danielle gives a short review of action steps to take next.
Links & Resources:
Episode Transcript
Introduction
Welcome to the Simplifying Legal podcast, brought to you by Businessese. I’m your host, Danielle Liss.
Many years ago, someone told me I was the least lawyer-y lawyer she’d ever met because I helped make legal easier to understand. To this day, it’s one of the best compliments I’ve received in my professional life.
If you've ever felt legal was too scary, too overwhelming, too complicated, or just plain incomprehensible, you're not alone. The Simplifying Legal podcast was created to help.
In each episode, we’ll do a deep dive into a legal topic and give you concrete next steps so you can apply it to your business.
My goal is for you to walk away from each episode thinking, oh, that was easier than I thought it would be.
Let’s get started.
Episode Content
Hey there, I’m Danielle. Welcome to episode 12 of Simplifying Legal for Small Business Owners. In Episode 8, we kicked off a series on contracts and we’ve discussed a number of different contract clauses, like confidentiality, payments, and termination. In this episode, I’m discussing exclusivity.
Disclaimer: As always, before we get into today’s topic, a quick disclaimer. This podcast is meant to provide you with legal information only. It’s not legal advice and does not create any type of attorney-client relationship between us. Please don’t take any action without consulting your lawyer first.
Now let’s talk about exclusivity.
An exclusivity provision places restrictions on one of the parties so that certain aspects of the relationship will be exclusive to the two parties. For example, if you are hiring a VA, you may ask that they aren’t working with anyone from a competing company while they work for you.
Not every contract includes exclusivity provisions, but there are a handful of industries where they are really common.
I work with a lot of bloggers and influencers and these are extremely common provisions in that field. Additionally, some VAs or other service providers see them, depending upon their industry and the types of services they offer.
For example, it may be common for a VA who specializes in real estate to be exclusive with a particular agent in a geographic area.
Exclusivity Clauses and Provisions
When I’m working with legal clients, exclusivity is often an area that is heavily negotiated, so it is extremely important to know how to read these provisions and evaluate if they are a good fit for your potential relationships.
Exclusivity clauses can include exclusivity based upon time, geography, service, categories of business, or specific competitors.
Term or Durations of Agreement
First, let’s discuss exclusivity and timing. An exclusivity clause should be specific about when it is in effect. This could include that it’s in effect for the term of the agreement, or for the term and a period after the term, and in some industries, a period before certain deliverables go live. I think this is way easier to understand with some examples.
An exclusivity agreement that lasts only for the term of the agreement may start with, during the Term, Contractor shall not do X.
Or, it might state that exclusivity is for the term of the agreement and a period after the agreement is over. For example, this type of clause may start with, during the Term and for 6 months thereafter, Contractor shall not do X.
Additionally, some agreements also include exclusivity for some periods before certain deliverables go live. This has become relatively common in contracts for bloggers and influencers. This type of clause may start with, for two weeks prior to and two weeks after the post date of the deliverables, Contractor shall not do X. As you will see, this type of clause isn’t necessarily for the full term of the contract, but is instead based around the timing of the deliverables.
The duration of the exclusivity period is critical since it may be restricting your ability to do other types of work. To ensure that you are aware of what you are signing, make sure you know what the term of the agreement is.
The term is the period of time in which the agreement is in full force and effect. It’s usually a specifically defined term within a contract.
Many contracts will state that the term starts on a particular date or when the agreement is fully executed by the parties.
The term of the contract can end in a number of ways.
- First, it may end on a certain date.
- Or, it could end upon the completion of certain services.
- And, in a contract for ongoing services, it may state that it is ongoing until terminated in accordance with the termination provision.
Once you know how long the term is, you will be in a better position to determine if the exclusivity period seems reasonable.
Also, duration of exclusivity periods is a heavily negotiated aspect in contracts if it goes past the end of the Term. For many bloggers and influencers especially, this is often an area that can bring additional compensation if the requested exclusivity period is long.
