Non-Circumvention Agreement
What is a Non-Circumvention Agreement?
A Non-Circumvention Agreement is a legal contract that prevents one party from bypassing the other party to engage directly with clients, customers, vendors, or business contacts introduced during a business deal or collaboration. The agreement is designed to protect the introducer’s interests by ensuring they are not cut out of the business transaction, typically in scenarios involving brokers, intermediaries, consultants, or agents.
Purpose of a Non-Circumvention Agreement
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Protects Business Interests:
- Ensures that the party making the introduction is not bypassed or excluded from future dealings with the contacts or opportunities they bring to the table.
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Maintains Trust and Good Faith:
- Promotes good faith and transparency in business relationships by clearly outlining expectations and preventing unethical practices.
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Secures Compensation:
- Helps the introducer secure their agreed-upon compensation, commission, or fees by preventing the other party from directly negotiating with the introduced contacts.
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Prevents Unfair Competition:
- Stops parties from using the information provided during the business deal to unfairly compete or establish direct relationships without the introducer’s consent.
Common Uses of a Non-Circumvention Agreement
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Brokerage and Sales:
- Used by brokers or intermediaries who introduce buyers and sellers. The agreement prevents either party from bypassing the broker to make a direct deal.
Example: A real estate broker introduces a buyer to a property seller. The non-circumvention agreement ensures that the buyer cannot bypass the broker and negotiate directly with the seller.
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Consulting and Agency Services:
- Consultants or agents who introduce clients or business opportunities may use a non-circumvention agreement to protect their commissions or fees.
Example: A business consultant introduces a client to a potential investor. The agreement prevents the client from bypassing the consultant to negotiate directly with the investor.
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Joint Ventures and Partnerships:
- In joint ventures or strategic partnerships, parties may use a non-circumvention agreement to protect their contacts and resources.
Example: Two companies collaborate on a project and share access to their vendor networks. The agreement ensures that each party cannot bypass the other to work directly with the shared vendors.
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International Trade:
- Used in import/export deals to protect the relationships between suppliers, distributors, and buyers in different countries.
Example: An intermediary introduces an overseas supplier to a domestic buyer. The agreement prevents the buyer from contacting the supplier directly without involving the intermediary.
Key Components of a Non-Circumvention Agreement
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Parties Involved
- Identifies the parties entering into the agreement and their respective roles.
Example Clause:
This Non-Circumvention Agreement (“Agreement”) is made and entered into as of November 14, 2024, by and between ABC Brokerage, LLC (“Introducer”) and XYZ Corporation (“Recipient”).
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Definition of Non-Circumvention
- Provides a clear definition of what constitutes “circumvention,” typically involving direct contact with clients, customers, vendors, or business contacts introduced by the other party.
Example Clause:
“Circumvention” shall refer to any attempt by the Recipient to engage in direct business dealings with contacts introduced by the Introducer without the express written consent of the Introducer.
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Scope of Protection
- Outlines the scope of the agreement, including the specific contacts, clients, or business opportunities covered by the non-circumvention clause.
Example Clause:
This Agreement applies to any and all business contacts, clients, and vendors introduced by the Introducer to the Recipient during the term of this Agreement.
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Confidentiality and Non-Disclosure
- Includes a confidentiality clause to protect any proprietary or sensitive information shared during the business deal.
Example Clause:
The Recipient agrees to maintain the confidentiality of all proprietary information disclosed by the Introducer and shall not share such information with any third parties without prior written consent.
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Term of Agreement
- Specifies the duration of the non-circumvention obligations, including how long the restrictions will remain in effect.
Example Clause:
This Agreement shall remain in effect for a period of three (3) years from the date of execution.
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Compensation and Remedies
- Details any compensation or commission due to the introducer if the recipient bypasses them, as well as the remedies available in case of a breach.
Example Clause:
In the event of a breach of this Agreement, the Introducer shall be entitled to receive the full commission or fee that would have been payable if the transaction had involved the Introducer.
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Governing Law
- Specifies the jurisdiction whose laws will govern the agreement.
Example Clause:
This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
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Dispute Resolution
- Outlines the method for resolving disputes, such as mediation or arbitration.
Example Clause:
Any disputes arising from this Agreement shall be resolved through binding arbitration in the State of California.
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Termination
- Specifies the conditions under which the agreement may be terminated.
Example Clause:
Either party may terminate this Agreement with 30 days’ written notice. However, the non-circumvention obligations shall survive termination for the remainder of the term.
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Signatures
- The agreement must be signed by authorized representatives of both parties to indicate their acceptance of the terms.
Example Clause:
This Agreement is executed by the undersigned parties as of the date first written above.
Key Takeaway
A Non-Circumvention Agreement is an essential tool for protecting business relationships, especially when intermediaries or brokers are involved in introducing key contacts or opportunities. It helps ensure that all parties act in good faith and respect the role of the introducer, preventing unethical practices and potential disputes. Given the importance of this agreement, it is advisable to consult with legal professionals when drafting or entering into a non-circumvention agreement to ensure it adequately protects your business interests and complies with applicable laws.