Exclusivity (or solus) agreements are a common feature of
trading arrangements between petrol suppliers and garages, or
between breweries and pubs. More recently, similar agreements have
been made in other trades such as motor manufacturers or finance
houses and car dealers; dairies and milk roundsmen; and building
societies and their agency outlets. Under these agreements traders
tie themselves for a period of years to one supplier of goods or
services. In return, they receive a lump sum payment and/or
periodic payments. Frequently such a sum is potentially repayable
but the agreement provides for the periodic waiver of the liability
to repay a proportion of the sum provided the terms of the
exclusivity contract are adhered to. If the agreement runs its full
course, none of the lump sum will be repayable (they are often
referred to as 'abatable' loans).
Often the only pointer to the existence of an exclusivity tie
will be a reference to a loan in the balance sheet. The amounts
written off the ‘loan' will normally be credited to sales or
netted off against purchases, but in some cases attempts have been
made to exclude them from the tax net by crediting them to the
capital account.
If the expiry date of an agreement is known, it may be worth
reviewing the case at that date to see whether the agreement has
been replaced by a further agreement.
