Non-compete clauses or agreements prevent one of the contracting parties from competing with the other party in certain specified ways. It could, for example, restrict a distributor from acting as a distributor for competing products. Read Non-compete clauses for more information.
These types of restrictive covenants are generally designed to prevent a business from approaching the customers of another business in a bid to win their custom. In the case of a distributor, it may also be used to prevent solicitation of suppliers.
This is similar to a non-solicitation clause but goes a step further. As well as preventing any solicitation of customers, it also prohibits any dealings (eg even if a customer approaches the business which is the subject of a non-dealing clause, they still cannot trade with them).
Normally this would apply to a former employee who sets up a business and tries to poach another employee (ie induce them to leave their current employer and join them in their new venture). But this can equally apply to businesses which become heavily integrated with a client and decide they would like to take on a member of their staff.
These types of clauses are generally used where confidential information is exchanged. They prevent one party from going directly to the other party’s suppliers or clients, with the intention of bypassing (or circumventing) them and contracting directly with the business partners. For more information, read Non-circumvention clauses.
Confidentiality (in Scotland)
These types of restrictive covenants are generally designed to prevent an individual from divulging trade secrets or other confidential information to their new employer or a third party.