Non Circumvention Clause: 11 Trustworthy Business Security Essentials

Hi! Welcome to the Non-Circumvention Nutshell!

In this post, we’ll crack open the nutshell of non-circumvention clauses together!

Circumvention Definition and Etymology

Circumvent‘ comes from Latin ‘circumvenire‘, and circumventing means ‘to go around‘ or ‘to bypass‘, so this gives us a glimpse of what we’re getting around today 😉

Jokes apart, this is serious business.

So, let’s get started!


Define Non Circumvention Clause

It belongs to a group of commercial clauses known as restrictive covenants that limit one or all parties involved to protect competitive advantages and ensure fair dealing between parties involved.

The initial results show how non-circumvention clauses in trade agreements are crucial in ensuring fair trade practices and safeguarding domestic industries.

What is the Core Purpose of the Non Circumvention Clause?

It ensures that all parties in a business agreement stick to the agreed-upon methods of communication and transactions to prevent any party from accessing opportunities or information directly without going through the other party. Consider it a watchdog that protects your business deals.

Common Confusion

Non-circumvention clauses are often confused with exclusivity and non-compete clauses, while each of the three covenants is restrictive in nature but serves different purposes.

  • An exclusivity clause stops someone from doing similar deals with other companies.
  • A non-compete clause stops one party from competing against the other.
  • A non-circumvention clause stops a party from going around the other to do business with a third party that was commonly introduced or is known as a result of joint efforts.

Here’s a simplified version of a non-circumvention clause for clarity. Party A cannot contact or work with any entities or parties introduced by Party B without Party B’s written permission.

Drafting a Non Circumvention Clause

Key Considerations

  • It is essential to establish a balance between protecting your business interests and not unduly restricting the other party’s ability to conduct business.
  • Non-circumvention clauses that are overly broad or restrictive may be deemed unenforceable and may burden your business relationships. So, it’s important not to use these rules in the wrong way. They shouldn’t be used to avoid fair competition or impose unfair terms on the other party.

Contracts are more than just formal papers; they determine how you and the other person will work together. Therefore, they should be drafted in a way that respects the interests of everyone.

Non Circumvent Language to Be Wary Of

A clause that stops the other party from doing a similar business to yours may be too restrictive and not enforceable. Whereas, if the language is too specific, it may not fully protect your business interests, or if it just protects your proprietary technology, it may not prevent the other party from developing a similar technology using the knowledge gained from working with you.

So, choose your objective and words carefully, and avoid using vague language in your non-circumvention clause to ensure its enforceability.

Non Circumvention Clause Template

“The Parties agree not to circumvent or attempt to circumvent this Agreement by any means or through any person, firm, corporation, entity, or third party, for the purpose of negotiation or entering into a transaction with any entity introduced directly or indirectly by one Party to another. This includes, but is not limited to, direct contact, engagement, or negotiation with such an entity without the express written consent of the Introducing Party.”

Remember that this is a very simple example. Make sure your non-circumvention clause is tailored to your needs and meets all legal requirements.

No Circumvention Clause Examples

Before executing a contract, it’s important to consult your lawyer to make sure it is complete and legally valid.

11 Essentials of a Non Circumvention Agreement

1. Identification

You need to clearly identify the parties involved; this includes all related entities like parent companies, subsidiaries, or affiliates, not just the primary parties. Covering related entities is important because they can be used to indirectly bypass the agreement.

2. Scope and Compliance

These are the obligations and responsibilities of each party under the agreement. To comply means that any party shouldn’t do anything that goes against the agreement; all parties need to stick to the planned business workflow and ask for permission before dealing with new third parties.

3. Contract Period

The agreement’s duration and renewal terms are important. This clause must balance the party’s interests and business activities without being too restrictive. The agreement’s duration can last from 1 to 5 years, depending on the business relationship.

4. Confidentiality

These measures protect sensitive business information from being shared with unauthorized parties during the business relationship. Clearly state guidelines for using the other party’s business information to prevent misunderstandings and breaches.

5. Payment Terms

Make sure they are clearly outlined, including the fee or commission structure. Depending on the business deal, it could be a flat fee, a portion of the profit, or a mix of both.

6. Liquidated Damages

If someone breaks a contract, this clause specifies the amount of money they have to pay the other party. Including this clause can help resolve disputes faster and avoid the challenge of proving damages in court.

7. Non-Disclosure (NDA)

This helps to keep confidential information protected.

8. Termination

This explains a breach and how either party can end the agreement.

9. Laws and Choice of Law

This clause in the agreement opts for a specific jurisdiction that affects how the provisions are interpreted, enforced, and what remedies are available.

10. Attorney Fees

Clarifying who pays for attorney fees during a dispute prevents future disagreements. It’s important to be mindful of legal costs in complex cases.

