Shotgun Clause Law and Legal Definition

A shotgun clause is a buy sell provision in a contract that allows one partner to offer his/her interest in a business venture to one of the other participating partners. If the partner does not buy the offered interest at this price, the partner must then sell his/her own interest to the offering party at the same specified price. Such clauses are used in situations where investors come together to launch a new business venture, and wish to ensure that those participating in the venture are committed to making the project a success. It also helps to maintain a degree of stability with the funding of the joint venture. A shotgun clause is a term of art, rather than a legal term.