Geographic Exclusivity
Next, exclusivity can cover geographic areas. This can be approached in a lot of ways. For example, a freelance ultrasound tech may exclusively work for this clinic in a ten-mile radius, but outside of that, the relationship is no longer exclusive. And, if you are familiar with them, this can have a lot of overlap with non-compete clauses, which we’ll discuss a couple of episodes from now.
Another common example that I’ve seen is for those working in real estate and it may be that you can only work exclusively with a particular agent in a geographic region. That might be based on county or state, depending on where you are.
Exclusivity Services and Restrictions
Next, an exclusivity provision should tell you what type of services are prohibited. Some will be broad and state any services you provide, but others are more specific.
For a blogger, a contract may state that you are exclusive for sponsored blog content, but the exclusivity may not extend to digital ads that you display on your site.
Make sure you know what services are restricted and if it isn’t clear, ask for clarification.
Next, an exclusivity provision may state that the service provider is exclusive for certain categories of business. For example, if you offer virtual assistant services, you may agree that you will work exclusively with one particular client in the real estate industry. But, you would be free to work with other business sectors.
When it comes to categories of business, make sure you are specific. In that example, would you be prevented from working with anyone in the real estate industry, or is it meant to only cover another real estate agent?
Beware of vague definitions on exclusive categories of business. For example, if it says something like, during the term, the contractor may not work with any other providers of professional services.
There, the term professional services is really vague. Is it meant to say any licensed professional? Or something else entirely? You should be able to read the clause and know exactly what businesses you are excluded from working with before you sign.
An example I often give for this is, if a food blogger receives an agreement that says, During the term, blogger may not work with any other companies in the breakfast food vertical. This is way too vague since just about anything could be a breakfast food to someone. Instead, ask for specificity. Is it granola? Cold cereal? Eggs? What exactly are they looking for? Ask them to narrow the definition before you sign the agreement.
Specific Competitors
And last, the final category that is often covered in exclusivity is competitors with the business. This is extremely common and, unfortunately, it is often poorly drafted. For example, a clause like this might say, during the Term and for 3 months thereafter, the Contractor may not work with any competitor of the Company.
But, what if you don’t know who they consider a competitor? This leaves too much guessing for the contractor. It should be up to the company to define what that means. Especially if it is a larger company that may be a subsidiary. Does that mean that you have to be exclusive to their parent company and absolutely any of their competitors as well as the competitors of the subsidiaries? You may have no idea about what holdings and product lines they have.
In that case, the company should be able to provide a list of specific competitors or, if they can’t, ask for a list of specific categories of business where they want exclusivity.
For example, let’s say you are a food blogger and you are asked to represent one of my favorite foods on earth, Kerrygold butter. Within the contract, they ask for exclusivity and state that you cannot work with any of their competitors.
For a clause like this, I would first ask for the list of brands that they consider competitors.
If that’s not available, ask them for the categories. Does it only mean butter? What about ghee? What about plant-based spreads? What about oils or other potential butter alternatives?
A good exclusivity provision should be specific and not leave questions in either party’s mind about what is and isn’t covered. No one wants to be in breach of a contract because they didn’t clarify what the company meant.
In addition to specific, make sure the terms of the exclusivity provision are reasonable and won’t be overly restrictive for your business. If a company wants you to work with them exclusively for a long period of time and that will greatly impact your revenue, you can typically request increased compensation to cover that lost revenue. This is very common in the influencer marketing space. If a brand doesn’t want to pay for this additional time period, they will often come to an agreement for a shorter period of exclusivity.
Action Steps
This wraps up our discussion of exclusivity provisions. Now, let’s review today’s action steps.
- Do you work in an industry that requires exclusivity? If so, review your contracts for specificity. Is it clear what aspects of the relationship are exclusive?
- If you have a clause that isn’t specific enough, ask for revisions or clarification.
- If you enter a lot of agreements with exclusivity, like bloggers and influencers, make sure you track things carefully. I know a lot of bloggers who have a spreadsheet with their exclusivity mapped out and they will calendar expiration dates to ensure that no issues arise within their sponsored content.
Thanks for joining me for today’s discussion on exclusivity on the Simplifying Legal Podcast. In the next episode, we’re continuing the contract series with an overview of content. Please subscribe if you haven’t already.
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