Sole source is a term used in commercial contracts to describe a situation where one supplier is chosen to provide a product or service to the buyer, and no other suppliers are considered. In other words, the buyer relies solely on that one supplier for the product or service.
Key elements of a sole source clause in a commercial contract include:
- Exclusive provider: The supplier named in the contract is the only source from which the buyer can obtain the product or service.
- No competition: The buyer agrees not to seek or consider other suppliers for the product or service.
- Continuity: The contract may specify a period of time for which the supplier will be the sole source, with the option to renew the contract at the end of that period.
- Pricing and terms: The contract may specify the pricing and other terms and conditions for the product or service to be provided.
Examples of sole source clauses in commercial contracts include:
- A company contracts with a single software vendor to provide all of their IT infrastructure software, and agrees not to consider other vendors for a specified period of time.
- A construction company hires a sole source contractor to provide all of the concrete for a building project, and agrees not to seek other concrete suppliers during the duration of the project.
- A government agency contracts with a single security company to provide all of their security needs for a government building, and agrees to renew the contract for a specified period of time.
A sole source clause in a commercial contract allows a buyer to rely exclusively on one supplier for a product or service, and may provide benefits such as lower prices, greater consistency, and more reliable delivery. However, it can also limit competition and potentially reduce the quality of the product or service if the sole source supplier fails to meet expectations.
How to manage clauses like these effectively?
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