Florida is a great place for doing business. Unlike other U.S. jurisdictions, our state offers many advantages to local companies.
One notable benefit is the possibility to sign a non circumvention agreement (also spelled “non-circumvention agreement”) to ensure that you get fair compensation for referrals and business opportunities you create for other companies or individuals.
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What Is a Non Circumvention Agreement in Florida? Our Definition
Before defining non circumvention agreements, we need to answer the question, “What does non circumvention mean?”
Non Circumvention Definition
In this context, “non circumvention” means not bypassing or circumventing parties involved in a business deal.
Non Circumvention Agreement Definition
A non circumvention agreement is a legally binding contract between two or more parties in a business relationship that seeks to prevent one or more of the parties from being bypassed and left without full compensation in business transactions.
When Is a Non Circumvent Clause Typically Used?
What is a non circumvention clause used for?
Let us consider a practical example. Imagine that a hair salon owner is good friends with the owner of a local nail bar. Because the two businesses have a good relationship and are not direct competitors, the hair salon owner often refers clients to the nail bar.
However, one day, the hair salon owner realizes they have not heard from several of their regulars in quite some time.
After a little asking around, they find out that the nail bar has expanded its services and now offers hair styling. The nail bar owner took advantage of the referrals and stole the hair salon’s customers without any compensation.
Non circumvention agreements seek to prevent these types of situations. In cases where one or more businesses operate in the same industry and provide each other with business opportunities, a non circumvention agreement safeguards the parties from being cut out from potential transactions and being left without remuneration.
A Broker Non Circumvention Agreement
Brokers and agents act on behalf of their clients in various business transactions. While they perform valuable services and help protect their clients’ interests, some clients do not perceive them as doing much. As a result, they may try to circumvent the broker or agent, cutting them out of the transaction and not paying them fair compensation.
A broker non circumvention agreement helps safeguard brokers and agents and ensures that they will be paid commissions or another form of compensation for services rendered.
Non Circumvention Agreement Real Estate Applications
Non circumvention agreements are often used to ensure that buyers and sellers of real estate do not conspire to exclude the real estate broker or agent from the transaction to avoid paying broker fees.
Non Circumvention Agreements for Independent Contractors
Independent contractors often have access to confidential, sensitive, or proprietary business information of the companies they work with. This creates potential conflicts of interest where a contractor has other clients in the same industry.
Non circumvention agreements help ensure that contractors do not abuse their position of trust and confidence by using their clients’ business information to procure financial benefits without consent and adequate compensation.
How a Non Circumvention Provision Interacts with Other Provisions & Agreements
Non circumvention clauses are not standalone. They are often paired with the following provisions or agreements:
NDNC Agreement (Non Disclosure Non Circumvention Agreement)
An NDNC agreement (also known as an “NDA non circumvention agreement” or a “non circumvention non disclosure agreement”) is a Florida non disclosure agreement with a non circumvention clause.
NCND agreement format varies depending on the parties’ needs but almost invariably includes restrictions on the use or disclosure of confidential business information. Penalties for breaching a non disclosure agreement include financial compensation and injunctions prohibiting the breaching conduct.
Greater Overall Knowledge Provisions
Greater overall knowledge provisions make a distinction between:
- Specific facts about a company or a transaction; and
- General knowledge about the industry in which that company operates
These clauses accept that the parties to a non circumvention agreement will inevitably increase their understanding of the industry in the course of the business relationship. Such general information is therefore not covered by NDA or non circumvent clauses.
Residual Knowledge Provisions
Residual knowledge clauses allow parties to an agreement to use “residual” confidential information in their unaided memory for purposes unrelated to the transaction at hand.
Non Compete Agreements
Florida non compete agreements protect confidential business information by preventing other parties from engaging in conduct such as:
- Starting a competing business
- Working for competitors
- Soliciting clients or employees of the company
- Selling business information
Non compete agreements may or may not include a non circumvention clause. A Cueto Law Group non compete attorney can advise you on what to include in your non compete agreement to best protect your interests.
