Sole agreement: Overview, definition, and example
What is a sole agreement?
A sole agreement is a contract in which one party agrees to provide goods, services, or fulfill a particular obligation exclusively to another party, with no involvement from other entities. It typically stipulates that the agreement is binding only between the specified parties, and no third-party engagement is allowed without prior consent. This exclusivity can apply to various business relationships, such as exclusive distribution agreements, sole supplier contracts, or non-compete clauses.
For example, a manufacturer may enter into a sole agreement with a distributor, guaranteeing that the distributor will be the exclusive seller of the manufacturer's products in a particular region.
Why is a sole agreement important?
A sole agreement is important because it provides clarity, exclusivity, and protection for the parties involved. For businesses, a sole agreement ensures that they are the only entities involved in a specific agreement or arrangement, preventing competitors or third parties from interfering. This exclusivity can increase loyalty, strengthen partnerships, and often enhance the negotiation power of the party granted exclusivity.
For businesses entering into sole agreements, it offers a clear commitment that the other party will not engage with competitors, helping protect market share, manage risks, and achieve long-term goals. On the other hand, the party agreeing to exclusivity may benefit from guaranteed sales, protected territorial rights, or focused support.
Understanding sole agreement through an example
Imagine a technology company that creates a new software application. The company enters into a sole agreement with a distributor to sell and promote the software exclusively in a specific country. As part of the agreement, the distributor is prohibited from selling any competing software products in the same market, and the technology company is obligated to provide the distributor with certain support, training, and pricing.
In another example, a supplier may enter into a sole agreement with a retailer, providing the retailer with exclusive rights to sell its products in a specific region. The supplier agrees not to sell the products through any other retailers in that region, while the retailer is guaranteed to have exclusive access to the products.
An example of a sole agreement clause
Here’s how a sole agreement clause might appear in a contract:
“The Supplier grants the Distributor the exclusive right to market, sell, and distribute the Products within [specified region] for the duration of this Agreement. The Distributor agrees not to engage in the sale of competing products during the term of this Agreement, and the Supplier agrees not to appoint any other distributor or seller for the Products in the region.”
Conclusion
A sole agreement creates an exclusive relationship between two parties, ensuring that one party is the only one involved in the agreement within a specified context. These agreements are crucial for establishing loyalty, protecting market interests, and managing competitive risks. Sole agreements are common in various industries, from distribution and sales to services and licensing, offering both parties clear terms and commitments for a specified period.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.