Non-Circumvention Clause

Critical Warning

Non-circumvention clauses are NOT standard NDA provisions. They go far beyond confidentiality protection and create significant business restrictions. If you see a non-circumvention clause in an NDA, carefully evaluate whether it's appropriate for your situation. In most cases, it should be negotiated out or significantly limited.

What Non-Circumvention Protects

A non-circumvention clause protects the value of business introductions. When Party A introduces Party B to a valuable contact (customer, supplier, investor, partner), Party B agrees not to cut Party A out and deal directly with that contact.

The core concept: If I introduce you to my supplier, you cannot go behind my back to buy directly from them at a lower price. The introduction has value, and non-circumvention protects that value.

However, non-circumvention clauses are frequently abused by parties trying to lock in business relationships that shouldn't require such protection. Many NDAs include non-circumvention language that has nothing to do with confidentiality.

When Non-Circumvention May Be Appropriate

Business Broker Relationships

When a broker introduces parties to a deal and earns commission only on closing, protecting against circumvention is reasonable.

International Trade Agents

Import/export agents who introduce foreign suppliers or buyers have legitimate circumvention concerns.

Investment Introductions

Finders who introduce companies to investors often need protection against the company going direct.

Standard Business Discussions

Most partnership, vendor, or customer discussions do not warrant non-circumvention restrictions.

Technology Evaluations

Reviewing a potential vendor's technology should not come with business relationship restrictions.

Employment Discussions

Non-circumvention has no place in NDAs related to potential employment or consulting arrangements.

Sample Clause Language

Introducer-Friendly: Maximum protection for the party making introductions. Broader scope, longer duration, and compensation rights for circumvention.

NON-CIRCUMVENTION (a) Covenant Not to Circumvent. For a period of five (5) years from the date of this Agreement, the Recipient agrees that it shall not, directly or indirectly: (i) Contact, solicit, negotiate with, or enter into any agreement with any person, entity, or business opportunity introduced by the Discloser; (ii) Interfere with or divert any business relationship between the Discloser and any introduced party; (iii) Use any Confidential Information to identify, pursue, or exploit contacts or opportunities introduced by the Discloser; or (iv) Disclose the identity of introduced parties to any third party without prior written consent. (b) Introduced Parties. The Discloser shall provide written notice identifying each Introduced Party. All contacts disclosed during meetings, calls, or correspondence shall be deemed Introduced Parties unless the Recipient can demonstrate a pre-existing documented relationship. (c) Compensation for Circumvention. In the event of any circumvention, the Recipient shall pay to the Discloser a finder's fee equal to fifteen percent (15%) of the gross revenue generated from any circumvented transaction during the first three (3) years of such transaction. (d) Injunctive Relief. The Recipient acknowledges that circumvention would cause irreparable harm not adequately compensable by monetary damages. The Discloser shall be entitled to specific performance and injunctive relief without the need to post bond. (e) Survival. This Section shall survive termination of this Agreement for the full five (5) year period.

Balanced: Reasonable protection with pre-existing relationship carveouts, time limits, and requirements for specific identification of protected contacts.

NON-CIRCUMVENTION (a) Limited Restriction. During the term of this Agreement and for a period of two (2) years thereafter, neither party shall directly contact, solicit, or enter into any business arrangement with any third party that was specifically introduced in writing by the other party ("Introduced Contact") for the purpose of circumventing the introducing party with respect to the specific transaction described in such writing. (b) Identification Requirement. A third party shall only be considered an Introduced Contact if the introducing party provides written notice specifically identifying such party and the protected transaction within thirty (30) days of the introduction. (c) Pre-Existing Relationships. This restriction shall not apply to any third party with whom the receiving party had a documented business relationship prior to the written introduction, regardless of whether such relationship was disclosed. (d) Carveouts. Nothing in this Section shall: (i) Restrict either party from engaging in their ordinary course of business; (ii) Prevent responding to unsolicited inquiries from third parties; (iii) Apply to contacts initiated by the third party; or (iv) Restrict competitive business activities not involving the specific Introduced Contacts. (e) Notice and Cure. Before claiming circumvention, the allegedly aggrieved party shall provide written notice and a thirty (30) day opportunity to cure.

Recipient-Friendly: Narrowest restrictions with short duration, extensive carveouts, and automatic expiration. Use this version if you must accept non-circumvention.

NON-CIRCUMVENTION (a) Limited Covenant. During the term of this Agreement only, the Recipient agrees not to directly solicit any third party that is: (i) specifically identified in writing by the Discloser as a protected contact within ten (10) business days of introduction; and (ii) a party with whom the Recipient has no prior relationship of any kind. (b) Extensive Carveouts. This covenant shall NOT apply to: (i) Any person or entity with whom the Recipient has any existing relationship, whether business or personal; (ii) Any contact initiated by the third party, regardless of how the third party learned of the Recipient; (iii) Any publicly known or publicly available business opportunity; (iv) Any person identified through independent research or networking; (v) Normal competitive business activities; (vi) Contacts made through Recipient's employees who were not personally involved in receiving protected contact information; or (vii) Any transaction in an industry sector where the Recipient has pre-existing business operations. (c) Automatic Expiration. This covenant shall automatically terminate upon the earlier of: (i) Twelve (12) months from the date of this Agreement; (ii) Termination of discussions between the parties for any reason; or (iii) Completion of the transaction contemplated by this Agreement. (d) No Implied Restrictions. Nothing in this Agreement shall create any non-compete, non-solicitation, exclusivity, or other restrictive covenant except as expressly stated in this Section. The Recipient retains all rights to conduct business with any party not specifically protected hereunder.

Duration Guidelines

Non-circumvention restrictions must have reasonable time limits to be enforceable. Courts are skeptical of perpetual or excessively long restrictions as potential restraints on trade.

12 months: Appropriate for most business discussions and short-term opportunities
2 years: Standard for broker and finder arrangements with identifiable transactions
3-5 years: Only appropriate for significant introductions with substantial value (major investments, long-term supply relationships)
Perpetual: Almost always unenforceable and should be rejected

The duration should be proportionate to the value of the introduction and the time needed to monetize the relationship. A simple customer introduction requires shorter protection than an introduction to a manufacturing partner.