Non-Circumvention Agreement Plc

Goodrich was born out of the desire of Treasurer, a cash management company, to acquire a smart secure business. The Treasurer hired Goodrich as a financial advisor, and Vector, a private equity firm, agreed to fund the agreement. The three parties entered into an NDA containing a “use clause” prohibiting Vector from using confidential information for purposes other than the “proposed commercial agreement” which the court interpreted as a cash settlement transaction involving the three parties. The NDA also contained a “non-circumvention clause” prohibiting Vector from avoiding payment of Goodrich`s consulting fees upon the conclusion of such an agreement. Confidentiality agreements (NDA) are essential elements of public and private processes for selling mergers and acquisitions, as they facilitate the flow of business information from the objective to the purchaser for dual diligence purposes, while protecting proprietary and competitive information from the target audience. In particular, where the potential purchaser and objective are active in the same sector, the objective may be to ensure that the information provided to the purchaser for duel purposes is used for purposes other than those that may be inappropriate. An important provision in almost all NOAs is therefore a usage clause that limits how the party receiving confidential information can use that information. DISCLAIMER: This agreement may not be appropriate for your circumstances and we advise you to get legal advice before using it. Jonathan Lea Limited disclaims any responsibility for events arising from your use of this document. Goodrich sued Vector for violating the NDA and claimed that Vector had used Goodrich`s confidential information (the list of potential targets) for prohibited purposes (other than investigating a transaction involving Goodrich and the Treasurer). Goodrich submitted that it was deprived of a US$3.5 million consulting fee for its services. In dismissing the application to dismiss the vector, Rakoff J. found that Goodrich had plausibly asserted that Vector had violated the NDA`s use clause.

The court also found that Goodrich plausibly asserted that Vector`s actions were an attempt to avoid Goodrich`s charge, which violated the “non-circumvention clause,” which put Vector in damages to the extent of the consulting costs.

© 2007-2012 Building Owners and Managers Association of California (BOMA Cal)