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What is a Non-Circumvention Agreement?
A non-circumvention agreement is a contract put into place to protect parties participating in a business deal. Non-circumvention agreements are signed to prevent a business from bypassing, or ‘circumventing’, another business and to guarantee full compensation will be received by the business doing work for or with another.
In many business deals, one party may introduce another party to its customers, vendors, or another high-value party during a transaction. By giving a party this exposure, a business may worry they will be ‘cut out’ of a deal. This is exactly why the non-circumvention agreement was created.
This agreement is often used in partner arrangements where one party may not show signs of trustworthiness or possibly it is just a precaution taken when someone new or unknown is being worked with.
There are agreements that are similar to a non-circumvention agreement which are listed below:
- Confidentiality Agreement - This agreement, also known as a non-disclosure agreement , is used when business partners agree that they will not share confidential information they learn during a transaction with anyone else.
- Noncompete Agreement – Noncompete agreements are useful when a business wants to make sure an employee or partner does not partner with a competitor and use proprietary information they learned to compete against their own business.
Read this article to learn more about non-circumvention and related agreements.
What’s Included in a Non-Circumvention Agreement
When writing a non-circumvention agreement, you will want to include the essential sections below:
- Involved Parties – Each party of the agreement should be included in the contract. If businesses, the party’s legal business name should be used.
- Compliance - A compliance section should be added to detail what rules and procedures each party needs to comply with and what will happen if they do not.
- Duration – Clearly state the beginning and end dates of the agreement along with notes indicating what will happen when the contract ends. If any gaps are expected during the timeframe of the agreement, then that should be expressed.
- Confidentiality - This section should be detailed with the type of information that is to be kept confidential and out of reach from third parties. You will be able to refer to this later and use it to your advantage if confidential information is disclosed to a person or business outside of the agreement.
- Payments - All fees, commissions, or other forms of payment are to be listed in this section. It should be stated whether there is a standard set fee or if payments will vary depending on the time spent or work done.
- Liquidated Damages - You can use this section to describe what will be expected from the wrongful party if terms of the agreement are violated at any point. It is typical for these types of damages to be paid in the form of money at an amount agreed to based on the specific breach that was done.
- Non-Disclosure - This section almost mirrors the confidentiality part but it goes into further detail as to what information, secrets, contact information, and other private data cannot be shared with anybody not involved in the current business. If there is a specific timeframe for which this applies and the disclosure of some information will be permitted at some point in time then that should be added.
- Termination - A termination section should be included to describe what actions may justify the early termination of the agreement. If a termination will result in a reduction or total loss of payments then that also needs to be laid out.
- Applicable Laws - This part of the agreement should list the local, state, federal, and industry specific laws that apply to the business being conducted as well as the location. This will allow parties to understand what exact legal action can and will be taken if violations happen.
- Attorney Costs - If a legal action is taken then lawyer fees will need to be paid. This section should clearly state who will be responsible for attorney payments and if there is a specific cap on the amount.
Pros and Cons of a Non-Circumvention Agreement
Non-circumvention agreements are great tools to have when working with partners outside of your direct company or circle of partners. As with any contract though these agreements have good sides and potential bad sides. See below for details:
Pros of Non-Circumvention Agreements
- It is guaranteed that personal or confidential information cannot be released outside of or used against the business.
- There is legal assurance that if a violation occurs the party that broke the agreement can be sued and may be demanded to pay money for damages.
- Promised payments per the agreement are required to be made to each party who performed work responsibly even if there is some sort of minor dispute.
Cons of Non-Circumvention Agreements
- The party being restricted may be subject to a long-time constraint that might prevent the ability to work in similar areas of business even when the agreement ends.
- Although there are sections in the agreement requiring parties to keep information confidential and not to trade secrets, it can be difficult to control their business actions once the assignment is complete and even while it is still active.
- An excellently drafted non-circumvention agreement is required to ensure all necessary sections and details are included and useful for the future. This can ultimately take up a lot of time and money to get it done right by a legal professional.
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Are Non-Circumvention Agreements Legally Binding?
Yes, a non-circumvention contract is a legally binding agreement. This type of agreement guarantees that a party who has been wronged by a breach can sue another business partner.
There are several sections in these agreements that represent legal requirements and what as well as where legal action will be taken if it comes down to that.
Brokers and Non-Circumvention Agreements
Brokers act on behalf of their clients and may be perceived to not do much in certain business deals. For this reason, they are susceptible to instances of circumvention. Due to the small role agents may play in a business transaction they safeguard themselves and their clients by putting a non-circumvention agreement into place.
A partnership becomes a joint venture when three or more parties come together to carry out business. When brokers enter into a joint venture it is done with the intention of being paid commissions or some other form of award for services performed. A non-circumvention agreement will benefit you as a broker in this scenario by guaranteeing your payment is received once your work is done.
Read this article on non-circumvention agreements and brokers.
Getting Help With a Non-Circumvention Agreement
Lawyers that handle business contract needs are well suited to assist you in drafting a non-circumvention agreement. If you need help today, post a project in ContractsCounsel’s marketplace to get bids from vetted lawyers for your project.
