What Should Parties to a Contract Be Aware of When Negotiating Exclusive Contracts?

 What should parties to a contract be aware of when negotiating exclusive contracts?

An exclusive contract refers to a contract in which a party agrees  to supply  goods  or services to another party and in exchange  the other party expressly  promises  to obtain the goods or services exclusively from the first party. Exclusive contract also refers to an arrangement where one firm agrees to do business with another firm and the other firm would not be allowed to do business with another firm apart from the initial firm. Parties to an exclusive contract should be aware of the following during negotiations.

• The scope of service

Parties to an exclusive contract need to be aware of the extent to which the other party would offer the services agreed upon in the contract.  The scope of service should be well defined and each party should know how the scope will be maintained currently and in the future.

• Availability of resources

Parties need to be aware if the other party has the resources need for the performances of the duties obligated to them as per the terms of the contract. This includes the extent to which the parties would be bounded by the exclusive contract.

• The compensation structure.

This is a very significant component in an exclusive contract negotiation. Parties need to know how compensation would be based on in any incase of termination of the contract in case it happens later on. For instance, the compensation structure can be based on the part of the productivity of the party affected. Parties also need to be aware of the benefits and the remedies that can be available to them in case the other party breach the terms of the contract.

• The obligation coverage.

Parties need to states out the obligations expected from each other during the negation of an exclusive contract. This will enable them to effectively understand the duties expected from them as per the contract they intend to enter into. For instance, if it is an employment contract, the employee needs to know what they are required to offer as service and the employer need to specify the schedule coverage for the employee to be aware.