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Non-Circumvention Agreement

Thursday, 26 January 2017

by Erin McAllister, Paralegal

A non-circumvention agreement is used to protect the business contacts and relationships under a business deal. It generally provides that each party shall use the other party’s information only for the purpose of pursuing a business relationship between the parties. A non-circumvention agreement is a legal document that can protect your business from being undercut or taken advantage of during special contractual agreements with other businesses. This type of agreement also often includes non-disclosure, non-solicitation and confidentiality clauses which further protect your company’s efforts. The non-circumvention agreement’s purpose is to ensure that the identity of the introducing party’s contacts and resources remain confidential, and that the other party will not circumvent the introducing party to engage with their contacts. If this agreement is violated, the violating parties may be responsible to pay steep penalty fees in damages that the introducing party would have received had the contract not been violated.

You should consider a non-circumvention agreement if you are contracting with another business in a similar field; and your list of resources and business contacts is both valuable and secret. A non-circumvention agreement should include provisions that require amendments to the agreement to be in writing and signed by both parties, specify the state laws that will govern and interpret disputes between the parties regarding the matters covered by the agreement, and prohibit the parties from assigning their obligations under the agreement to third parties. Generally, the state laws that govern the agreement should be the state of the disclosing party.

An example of a situation where a non-circumvention agreement would be used follows.

You own a special boutique that designs high-quality blouses for women. You, party A, design high-quality blouses to be distributed to department stores nationwide. Party B, is a high-quality blouse manufacturer. You have contacted party B to manufacture these blouses to your design specifications and then to ship them to the department stores (party C). The non-circumvention agreement may prevent party B from creating these specialty blouses for a lower fee arrangement than offered by party A. It also could prevent party B from bypassing party A altogether and going directly to party C with the same products.

This Blog is made available by the law firm publisher for educational purposes only as well as to give you general information and general understanding of the law, not to provide specific legal advice. By using this blog site, you understand that there is no attorney client relationship between you and the law firm publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney.

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