Exclusivity (no-shop) clause
An exclusivity clause, also called a no-shop clause, is a promise in a letter of intent that the seller will stop marketing the business and negotiating with other buyers for a set period, usually while due diligence and the definitive agreement are being finalized.
Once a buyer and seller sign a letter of intent, the buyer often wants assurance that the seller will not keep shopping the business to other interested parties. That assurance is the exclusivity clause, sometimes called a no-shop or no-solicitation clause. It gives the buyer a defined window to complete due diligence and negotiate final documents without competing for the seller’s attention.
Why buyers ask for it
Due diligence and legal drafting cost time and money. A buyer who spends weeks reviewing financials and negotiating a definitive agreement does not want the seller quietly accepting a better offer from someone else. Exclusivity periods in Canadian small business deals typically run somewhere between thirty and ninety days, renewable if both sides are still working in good faith.
What it does not do
Exclusivity is a contractual promise, not a guarantee the deal closes. If the seller breaches it, the buyer’s main remedy is usually to walk away and pursue a claim for damages, which can be hard to prove. Most buyers pair exclusivity with a clear timeline so the period does not drag on indefinitely.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Treadstone LawLegal commentaryBuying & Selling a Business
- 02Treadstone LawLegal commentaryConditions Precedent to Closing in an Ontario Business Sale Agreement
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