Non-circumvention: Overview, definition and examples
What is non-circumvention?
A non-circumvention clause is a contractual agreement that prevents one party from bypassing the other to deal directly with a third party. It’s commonly used in business arrangements to ensure that a party doesn’t exploit the relationship or contacts introduced during the deal to cut the other party out of the process.
For example, if a company introduces a potential client or partner to a broker, a non-circumvention clause would prevent the client or partner from working directly with the company without involving the broker.
Why is non-circumvention important?
Non-circumvention is important because it protects the time, effort, and connections of the party making the introductions. It ensures that businesses or individuals don’t lose out on potential benefits, commissions, or partnerships because the other party bypasses them.
For businesses, these clauses are especially useful in industries like consulting, brokerage, or joint ventures where relationships and introductions are key. A well-drafted non-circumvention clause helps maintain trust and fairness in collaborations.
Understanding non-circumvention through an example
Imagine a consulting firm connects a manufacturer with a supplier as part of a supply chain optimization project. The consulting firm includes a non-circumvention clause in the agreement, ensuring the manufacturer cannot approach the supplier directly for future deals without involving the firm. If the manufacturer tries to cut out the consulting firm and negotiate directly with the supplier, they would be violating the clause.
In another case, a broker introduces an investor to a business owner looking for funding. A non-circumvention clause ensures that the business owner cannot sidestep the broker to finalize a deal directly with the investor.
An example of a non-circumvention clause
Here’s how a non-circumvention clause might look in a contract:
“The Parties agree that neither Party shall circumvent, bypass, or avoid the other Party to negotiate or enter into any transaction with third parties introduced by the other Party, without the prior written consent of the introducing Party.”
Conclusion
A non-circumvention clause is a critical safeguard in business relationships, ensuring that the party facilitating introductions or connections is not unfairly cut out of the deal. It promotes trust and ensures that all parties benefit from the relationship as intended.
By including clear terms in a non-circumvention clause, businesses can protect their interests, preserve valuable connections, and foster fair collaborations. It’s a practical way to safeguard efforts in industries where partnerships and introductions drive success.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.