Example: “In the event of a dispute arising out of or related to this Agreement, including the alleged breach, termination, validity, interpretation, and/or enforceability of this Agreement, or threats to break this Agreement, the Prevailing Party shall be entitled to recover its reasonable attorneys’ fees and other costs incurred in that dispute, in addition to any other relief it may be awarded. The term “Prevailing Party” and the amount of reasonable attorney fees to be paid to the Prevailing Party will be decided by the court or courts, including any appellate courts, in which the matter is tried, heard, or decided.”

11. Amendments

If the agreement needs to be modified in the future, all parties must agree in writing, and this amendment shall supersede all previous verbal or written agreements.

Implementation and use of Non Circumvention Clauses

Joint Ventures

In JVs, parties bring different things to the table, like intellectual property, industry connections, expertise, or other resources. A non-circumvention clause prevents one party from using unique resources without involving the other party.

Example: If two companies form a joint venture to develop a new technology and one company contributes a unique algorithm while the other contributes market access, a non-circumvention clause would prevent the latter from using the algorithm to develop similar technology outside of the joint venture.

Supply Chain

This clause in supply agreements prevents a party from going directly to the other party’s suppliers and bypassing the agreed-upon structures of the agreement. This ensures that the person who brought in the supplier gets the credit and benefits they deserve.

Distribution Arrangements

Similarly, within distribution agreements, these clauses protect distributors from manufacturers going directly to customers that the distributors introduced. This ensures that distributors are fairly paid for expanding the market’s reach.

Brokers and Agents

Sometimes brokers and agents connect two parties who then continue to do business without them, cutting them out of potential commissions or fees. Non-circumvention agreements ensure that they receive their commissions or fees even if the parties continue the business relationship independently.

Example: A real estate broker can use a non-circumvention agreement to make sure they get their commission if the seller and buyer complete the transaction without the broker’s help.

Independent Contractors

Companies use non-circumvention agreements to protect their interests while working with independent contractors because they share sensitive information with contractors to complete projects. This clause prevents the contractor from using the acquired knowledge to compete with the company or sharing it with the company’s competitors.

Residual Knowledge Provisions

A residual knowledge provision comes into play when an individual wants to use information remembered from a past job. Companies use non-circumvention agreements to safeguard their proprietary information. But it’s important to balance residual knowledge provisions with an individual’s right to use their acquired skills and knowledge from their employment or contract.

Unilateral vs. Mutual Non Circumvention

These clauses can be unilateral or mutual.

  • A unilateral non-circumvention clause means one party must not bypass the other party. This clause is used when only one party shares confidential information.
  • A mutual non-circumvention clause binds both parties to the agreement. It’s used when both parties want to protect their trade secrets to prevent unfair advantage by either party.

The decision to use a unilateral or mutual clause depends on the situation and the relationship between the parties involved.

Pros and Cons of a Non Circumvention Provision


  • Protection of Business Interests: It prevents other parties from misusing a company’s private information, trade secrets, customer relationships, and other crucial business interests.
  • Encourages Collaboration: It promotes trust and openness between parties by preventing them from going behind each other’s backs to gain an advantage. This leads to more productive collaborations and business relationships.
  • Deters Unfair Practices: Contractual penalties discourage unfair practices and promote fair competition.


  • Limitations on Business Activities: Restrictions can limit a party’s ability to seek new opportunities and partnerships.
  • Enforceability Concerns: It can sometimes be difficult to enforce due to differences in jurisdiction and the overly broad language used in the agreement.

What Makes a Non Circumvention Clause Unenforceable?

  • Overbreadth: A court may not enforce a clause if it is too broad in scope or duration, i.e., if it restricts more activities than needed to protect a party’s business interests or lasts longer than necessary.
  • Unfairness: Unfair clauses are not enforceable if they significantly disadvantage one party. While making the agreement, if the weaker party had no say in it, chances are it would be highly unfair.
  • Violation of Public Policy: If the clause goes against public policy, like laws against restricting trade or employment.

Are Non Circumvention Clauses Legally Binding?

Consequences of Breach?

It can be severe and often includes financial penalties and potential reputational damage. If a contract has been breached, the party should gather all the evidence and seek legal counsel to evaluate their options, which may include negotiation, mediation, arbitration, or litigation.

Remedies in the Event of a Breach

More often than not, remedies for common breaches are already provided in the contracts, but if not, courts can offer solutions for breaches. When someone breaches a contract, courts may order them to pay money as compensation to make up for the other party’s losses, which is referred to as the damages.

Otherwise, a court may order injunctive relief to stop the breaching behavior, and other remedies may include returning the non-breaching party to their original position or requiring the breaching party to fulfill their obligations. It all depends on how complex the case is.


Make the best use of non circumvention clauses to promote fairness, protect interests, and build stronger business partnerships.

Over to You

As we wrap up this Non-Circumvention Nutshell, I would now love to hear from you!

Have you used non-circumvention clauses in your business deals? What challenges did you face, and how did you overcome them?

Share your insights by leaving a comment below right now!

or feel free to ask any questions or voice any concerns.

I’m excited to hear back from you.

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