Meet some of our Non-Circumvention Agreement Lawyers
William L Foster has been practicing law since 2006 as an attorney associate for a large litigation firm in Denver, Colorado. His experience includes drafting business contracts, organizational filings, and settlement agreements.
Terry Brennan is an experienced corporate, intellectual property and emerging company transactions attorney who has been a partner at two national Wall Street law firms and a trusted corporate counsel. He focuses on providing practical, cost-efficient and creative legal advice to entrepreneurs, established enterprises and investors for business, corporate finance, intellectual property and technology transactions. As a partner at prominent law firms, Terry's work centered around financing, mergers and acquisitions, joint ventures, securities transactions, outsourcing and structuring of business entities to protect, license, finance and commercialize technology, manufacturing, digital media, intellectual property, entertainment and financial assets. As the General Counsel of IBAX Healthcare Systems, Terry was responsible for all legal and related business matters including health information systems licensing agreements, merger and acquisitions, product development and regulatory issues, contract administration, and litigation. Terry is a graduate of the Georgetown University Law Center, where he was an Editor of the law review. He is active in a number of economic development, entrepreneurial accelerators, veterans and civic organizations in Florida and New York.
I'm a Washington-licensed lawyer specializing in trademark practice and with an extensive trademark education and academic background. I currently work with domestic and international businesses seeking trademark protection in the U.S. by conducting trademark searches, providing legal advice, submitting USPTO applications, and preparing responses to office actions. I'm passionate about trademark law and always looking forward to helping small and medium businesses promote their value by having a registered federal trademark. If you have questions or concerns about trademark/copyright/IP licensing and require legal advice, feel free to contact me so we can have a first chat.
Mr. Pomeranz serves as the principal of Pomeranz Law PLLC, a boutique law firm representing clients across myriad industries and verticals. Before founding the firm, Mr. Pomeranz served as Senior Vice President, Legal & Compliance and General Counsel of Mortgage Connect, LP in 2017. Mr. Pomeranz also served as Counsel, Transactions for Altisource Portfolio Solutions S.A. (NASDAQ: ASPS) beginning in 2013, and was based in the company’s C-Suite in Luxembourg City, Luxembourg. Mr. Pomeranz began his career with Mainline Information Systems, Inc. as an in-house attorney.
I have 10 years experience providing general counsel, in the form practical and timely legal advice, under strict deadlines to individuals and various business unit stakeholders, balancing commercial needs with legal concerns at large corporations and start-ups. I am skilled at reviewing, analyzing, drafting and negotiating commercial and government contracts globally for the procurement and sale of services and goods. I also help clients ensure compliance with regulations (including data privacy), laws and contractual obligations and protect, enforce and exploit intellectual property rights and support in the development of IP strategy. I am a Certified Information Privacy Professional/United States (CIPP/US) licensed by the IAPP - International Association of Privacy Professionals.
Over 15 year experience drafting, reviewing and negotiating contracts both as in-house counsel and in law firms, including my own law firm.
Rinky S. Parwani began her career practicing law in Beverly Hills, California handling high profile complex litigation and entertainment law matters. Later, her practice turned transactional to Lake Tahoe, California with a focus on business startups, trademarks, real estate resort development and government law. After leaving California, she also served as in-house counsel for a major lending corporation headquartered in Des Moines, Iowa as well as a Senior Vice President of Compliance for a fortune 500 mortgage operation in Dallas, Texas prior to opening Parwani Law, P.A. in Tampa, Florida. She has represented various sophisticated individual, government and corporate clients and counseled in a variety of litigation and corporate matters throughout her career. Ms. Parwani also has prior experience with state and federal consumer lending laws for unsecured credit cards, revolving credit, secured loans, retail credit, sales finance and mortgage loans. She also has served as a special magistrate and legal counsel for numerous Florida County Value Adjustment Boards. Her practice varies significantly from unique federal and state litigation cases to transactional matters. Born and raised in Des Moines, Iowa, Ms. Parwani worked in private accounting for several years prior to law school. Her background includes a Certified Public Accountant (CPA) certificate from Iowa (currently the license is inactive) and a Certified Management Accountant (CMA) designation (currently the designation is inactive). Ms. Parwani or the firm is currently a member of the following organizations: Hillsborough County Bar Association, American Bar Association, Tampa Bay Bankruptcy Bar Association, National Association of Consumer Bankruptcy Attorneys, and the American Immigration Lawyers Association. She is a Fellow of the American Bar Association. Ms. Parwani is a frequent volunteer for Fox Channel 13 Tampa Bay Ask-A-Lawyer. She has published an article entitled "Advising Your Client in Foreclosure" in the Stetson Law Review, Volume 41, No. 3, Spring 2012 Foreclosure Symposium Edition. She is a frequent continuing legal education speaker and has also taught bankruptcy seminars for the American Bar Association and Amstar Litigation. She was commissioned by the Governor of Kentucky as a Kentucky Colonel. In addition, she teaches Immigration Law, Bankruptcy Law and Legal Research and Writing as an adjunct faculty instructor at the Hillsborough Community College Ybor campus in the paralegal studies program.