Businesses have been warned to ensure supply contracts are crystal clear about their terms when it comes to exclusivity, with a case involving department store giant Myer and a young up-and-coming fashion designer highlighted as an example of what can go wrong.
The department store has taken Kym Ellery to court claiming she has breached an exclusivity contract, and has not supplied the company with product for her winter and autumn collections. The matter has been fast-tracked before the Supreme Court of Victoria.
The store has also said Ellery has breached the contract by working with David Jones, in yet another example of the two companies squabbling over exclusive design deals.
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Sally Scott, partner at law firm Hall & Wilcox, says these cases have become more common as David Jones and Myer attempt to shore up falling sales by winning exclusive fashion deals.
“You’ve seen issues with Myer or David Jones trying to get exclusivity…they’ve been having this long-running dispute, whereas they used to often have designers in both.”
Carla Zampatti is another key case of a department store winning an exclusive contract. The designer’s products used to appear in both David Jones and Myer, but now only appear in David Jones stores.
“You’ll see more and more of these designers in one store and not the other,” says Scott.
Ellery, a former fashion editor, has been a fast-rising success in the local fashion industry, collaborating with companies such as Sportsgirl and selling through her own boutique, Elleryland.
Myer spokesperson Jo Lynch told SmartCompany this morning while it has maintained a good relationship with Ellery since signing a deal in 2011, “we think there has been a breach of contract”.
“We think Kym is talented, and have promoted her significantly as well as the Ellery brand. Our customers love it, and in our view we owe it to our customers to showcase her collection.”
Myer has accused Ellery of working with David Jones on her Ellery and L’America branded clothing, and is suing for damages and an injunction. The case is set to appear before the Supreme Court in Victoria.
Speaking with Fairfax, Ellery’s lawyer Charles Shaw said the contract was restrictive and did not include an obligation from Myer to buy any product, yet restricted any sales to other stores.
Scott says the incident not only highlights the need of both stores to boost sales using exclusive deals, but also the importance of ensuring exclusive contracts are both created and read with full scrutiny.
“Parties to a contract need to decide at the outset what sort of a supply arrangement they want and then they need to ensure the contract is clear on this,” she says. “If parties want exclusivity, they need to undestand the effect of this and ensure the contract clearly provides for it.”
“Often, these cases aren’t as clear as it might seem.”