Buying, running or starting a business can be a complicated process. One way to protect your business is through a non-solicitation agreement. In this article, we’ll explain what a non-solicitation agreement is and how it might assist your business.
What is a Non-Solicitation Agreement?
Put simply, a non-solicitation agreement is an agreement between two parties. It will restrict one party from misusing the business’ contacts. For instance, this could include luring the business’ clients and/or customers away from the business or using them for personal gain.
There are many different variations to this agreement. For example, the agreement could take the form of preventing an employee from using a client list for personal gain. Alternatively, it could also prevent the seller of a business from contacting clients after the sale of a business. In each example, the business is protecting the value of its contacts list.
Example
Jennifer is selling a local tax accounting franchise to Megan. As a condition of sale, Megan requests that Jennifer sign a non-solicitation agreement. The agreement states that post-sale Jennifer is not allowed to contact any person on the business’ contact list. As a result, Megan has piece of mind that Jennifer will not take all the business’ clients after selling it to her.
How Does this Differ to a Non-Compete Agreement
Generally, non-compete agreements are concerned with preventing employees or previous owners of a business setting up competing business. This restriction may use geographic and/or time restraints depending on the individual circumstances. For example, an employer may negotiate a non-compete agreement with an employee which states that they cannot set up a business of similar nature within 10 kilometres for a period of 5 years after they leave the business.
Whilst a non-compete agreement protects a business in a similar manner to a non-solicitation agreement, the protection they provide is different. Whilst the former protects a business’ contacts and customer databases, the latter protects the business from the residual knowledge and expertise of its employees.
Summary
In summary, a non-solicitation agreement is one way a business can protect its business interests. Generally, it prevents employees from using a business’ contacts and customers for personal purposes. Above all, if you think an agreement of this kind might be of interest to your business it is best to seek professional legal advice.
