Since English law does not recognize an „agreement of agreement,“ any exclusivity agreement has its limits, as it does not guarantee that the buyer will enter the underlying transaction, even if the buyer is ready, willing and able to do so until the end of the exclusivity period. In addition, the exclusivity agreement cannot prevent the seller from letting the time pass and then entering into an agreement with another buyer. Suppose the buyer is willing to pay a down payment and wants at least three weeks to perform due diligence and know with certainty that he can continue to purchase the property at the end of the three weeks. Let`s also assume that the seller is prepared to commit to the terms agreed upon at the end of this period. In many ways, an exclusive agreement creates a „gentlemen`s agreement.“ Why do you have one? Many property buyers believe that once an offer has been made for the property, the seller will remove the property from the market, giving buyers the opportunity to exchange contracts within a reasonable time. Unfortunately, there is no law in England and Wales (unlike other countries, including Scotland). In the recent lively real estate market buyers have found at their expense that sellers have acted with other buyers at higher prices or have started a contractual run. English law does not prevent it. The Law Society has imposed professional rules on lawyers so that they do not allow a client to send a second contract without the first buyer being informed, but that does not prevent a seller from keeping the property on the market and continuing with someone else who can make a higher offer. Some lockout agreements therefore provide for damages expressly agreed at a certain higher level, in order to make the seller think twice before violating the agreement. A seller`s acceptance of such a provision depends on the bargaining power of the parties and the period of exclusivity. The amount of damages predetermined should be a reasonable estimate of the damages.

If they are too high, they could be considered a „punishment,“ which is unworkable. A lockout agreement must not be enforceable in writing and must not comply with the technical requirements for land contracts of the Dasasie Act (Various Provisions) of 1989, as it is not an agreement to sell land. Of course, it is preferable for both parties to have the agreement written down, otherwise there will be more leeway for disputes over agreed terms. Lockout contracts can therefore offer a potential buyer a short period of protection during which they can continue due diligence.