Key Takeaways

  • An NCND (Non-Circumvention/Non-Disclosure Agreement) protects intermediaries from being bypassed and ensures confidential business information remains secure.
  • The agreement typically includes two parts: Part A (special conditions) and Part B (standard ICC clauses).
  • Intermediary services can vary from simple introductions to full negotiation and contract execution support.
  • Exclusivity, customer protection, and non-compete clauses are critical elements that should be clearly defined.
  • NCNDs are commonly used in international trade and often follow the ICC Model for occasional intermediary contracts.
  • The agreement’s enforceability depends on clarity, jurisdiction, and the inclusion of specific terms such as dispute resolution mechanisms.

An NCND, also called a non-circumvention/non-disclosure agreement, is used in the early stages of a business agreement. It is commonly used when the buyer and seller aren't familiar with each other but have been connected by a broker or middleman to make a transaction. An NCND agreement makes sure that the brokers or intermediaries aren't left out of the transaction. In other words, it is an agreement to protect the broker in case the buyer and seller want to pursue the deal but leave the broker out of it.

Many trade agreements follow a standard chain, with the product moving from the seller to a broker to another broker and then to the buyer. NCNDs protect the middle brokers so that they aren't cut out of the deal and so that information about the other groups involved in the trade process isn't passed to outside parties. NCNDs are valid for a specific length of time, which is generally two years.

There are two parts of an NCND agreement:

  • Part A, which includes special conditions that establish what is unique about this agreement. This section must be completed by each party.
  • Part B, which includes general conditions and other provisions that are standard for all NCND agreements. These clauses follow the ICC General Conditions for Non-Circumvention and Non-Disclosure Agreements.

Both parts are required to create a valid NCND that must be agreed to by all parties involved.

Intermediary Services

Establishing the services to be provided by the intermediary is an important part of an NCND. One service that the intermediary can provide is communicating information. This clause is useful for an intermediary whose business involves sharing information because it allows them to communicate but limits what they can share. Simple communication can include the names of potential customers, basic information about a deal, or a service that doesn't bring direct contact from the intermediary to a third party.

If the intermediary is going to be more active, an alternative is to allow them the service of getting into contact with a third party. With this clause, the intermediary agrees to establish contact between the third party and the counterpart. Both sides can decide if the contact should be solely for a specific deal or for general potential business opportunities.

If an intermediary is allowed to offer assistance in contract negotiation, the intermediary is obligated to help the counterpart during the negotiation process until the contract is over.The intermediary can also be granted allowance to give assistance during the performance of the contract. This clause allows the intermediary to help the counterpart with issues that may arise while the contract is in action.

Scope and Flexibility of Intermediary Roles

The role of an intermediary in an NCND agreement can be tailored to the specific needs of the parties involved. Beyond sharing basic deal information, intermediaries can be empowered with a range of responsibilities:

  • Passive Role: Sharing non-confidential information such as market opportunities or generic introductions without direct involvement in transactions.
  • Active Role: Facilitating introductions and negotiations between third parties, and being an ongoing point of contact throughout the deal lifecycle.
  • Contract Performance Monitoring: Intermediaries may support the implementation of contracts by monitoring compliance, assisting in dispute resolution, and ensuring that all terms are fulfilled properly.

The ICC Model Occasional Intermediary Contract provides frameworks for defining these roles, emphasizing flexibility and clarity to avoid future disputes.

Intermediary's Right to Customer Protection

The counterpart who appoints an intermediary typically allows him exclusivity with the business he is promoting. The standard practice for NCNDs is to not allow the intermediary exclusivity around the promotional activity being performed. An example of this is if a manufacturer hires an intermediary to find customers in a particular geographic region. The manufacturer would typically assume that the intermediary doesn't have exclusivity and is allowed to hire other intermediaries to make direct contact with potential customers.

In the case that the intermediary is tasked with promoting a specific deal with a third party, there is typically a clause that allows the intermediary to be the exclusive middleman for that deal.Customer protection is given to an intermediary, which allows it to have certain rights and protections regarding future business with the third party.

Duration and Territorial Limitations of Protection

Customer protection clauses in an NCND should clearly define the duration of protection (commonly two years) and the territorial scope in which the intermediary’s rights apply. Without clear boundaries, enforcing protections becomes more challenging. Standard practices include:

  • Time-limited Exclusivity: Often tied to the life of a particular transaction or a set number of months/years.
  • Geographic Scope: Restricting protection to a specific market or territory, such as a country or region where the intermediary operates.

Clearly defining these terms ensures fair treatment for all parties and prevents unintended overlap or disputes with other intermediaries or agents.

Undertaking Not to Compete

It is also important for the NCND to state if the intermediary is allowed to act for the counterpart's competitors. If this is not allowed, it should also state what the intermediary needs to do to avoid this from happening.

A typically NCND offers two alternatives:

  • The intermediary agrees to a non-competition clause, or
  • The intermediary is free to act for competitors

Unless all parties agree on the intermediary's non-competition status, the agreement defaults to the rule stated in the general conditions. That clause says that the intermediary is obligated to not act for a counterpart's competitors unless it has been given an exclusive right to a certain type of business.

Legal Enforceability and Dispute Resolution in NCNDs

To enhance enforceability, an NCND should include specific language on dispute resolution, applicable law, and jurisdiction. These provisions ensure that if disagreements arise, there is a predetermined legal pathway to resolve them:

  • Jurisdiction Clause: States which country’s laws govern the agreement.
  • Arbitration or Mediation Clause: Outlines whether disputes will be resolved through court litigation, arbitration, or mediation.
  • Severability Clause: Ensures that if one clause is found unenforceable, the rest of the agreement remains intact.

The International Chamber of Commerce (ICC) recommends including standardized clauses based on global legal norms, which helps improve acceptance and enforceability across borders.

Importance of Confidentiality in NCND Agreements

A cornerstone of any NCND agreement is its confidentiality component. The parties agree not to disclose sensitive information shared during the course of their relationship. This may include:

  • Business models and pricing strategies
  • Customer and supplier lists
  • Trade secrets or proprietary methodologies
  • Draft contracts or offer terms

Violations of the non-disclosure clause can lead to reputational damage, financial loss, or legal action. Including penalty clauses for breaches and clarifying what information is considered confidential helps reinforce the seriousness of the obligation.

Frequently Asked Questions

What does NCND stand for? NCND stands for Non-Circumvention/Non-Disclosure Agreement, which protects intermediaries and ensures confidentiality between parties in a business deal.

How long does an NCND agreement usually last? Most NCNDs are valid for two years, though the duration can be adjusted depending on the deal or jurisdiction.

Is an NCND legally enforceable? Yes, if the terms are clearly defined and mutually agreed upon, especially when they include jurisdiction and dispute resolution clauses.

Can an intermediary act for competitors under an NCND? Only if permitted in the agreement. Otherwise, they are generally restricted unless they have exclusive rights.

Where can I get help drafting an NCND agreement? You can find experienced business attorneys on UpCounsel who specialize in drafting and reviewing NCND agreements.

If you need help with an NCND, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.