What is a Non-Circumvention Agreement?

A Non-Circumvention Agreement is a legal contract used when one or more parties plan to share confidential information. Its purpose is to stop the receiving party from using that information to cut out the disclosing party and complete a deal directy.

To make this more concrete, here is an analogy.

A gem-mining company — let’s call it Opalz, LLC — wants to hire a drilling firm that supplies specialised equipment and trained operators. Let’s call them Digging Dirt, Inc.

To bring Digging Dirt on board, Opalz must share sensitive information: the drilling location and the property owner who hired them to mine the gems.

By signing a Non-Circumvention Agreement, Digging Dirt agrees not to contact that property owner directly. In other words, they cannot cut out Opalz and offer their services independently.

How Are Non-Circumvention Agreements Commonly Used?

Most frequently, parties combine a non-disclosure agreement (NDA) and a non-circumvention clause into a single document, commonly called an NCNDA. At its core, an NCNDA is a standard NDA with a non-circumvention clause added.

Key provisions — including the non-circumvention clause — survive the agreement’s expiration or early termination for a defined period.

NCNDAs are most common when the confidential information being shared relates to a transaction that has not yet closed. They give both parties a way to exchange critical information freely — without putting future revenue at risk.

What Makes a Strong Non-Circumvention Clause?

A strong non-circumvention clause protects the disclosing party against a range of bad acts. It should prohibit the recipient from:

• Going around the disclosing party to complete the transaction directly
• Using the information to sabotage or undercut the pending deal
• Using the information to harm the disclosing party’s business or reputation
• Using the information to poach opportunities or employees

These protections must cover not just the recipient itself, but also its affiliates, directors, employees, and agents.

The clause must also prevent the recipient and all related parties from asking a third party to act on their behalf. In short, it closes every loophole.

Thinking of It Like a Prenuptial Agreement

It may feel strange to enter an agreement on the assumption that the other party will do exactly what they agreed not to. But that is simply part of doing business.

When you already know the other party, they may push you to skip the lawyers and just share. Resist that. Going unprotected and regretting it later is far worse.

Think of it like a prenuptial agreement. Asking a partner to sign one can feel uncomfortable — like a signal you do not trust them. But the logic is sound.

You may need to reassure them that you never expect to need it. But the logic is sound: not buying travel insurance for a holiday booked during hurricane season is a gamble. Pre-planning for the worst is the best way to avoid bad outcomes.

A strong clause also addresses whether the recipient may contact the parties named in the shared information. If permitted, the recipient must document all contact and copy the disclosing party on every email and discussion.

A Real-World Example

Imagine a PPE manufacturer with gloves to sell. They hire Joe to find buyers. While prospecting, Joe meets Mark — a broker who represents hospitals looking to buy PPE.

To work together, Joe and Mark need to share confidential information about both the seller and the buyers. However, each has something to protect.

Joe does not want Mark contacting his seller directly and cutting him out of the transaction. Mark does not want Joe approaching his hospital clients without permission.

As a result, the two enter into a mutual NCNDA with a well-drafted non-circumvention clause that covers both concerns.

Should the Non-Circumvention Agreement Include a Non-Competition Provision?

If the recipient will have access to employees or contractors who hold key business knowledge, consider adding a non-competition provision.

This provision stops the other party from recruiting your employees — directly or indirectly — to leave and join them.

Summary

Non-circumvention clauses are an important part of any well-drafted NDA where the business relationship involves sharing sensitive deal information.

Without one, you are exposed. The recipient could use your information to seize deals you built, costing you revenue and growth opportunities.

If you plan to enter a joint venture or working relationship where confidential deal information will flow to a third party, broker, or consultant, an NCNDA is essential. It builds a safe and effective foundation from the start.