What is a Non-Circumvention/Non-Disclosure Agreement?
A non-circumvention/non-disclosure agreement (NCND) is commonly used in the early stages of a business transaction to protect the interests of intermediaries, often referred to as “middlemen,” who facilitate domestic and international trade. These individuals or entities play a critical role by introducing parties, promoting business opportunities, assisting with negotiations, and offering various business-related services. NCND agreements ensure that these middlemen are not bypassed and that sensitive information remains confidential. By preventing the circumvention of established business relationships and safeguarding proprietary details, NCND agreements serve as essential tools for protecting all parties involved and advancing broader business objectives.
When Should I Draft an NCND Agreement?
NCND agreements are often used to allow parties to engage in initial discussions or explore potential transactions. They also require the signing parties to formally acknowledge the role and contributions of the middleman.
One alternative to drafting a comprehensive NCND agreement is to limit the middleman’s involvement to the basic provision of information, which can be done by supplying the names and contact details of potential customers directly, rather than through the middleman. In such cases, the middleman may be granted a limited form of exclusivity related to the business opportunity they are promoting.
Another option is to allow the middleman greater participation, including access to communications between the buyer and seller. This could involve implementing the middleman into contract negotiations, where they may assist the buyer in shaping terms and conditions. Finally, the middleman’s role can also be extended to supporting the execution of the contract itself, helping to address and resolve any issues that may arise during the transaction process.
What Provisions Are Included in an NCND Agreement?
NCND agreements typically consist of two main components: Special Conditions and General Conditions. Special Conditions outline the specific and unique terms applicable to the particular agreement and are usually completed by the parties involved. General Conditions establish the standard contractual terms that commonly apply across most NCND agreements.
A critical element of an NCND agreement is the non-disclosure provision, which prohibits the parties from disclosing confidential information obtained through the course of the agreement. Such information may include customer identities, business opportunities, pricing structures, marketing strategies, commercial plans, and other sensitive data.
In addition, a non-compete provision is often included. The extent of this restriction is determined by mutual agreement between the parties. They may choose to prohibit the middleman from working with competitors, or alternatively, permit them to act freely in other business dealings. If a non-compete clause is not expressly included, the default rule typically establishes that the middleman is restricted from assisting competitors of the counterpart, but only to the extent that the middleman has been granted an exclusive right to promote or manage the business opportunity.
What is the Difference Between a Non-Compete and a Non-Circumvention Agreement?
A non-compete agreement and a non-circumvention agreement serve different purposes in protecting business interests. A non-compete agreement is designed to prevent an individual from engaging in activities that would compete with a specific company. This typically includes prohibiting the individual from working for a competitor, starting a competing business, or otherwise operating within the same market for a defined period and specific geographic area. In contrast, a non-circumvention agreement ensures that the middleman is not bypassed in a business transaction. It prohibits a party from directly contacting or conducting business with third parties, such as clients, suppliers, or contacts, who were introduced by the middleman.
In short, a non-compete protects against competition, while a non-circumvention protects against being cut out of a deal. When combined in an NCND agreement, these provisions work together to safeguard both the confidentiality of sensitive information and the integrity of business relationships, ensuring that middlemen and other involved parties are not bypassed or exploited.
If you have questions or want to explore how to implement NCND agreements into your business relations, do not hesitate to contact one of our experienced business attorneys at EPGD Business Law in Miami, Florida. Call us at (786) 837-6787 or email us to schedule a consultation.
EPGD Business Law is located in beautiful Coral Gables. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.
