Contract terms often focus on what each party should do for the other. They may outline payment terms and delivery schedules for vendors, for example. Contracts also sometimes include provisions explaining what either party should not do.
Restrictive covenants in contracts impose prohibitions on certain activities. Non-compete agreements prevent one party from starting a competing business or working for a direct competitor of the other party signing the contract. Non-disclosure agreements help preserve confidentiality. Non-solicitation agreements help protect business relationships from poaching.
What types of contracts may need to include restrictive covenants?
1. Employment agreements
Employment contracts frequently contain restrictive covenants. The goal is to protect a company’s reputation and trade secrets. Requesting that employees limit future competition against an employer or keep information private is a common employment contract provision.
2. Partnership agreements
Those who are intending to do business with another party are vulnerable to unfair competition if their partner leaves the organization. Restrictive covenants addressing the solicitation of employees, direct competition and the disclosure of trade secrets can all help limit the exposure that comes from a business partnership.
3. Vendor and service provider contracts
Outside professionals and organizations providing retail goods, raw materials or specialized services may have access to insider information about how a company operates. Integrating restrictive covenants into contracts with these parties can prevent them from damaging an organization.
Creating enforceable restrictive covenants and valid contracts often requires the insight of an experienced legal professional. Business owners, entrepreneurs and executives can benefit from assistance creating new contracts, reviewing existing contracts and enforcing contracts if a breach occurs.