Non-Solicitation Agreement-Purpose and Elements

Non-Solicitation Agreement: Purpose and Elements

A non-solicitation agreement can either be a close within a master contract or a separate contract that forbids one party from soliciting the clients, suppliers, partners, and employees of another party for its own benefit or the benefit of a competitor.

Purpose of and Justification for Non-Solicitation Agreement

The concept is one of the three major restrictive covenants in contract law alongside the non-disclosure clause and non-compete agreement. Hence, it intends to protect the interest of a party involved in a particular agreement, deal, transaction, or arrangement.

Employment contracts typically contain this clause. However, it is also applicable in other written contracts to include service contracts with independent contractors or organizational service providers, authority to sell, and vendor agreements, among others.

A party is essentially barred from approaching a client or suppliers, as well as pirating employees or partners of another party for self-serving purposes while the agreement is enforced. It essentially restricts communications with these stakeholders.

The configuration of the agreement can either be unilateral, bilateral, or multilateral. Unilateral non-solicitation agreements are typical in employment contracts. Bilateral and multilateral configurations are useful in business-to-business arrangements or transactions.

Elements of an Enforceable Non-Solicitation Agreement

It is important to note that the legality of non-solicitation agreements depends on the jurisdiction. Some states in the United States prohibit employers from compelling their employees from signing one. Other states and countries allow their enforcement.

Remember that alignment with relevant laws or legal compatibility is one of the elements of an enforceable contract. When included as one of the clauses in a written contract and applied in a jurisdiction that prohibits its utilization, it is naturally non-binding.

However, in jurisdictions that permit its application, there are still restrictions that either effectively limit its scope of application or affects its enforceability. O be enforceable, the clause or agreement must satisfy the following requirement:

1. Valid Reason for the Prohibition

The party barring the other party from solicitation must provide a valid and compelling reason to do so. It must explicitly state how the agreement would protect its interest. It is not an implied contract. A vaguely written agreement could violate the standard of reasonableness.

2. Justification for the Contact List

Note that the agreement also bars the other party to exploiting the contact list of the other party for its own benefits. However, this other party must justify that its contact list is worth protecting and that it contains information available to the general public.

3. It Should Not Be Too Restrictive

The agreement should not contain suggestive wording that would prevent the other party from interfacing with an individual or organization that is part of the contact list of the other party. It essentially does not prevent communication with these stakeholders.

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