What is a Non Circumvention Agreement?

If you go into business with other people, whether in a partnership or some other business entity, the hope and assumption is that you are going into business with people you trust. That is, of course, not something to rely on—business agreements, contracts, bylaws, or management agreements are always vital in any business venture with other people.

But sometimes, we’re not sure we can trust those that we are doing business with. Or, we just have a sense that something could go wrong. That’s where a non-circumvention agreement comes in, and where it could provide you with a sense of security that you may not otherwise have.

Why Do You Need a Non Circumvention Agreement?

When multiple people go into business together, one (or more) may have a concern that they could be “left behind” by the others—especially when there may be an odd number of owners, and especially if some of the owners are closer than others. The “outside person” may want to make sure that the owners who know and trust each other, don’t leave that outside owner in the cold.

This may also be the case, where one party is “replaceable.” For example, if one party brings skills, knowledge, expertise, or something else, that others could do just as well. That party may want to make sure that the other owners don’t cut him out, and try to find others to do his or her work.

It also may be the case where someone’s job may be short term. For example, if your job in the joint venture is to set up financial records and accounting books, once that’s done, you could be shut out by the other partners or owners-your work for the business venture is technically done. Why not find a way to cut you out, and avoid paying you your profits from the business venture?  The non-circumvention agreement avoids that from happening.

Brokers and People Who Bring Others Together

Non-circumvention agreements are also used by brokers—that is, anybody whose job it is to “introduce people.” For example, if my job is to connect my business partners to others who can help them, and I make those introductions, after that happens, I could be shut out by the other owners.

Non Circumvention agreements may restrict the partners or owners from contacting people that the protected party “brings to the table,” or from using materials or trade secrets that the protected party brings. Non Circumvention agreements may prohibit contact or communication between the other partners or owners, and certain third persons, to avoid the direct communication between them from “freezing out” the party seeking protection.

Duties to Inform and be Included

Many agreements have agreements to inform, which will say that all partners or owners need to tell each other who they are contacting and when, and to be included in meetings or to be consulted in any contracts the business entity may enter into.

Let us help protect you in that new business venture. Call our West Palm Beach business attorneys at Pike & Lustig today.

Sources:

nolo.com/legal-encyclopedia/how-to-draft-a-non-circumvention-agreement.html#:~:text=The%20purpose%20of%20a%20non,for%20their%20labor%20or%20involvement.

upcounsel.com/non-circumvention-clause-definition