What Is Non Circumvention Clause Definition?
Non-circumvention clause definition is something you should know if you are planning to work with a party you cannot fully trust.3 min read updated on February 01, 2023
Updated August 13, 2020:
Non-circumvention clause definition is something you should know if you are planning to work with a party you cannot fully trust. Also known as a non-disclosure agreement, a non-circumvention agreement is a legally-binding agreement that is established to prevent a business from being bypassed or circumvented by other parties involved in a business deal. It ensures that the business will receive full compensation for its contribution. In the event that a non-circumvention agreement is breached, the non-breaching party can sue for damages.
What Is a Non-Circumvention Agreement?
A non-circumvention agreement serves the important purpose of protecting businesses from being taken advantage of. It prevents one or more parties in a business deal from being bypassed and deprived of full compensation for their efforts or involvement. In addition, such an agreement ensures that the intellectual property that a business discloses to another party during negotiations will not be disclosed to a third party. An unsure party can use a non-circumvention agreement to protect itself when it is entering into an agreement with a certain party for the first time or there is insufficient trust between the parties.
By signing a non-circumvention agreement, the restricted parties agree to refrain from conspiring with each other to circumvent or take advantage of the protected party in their dealings. This kind of agreement typically includes confidentiality and non-disclosure provisions to provide additional protection for your business. If the protected party's business contacts are shown to another party, the agreement ensures that the contacts will remain confidential and the recipient of the contact information will not bypass the protected party and engage directly with the contacts.
After all the parties sign the contract, any party who violates the terms of the agreement will be liable to pay a penalty equal to the amount the protected party would have received if the agreement had not been violated, or more in some cases. If a non-circumvention, non-disclosure agreement is breached, the breaching party can be sued for damages, forced to reimburse the innocent party for lost profits, and possibly held in contempt of court.
What Should a Non-Circumvention Agreement Include?
Term of Agreement
This section includes information related to the duration of the non-circumvention agreement, such as:
- The number of years the agreement will be valid from the date of signing
- The availability or unavailability of automatic renewal following the completion of the transactions
- The methods of handling term amendments
Contacts Deemed Valuable and Exclusive
In this section, you can explain the kind of valuable information that must be kept confidential between parties. This is one of the main reasons why the agreement is created in the first place, so you should be very specific.
Fee or Commission Agreements
List the terms of your commission and fee agreements. If you have standard fees for specific services, you can include more details. Otherwise, it is advisable that you leave it open so that you can make changes and come to an agreement with the other parties at a later date.
This section states the penalties that will apply if a party violates the terms of the agreement. It can be changed to suit your specific situation.
It is not absolutely necessary to include this clause in a non-circumvention agreement. However, you can do so if your business needs more protection from wrongful disclosure of confidential information that has a negative impact on your business.
Similar to the confidentiality clause, the non-disclosure clause states that the participating parties are not allowed to disclose any information related to your business, products, and ideas. You should include any information you wish to be held confidential in this section, such as intellectual property, trade secrets, customer information, and email addresses.
Choice of Law
This part states that the terms of the agreement comply with the laws of the state where you are conducting business.
In the event that a dispute over the agreement is brought before the court, the losing party will have to pay the legal expenses incurred.
This section lists the individuals or entities that are related to each participating party. You should include a provision requiring all parties to make sure that their agents, contractors, and employees comply with the agreement. Also, the document must be signed by all parties involved and amendments must be made in writing and signed by all parties.
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