Agree to agree

December 20, 2007 9:17 AM

Help me find the right non compete, non disclosure agreement.

We have a client that is asking for specific work which we have found from an outside source. We would like to make sure this outside source does not go after our client directly. What is the appropriate agreement to present?

There aren't any trade secrets or any major pieces of information involved other than our own business plan and workflow.

Ive found non solicitation agreements, different non compete agreements, and non disclosure of business plans.... which one is best for us?

posted by paulinsanjuan to law & government (13 comments total)

Am I understanding that you want to give your client a piece of work from an outside source and, if the outside source decides to sue someone, your client is in the clear? If so, you don't want any of those, you want an indemnification agreement. Your question is a bit unclear, bt it doesn't seem to involve disclosure or competition at all -- am I missing something? IAAL, IANYL.
posted by The Bellman at 9:21 AM on December 20, 2007

Our client has asked us for specific work. We are contracting an outside source to complete this work. Essentially, we are the middlemen in the process. We dont want this outside source to approach our client directly (thereby cutting us out of the process). Would a non compete agreement give us some legal backing if they tried to pitch our client directly?
posted by paulinsanjuan at 9:31 AM on December 20, 2007

What's going to keep your client from cutting you out of the process? You are also going to need a clause in your contract with them otherwise you may find your client discovering very quickly that you are superfluous and costing them money.
posted by Pollomacho at 9:39 AM on December 20, 2007

If it is worth it to you to protect this particular arrangement, then it is worth it to you to open your wallet and consult an attorney in your location. Non-compete agreements are a completely different animal from non-disclosure agreements, and both are enforced differently in different jurisdictions. Without knowing where you are, no one can give you any reliable information, and any advice you may get here is worth exactly what you paid for it.

As an aside, I can tell you that being unwilling to get legal help in crafting an agreement at the beginning can really bite one in the butt if it ever results in litigation.
posted by ambrosia at 9:44 AM on December 20, 2007

The specific term you're looking for is "non-solicitation", which typically says that neither party is allowed to do any business with the clients (and usually employees) of the other without written permission. Consult your lawyer.
posted by Caviar at 10:09 AM on December 20, 2007

What you are really talking about is an exclusivity provision, that your client can only get those services from you, and not anyone else. It would be uncommon for a service recipient to accept such a provision. You don't know what you are doing and you need advice from someone who does. IAAL, IANYL, get a lawyer.
posted by iknowizbirfmark at 10:10 AM on December 20, 2007

IANAL but have been in similar situations. You are looking for a non-compete agreement which tells your subcontractor that in order to get the business with you they must refrain from soliciting and doing business your existing clients for a period of (usually) 18 months max.

Your customer obviously doesn't know about your subcontractor or they would contact them directly. They assume you will provide them the service/product at the agreed upon price. Sub-contractor price mark-ups are part of doing business and I'm sure your customer knows this.

What I have done, is to find online what looks line an appropriate agreement, tailor it to my specific situation, and run it by my attorney for review. My lawyer hasn't had problems with this approach.
You should though, be aware of this.
posted by Xurando at 10:44 AM on December 20, 2007

What you are really talking about is an exclusivity provision, that your client can only get those services from you, and not anyone else.

This is not correct. What you want is a standard clause that prevents your customers from hiring your employees or subcontractors (and your employees or subcontractors from working for your clients).

Also, the cases where non-compete clauses have been found to cause hardship apply only to employees in the general case - in other words, you can't prevent someone from working in their field. That restriction does not apply to preventing someone you subcontract to from working directly for a specific client of yours.

Again, you really need to talk to a lawyer.
posted by Caviar at 10:55 AM on December 20, 2007

I agree with Xurando that a common way this is done in the US and, in my experience, Canada is with a non-compete signed with the subcontractor. It could be a clause in the larger subcontracting agreement (which you should definitely have).

However, I've avoided using non-competes with my subs by not giving them the client's contact info. The sub can do the work without dealing directly with the client. Since the client is usually a big corporation, the sub would have to do a lot of detective work to find my contact. They would then have to woo the contact, because I already have a relationship with them. Finally, since my subs provide only part of the service my clients want, the client is unlikely to replace me with the sub.

In my opinion, this approach is preferable to a non-compete. I hated being under non-competes when I was a contractor and would negotiate them down to almost nothing. Now that I'm hiring contractors, my position is that I shouldn't really claim the right to tell another business who they can do business with.

My standard contract for subcontractors does contain a non-disclosure clause, along with stuff about liability, copyright, etc. You should certainly be using a contract with your sub. I no longer remember where my contract came from. It was likely a Nolo publication plus a review by a lawyer.
posted by PatoPata at 11:07 AM on December 20, 2007

Are you really attempting to craft a legal document which you have already identified as really important by asking strangers on the internet and not talking to a lawyer?

This is an insanely bad idea.

Contact a lawyer and ignore everything else you have read in this thread. (Pro-tip: a lot of it is really wrong).
posted by dios at 12:01 PM on December 20, 2007 [1 favorite]

Nthing talk to a lawyer.
posted by aerotive at 12:13 PM on December 20, 2007

If you're just googling for agreements, odds are you're not finding things specific to your state. The enforceability of various clauses in non-compete / non-solicitation agreements can vary greatly from state to state. Some of these issues trip up even experienced lawyers.

Worst-case scenario is that you use language from a sample contract that might be a perfectly valid restriction in South Dakota but is unenforceable in Arkansas. Oops!

I suspect that a lot of your negotiating leverage depends on whether your contract with the "outside source" is already negotiated and signed.

IAAL but IANYL and TINLA. So, there.
posted by QuantumMeruit at 12:48 PM on December 20, 2007

What you are really talking about is an exclusivity provision, that your client can only get those services from you, and not anyone else.

This is not correct. What you want is a standard clause that prevents your customers from hiring your employees or subcontractors (and your employees or subcontractors from working for your clients).

Fair enough, but the enforceability issues are much greater with non-solicitation in the jurisdictions with which I am familiar. If you're going to go that way, you might as well just use exclusivity, since if they can find the current subcontracted service provider they can find someone else to do it entirely.
posted by iknowizbirfmark at 3:07 PM on December 20, 2007