Confidentiality Agreements
Confidentiality agreements prohibit one party from disclosing another party’s confidential information to third parties. This is similar to a nondisclosure agreement.
What Should Be Included in a Non Circumvention Clause?
When drafting a non circumvention clause within a larger contract such as an asset purchase agreement, for example, you typically want to include the following sections:
Parties
Each party to the agreement should be explicitly named. If the parties are legal entities rather than individuals, the contract must include their full business names.
Duration
The document must clearly state the start and end dates of the agreement, any potential gaps during the timeframe, and what will happen when the agreement ends.
Confidentiality
Include the type of information that should be kept confidential.
Non Disclosure
This section is similar to the confidentiality clause but goes into greater detail about what information may not be disclosed to third parties: trade secrets, customer data, manufacturing processes, etc.
Payments
List all fees, commissions, and other forms of payment for services rendered under the agreement. You should specify whether there is a set fee or if payments will vary, and, if so, on what basis.
Liquidated Damages
Use this section to specify what will be expected from the breaching party. Typically, they are expected to pay liquidated damages. The amount will vary depending on the nature of the breach.
Applicable Laws
Specify which local, state, federal, and industry-specific laws govern the agreement.
Compliance
A compliance section lists the rules and procedures each party must comply with and what will happen if they do not.
Attorney Costs
This section should state who is responsible for attorney fees and if there is a limit on the amount in the event of legal action.
Termination
A termination section specifies when and how the agreement may be terminated before the end date and if this would result in a reduction or total loss of payments.
Non Circumvent Language to Be Wary Of
Tiny variations in the wording of non circumvent clauses could unlock new business opportunities or lock you out of potential sources of revenue.
For instance, it is not the same if a non circumvent provision allows the use of confidential information in transactions “with,” “between,” or “involving” Company X. In one case, Company X must be the subject of the transaction. In other cases, it will also have to be involved in the negotiations.
The article before the word “transaction” and even the capitalization of the word are also significant. If a non circumvent clause allows the use of confidential information in connection with “the” transaction or “Transaction,” that likely means the specific transaction at hand or a transaction specifically defined elsewhere in the contract. If the non circumvent clause allows the use of information in connection with “a” transaction related to the other party, you have more leeway.
Non Circumvention Agreement Template
Looking for a sample non circumvention clause? Download our non circumvent agreement template to get a better idea of what these contracts entail.
Non circumvention agreement PDF | Non circumvention agreement doc (Word) |
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Need Help with a Florida Non Circumvent Agreement?
An experienced contract attorney from the Cueto Law Group can help you draft a non circumvent agreement that will safeguard your interests and ensure the continued growth of your business.
Contact us today for a free consultation.
Final Thoughts on Non Circumvent Agreements
We do not recommend copy-pasting a generic non circumvent agreement sample from the Internet. These documents are complex and should be carefully tailored to your needs. Even tiny differences in the wording can make or break your future success.
Non Circumvent Agreements FAQs
Here are the answers to questions we often get in our practice:
What Is a Non-Circumvention Clause in an NDA?
A non circumvention clause is a legally binding provision in a non disclosure or another agreement between two or more parties in a business relationship. Non circumvention clauses seek to prevent one or more parties from being cut out and left without compensation in future transactions.
Are Non Circumvention Agreements Enforceable?
Yes, non circumvention agreements are legally binding and enforceable when properly drafted. The wronged party can sue the breaching party and seek financial compensation in the form of damages or a court-mandated injunction prohibiting the breaching conduct. The exact compensation will depend on the wording of the non circumvention clause.
Is Non-Circumvention the Same as Exclusivity?
Non-circumvention is not the same as exclusivity. Exclusivity clauses, aka non compete provisions, prevent one party to a contract from soliciting or negotiating with a third party within a specified timeframe. Non-circumvention clauses prevent one or more parties to a contract from being bypassed in transactions with third parties.
What Does NCND Stand For?
NCND stands for non-circumvention, non disclosure agreement. An NCND agreement prevents one or more parties to the contract from being bypassed and left without compensation in business transactions with other parties (non circumvention) and restricts the use or disclosure of confidential business information (non disclosure).
