What to Do When a Manufacturer or Supplier Ignores Your Exclusive Rights

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

If a manufacturer sells into a market your contract made exclusive, your claim in California is for breach of contract. You will need to prove what the exclusivity covers, that you kept any conditions attached to it, and what the sales around you cost. The remedies are damages and, where money would not be adequate or would be extremely hard to measure, an injunction. (Civ. Code, § 3422.) Kolmogorov Law, P.C., a business litigation firm in Irvine, represents companies on both sides of these disputes.

Call (909) 235-6116 or contact us online to discuss an exclusive territory, account, or supply right that is not being honored.

The situation: an exclusive right that is being sold around

It surfaces in a few ways. A dealer learns from a customer that the manufacturer quoted the same product direct, at a lower price. An exclusive distributor for a region finds the product listed online by the maker itself, shipping into the territory. A company that paid for tooling on the promise of exclusive supply sees the same component in another company's product.

Three questions decide the claim. What exactly was made exclusive? Was the exclusivity still in force? What did the breach cost?

This page covers a breach during the relationship. If the other side has ended the agreement, start with our page on distribution agreement termination.

Step one: establish what the exclusivity covers

Scope comes first. Read the grant for five things.

Products. Does the clause name a product line, listed part numbers, or everything the maker sells, including later models?
Territory. Is it a state, a list of counties, or a customer's location wherever the order is placed?
Channel. Does it reach online sales, sales to national accounts, or sales through the maker's affiliates?
Reserved rights. Are house accounts or direct sales carved out anywhere in the document?
Duration. Did the exclusive period expire or convert to a non-exclusive one?

A court's task is to give effect to the mutual intention of the parties at the time of contracting. (Civ. Code, § 1636.) Clear and explicit language governs, and the whole contract is read together so that each clause helps interpret the others. (Civ. Code, §§ 1638, 1641.)

Where the wording is open to two readings, the contract may be explained by the circumstances under which it was made and the matter to which it relates. (Civ. Code, § 1647.) Our page on contract ambiguity explains how a court chooses. Exclusivity that was promised orally and never written down is a harder case, and an integration clause may shut it out.

Step two: confirm the exclusivity was still yours

Check whether the exclusive right came with conditions: minimum purchases, sales quotas, payment terms, or marketing commitments. The contract may say exclusivity ends if they are missed.

For goods there is a default rule as well. Unless otherwise agreed, an exclusive dealing agreement obligates the buyer to use best efforts to promote the goods and the seller to use best efforts to supply them. (Com. Code, § 2306, subd. (2).)

Compare your purchase history with every threshold in the contract before you send a demand. If you fell short and the manufacturer accepted it for years without objection, that history matters too, as our page on waiver of contract rights explains.

Step three: document the sales and give notice

Collect proof of specific transactions: the customer, the date, the quantity, and the price.

Then follow the contract's notice clause. If it requires written notice of breach and a period to cure, give both, and check which remedies the clause ties to that step. A notice that identifies the transactions and cites the exclusivity clause also records the date the other side was told.

Keep performing your own side while you do this, unless the breach is serious enough to excuse your performance.

Damages for breach of an exclusivity clause

Contract damages are the amount that compensates for the detriment the breach caused or would be likely to cause. (Civ. Code, § 3300.) Here that is normally the profit you would have earned on the diverted sales: your margin, less the costs you avoided.

Two limits apply. Damages must be clearly ascertainable in both their nature and origin. (Civ. Code, § 3301.) And you must show the customer would have bought from you. A sale the manufacturer made at a price you could not have matched is harder to claim. Our page on lost profits covers the proof courts expect.

Once a case is filed, discovery can reach the manufacturer's records of sales into the territory.

Injunctions and orders to perform

Sometimes the harm is to the market position itself. California allows a final injunction to prevent the breach of an obligation where pecuniary compensation would not afford adequate relief, or where the amount would be extremely difficult to ascertain. (Civ. Code, § 3422.) A preliminary injunction may be granted before judgment, on notice to the other side. (Code Civ. Proc., § 527, subd. (a).)

There is a boundary. An injunction cannot be granted to prevent the breach of a contract that would not itself be specifically enforced. (Code Civ. Proc., § 526, subd. (b)(5).) An agreement whose terms are too uncertain to show the precise act required cannot be specifically enforced. (Civ. Code, § 3390, subd. (e).) A vague exclusivity grant therefore weakens the request for an order as well as the damages claim.

For an exclusive supply of goods, a court may order performance where the goods are unique or in other proper circumstances. (Com. Code, § 2716, subd. (1).) Our pages on injunctions and specific performance describe the showing required.

A company that knowingly helped the manufacturer breach may face a separate claim, covered on our page about interference with contract.

If you are the manufacturer or supplier accused of the breach

Start with the same reading of scope. A sale outside the named products, territory, or channel is not a breach, and a reserved-accounts clause may answer the claim outright.

Check the conditions next. If exclusivity depended on minimums that were missed, say so with the figures, and check whether the contract required you to give notice before treating the exclusivity as lost.

If the sales were inside the grant, stop them while the dispute is assessed. Continued sales after a written notice can add to the damages and may support a request for an injunction.

What to bring to the first meeting

The agreement, every exhibit and amendment, and any price lists or territory maps it refers to.
Your purchase and sales history for the exclusive products.
Evidence of each sale made around you, with dates and customers where known.
All notices and emails about exclusivity, quotas, or direct sales.

Frequently asked questions

We have an exclusive right to sell a product in California and the manufacturer is selling direct. What can we do?

Treat it as a breach of contract. Confirm that the exclusivity clause covers direct sales by the manufacturer and that you met any quotas tied to it. Send the written notice the contract requires. Under California law you may sue for the profits lost on the diverted sales and, if money would not be adequate, ask the court for an injunction.

Our supplier agreed to sell a custom component only to us and is now selling it to another company. Can a court stop that?

Possibly. A California court may enjoin the breach of an obligation where money would not afford adequate relief or the loss would be extremely difficult to measure. The exclusivity term must be definite enough to enforce. You would need to show the scope of the promise, your own performance, and why damages alone would fall short.

What counts as a breach of an exclusivity clause?

Any sale, appointment, or supply that the clause reserved to you, made by the other party during the exclusive period. In California the answer comes from the contract's wording on products, territory, channels, and reserved accounts, read as a whole. Sales outside those terms are not a breach, even if they hurt your business.

Can I get an injunction for breach of an exclusivity agreement in California?

It is available but not automatic. Civil Code section 3422 permits an injunction where pecuniary compensation would not afford adequate relief or would be extremely difficult to ascertain. California law also bars an injunction to prevent the breach of a contract that could not be specifically enforced, so the exclusivity terms need to be certain.

What damages can I recover for breach of exclusivity?

Generally the net profit you would have made on the sales that went around you. California measures contract damages by the detriment the breach caused, and the loss must be clearly ascertainable in its nature and origin. Expect to prove which customers would have bought from you and at what margin.

Talk to a California breach of contract attorney

If an exclusive right you paid for is being ignored, or you have been accused of ignoring one, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located in Irvine, California. Related reading: our breach of contract practice page and our page on distribution agreement termination.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract, the proof of lost sales, and the court.