The public battle between Ellery and retail giants Myer and David Jones is now over, with a settlement being reached. And there is a lesson for us all in dealing with exclusivity clauses.
Kym Ellery signed up to a contract with Myer, to supply the Ellery label exclusively to Myer until 2014. But Myer sued when it discovered that the label was also being simultaneously supplied (under a similar exclusivity clause) to its competitor, David Jones.
Many designers in the fashion industry (and any suppliers of high-demand products, really) can expect to see exclusivity clauses in their contracts, to stop them entering into negotiations with other purchasers. Such clauses should be reviewed and considered seriously, as they may have large ramifications on the supplier’s business.
Some things to consider when it comes to exclusivity clauses:
- Is the minimum quantity to be ordered by the purchaser high enough to justify tying yourself into an exclusive arrangement? Myer’s minimum order for the Ellery collection was said to be zero.
- Make sure you are able to terminate the contract early if the purchaser does not meet the minimum order quantity.
- If the contract is terminated due to a fault other than yours, ensure you are fairly compensated for all loss. This could include potential future sales or a pre-agreed figure.
- Is the duration or type of exclusivity reasonable? Or does it unreasonably restrict your business? Unreasonable or overly restrictive exclusivity clauses may be deemed by the courts to be void and unenforceable.
- Save yourself the heartache and don’t breach an exclusivity clause. Consider your termination options instead.
Ellery may consider the above to be lessons learnt, albeit the hard way.