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An exclusivity clause is a contractual agreement that restricts one party to engage in specific activities solely with another party. For example, a company may agree to have a single supplier for water in North America for two years. Such clauses can appear in various formulations; for instance, a contract might state that a company will purchase all their water from a supplier, which implies exclusivity without using the term. While exclusivity clauses are not overly common, they are significant in crucial business transactions and can be financially impactful, such as exclusive distribution rights in specific regions. Violating these clauses can lead to serious consequences.
