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NDA and Non-Circumvention Agreement: What Each Protects Before a Deal Begins

  • Todd Nurick
  • 2 days ago
  • 11 min read

Business attorney advising parties on an NDA and non-circumvention agreement before sharing information and introductions
Business attorney advising parties on an NDA and non-circumvention agreement before sharing information and introductions

A consultant introduces a manufacturer to a potential buyer. A founder shares pricing, customer information, financial projections, and a product roadmap with a possible business partner. Two companies discuss working together before either knows whether the relationship will go anywhere. Each situation requires some trust. None should require blind trust.


Clients often ask for a non-disclosure agreement, (NDA), before these conversations begin. That makes sense, but confidentiality may only address part of the concern. The other party could keep the information private while still using an introduction, supplier relationship, customer contact, or business opportunity to cut the introducing party out of the deal. A non-circumvention provision addresses that separate risk.


An NDA and Non-Circumvention Agreement can place both protections in the same document before the parties exchange sensitive information or make valuable introductions. The agreement should still reflect the specific relationship. A generic form that tries to protect every contact, every opportunity, and every piece of information forever may create more uncertainty than protection.


Todd Nurick of Nurick Law Group, LLC is a Pennsylvania and New York business attorney with approximately 30 years of civilian business law and litigation experience and a former Army officer. As Fractional General Counsel and Outside General Counsel, he helps businesses structure confidentiality agreements, non-circumvention provisions, commercial contracts, intellectual-property protections, strategic relationships, and the broader legal needs an internal legal department would ordinarily handle.


NDA and Non-Circumvention Agreement: why one document may need two protections

Confidentiality and non-circumvention protect different business interests. An NDA generally controls how protected information may be used and disclosed. A non-circumvention provision generally prevents a party from bypassing the person or company that introduced a contact, transaction, or opportunity.


The distinction matters because a recipient might honor the NDA and still cause the exact economic harm the disclosing party feared. Suppose a consultant introduces a supplier to a company that needs a particular product. The consultant provides pricing, quantities, contact information, logistics, and enough background for the parties to evaluate the transaction. The company never publishes or shares the information with anyone else. Instead, it contacts the supplier directly and completes the transaction without the consultant.


The information may have remained confidential. The introduction was still used to eliminate the person who created the opportunity.

A well-drafted combined agreement can address both concerns without pretending they are the same obligation.


NDA and Non-Circumvention Agreement in a simple business introduction

Consider three parties:

  • a consultant who identified the opportunity;

  • a manufacturer capable of supplying the product;

  • a buyer interested in purchasing it.


The consultant may need to tell the buyer who the manufacturer is before the buyer will spend time evaluating the deal. The manufacturer may need access to specifications, forecasts, customer requirements, or pricing information. The buyer may need assurance that its plans and requirements won’t be disclosed to competitors.


A mutual NDA may protect the information exchanged among the parties. The non-circumvention language can separately prohibit the buyer and manufacturer from dealing directly with one another on the protected opportunity without involving or compensating the consultant as agreed. That protection only works well when the agreement answers practical questions:

  • Who made the introduction?

  • Which contacts are protected?

  • What transaction or type of transaction is covered?

  • What conduct counts as circumvention?

  • How long does the restriction last?

  • What happens if the parties already knew one another?

  • Does the protection apply to affiliates, employees, agents, or related companies?

  • Is the introducing party entitled to a fee, continued participation, damages, or some other remedy?


Without those answers, the parties may sign the document and still disagree about nearly everything important.


When a standalone NDA may be enough

Not every business discussion needs a non-circumvention restriction.

A standalone NDA may be enough when the parties are evaluating a possible transaction and the principal concern is protecting sensitive information. That may include discussions involving:

  • financial information;

  • pricing or margins;

  • product specifications;

  • source code or technical information;

  • business plans;

  • customer data;

  • marketing strategy;

  • manufacturing processes;

  • proposed contract terms;

  • acquisition due diligence.


If neither party is introducing a valuable contact or creating an opportunity that could be pursued around it, non-circumvention language may add little. The confidentiality obligation can also appear as a clause in a broader agreement. Customer contracts, vendor agreements, consulting agreements, joint venture documents, employment agreements, acquisition agreements, and licensing arrangements often include their own confidentiality provisions.


The timing is important. Before a definitive agreement exists, a standalone NDA may be the only contract governing the parties’ discussions. Once the parties sign the larger agreement, they should decide whether the earlier NDA survives, is incorporated, or is superseded. A broad merger clause in the later contract can create an unintended argument that the earlier protection disappeared.


Mutual or one-way confidentiality depends on who is talking

A one-way NDA makes sense when only one party expects to disclose confidential information. A mutual NDA is usually more appropriate when both sides will share protected information. That often happens when companies are assessing a joint venture, strategic partnership, technology integration, acquisition, supply relationship, or other potential collaboration.


Calling the document “mutual” doesn’t necessarily make every provision fair. The definition of confidential information, permitted uses, access by representatives, security requirements, duration, remedies, and return/destruction obligations still need review.


The agreement should match the actual information flow. A party shouldn’t assume mutual language is automatically balanced simply because the same words apply to both sides.


What a useful confidentiality section should cover

The purpose of the exchange should be clear. “Evaluating a possible business relationship” may work in a straightforward situation. A more complex transaction may need a narrower description, particularly where the recipient could use the information in its existing business.


The permitted purpose controls what the recipient may do with the information. Confidentiality alone shouldn’t be treated as permission to use the information for unrelated projects, competitive analysis, product development, solicitation, or the recipient’s independent benefit. A practical confidentiality section will usually address:

  • the purpose of the disclosure;

  • what qualifies as confidential information;

  • oral, written, electronic, visual, and observed information;

  • information shared before the agreement was signed;

  • notes, analyses, summaries, and copies derived from the information;

  • the people who may receive it on a need-to-know basis;

  • the receiving party’s responsibility for its representatives;

  • the standard of care required to protect it;

  • prohibited use, disclosure, copying, or reverse engineering;

  • legally compelled disclosures;

  • notice of unauthorized access or disclosure;

  • return or destruction of the information;

  • ownership and the absence of any implied license;

  • the length of the confidentiality obligation;

  • the treatment of trade secrets;

  • available remedies.


Common exclusions generally cover information that was already lawfully known, becomes public without a breach, comes from an authorized third party, or is independently developed without using the protected information. Those exclusions matter. An NDA shouldn’t allow one party to claim ownership over information the other side already possessed or developed independently.


Trade secrets require more than an NDA

A confidentiality agreement can help demonstrate that a company took reasonable steps to protect its trade secrets. It doesn’t complete the job by itself. Federal and Pennsylvania trade-secret laws generally require the owner to take reasonable measures to preserve secrecy. Depending on the information and the business, those measures may include access controls, passwords, encryption, confidentiality markings, internal policies, employee/contractor agreements, secure data rooms, download restrictions, and records showing who received the information.


A company that labels everything confidential but gives unrestricted access to anyone who asks may have trouble proving later that it treated the information as a trade secret.

The agreement should also avoid giving ordinary confidential information and trade secrets the same expiration date without considering the consequences. Pricing and financial projections may become stale after several years. A trade secret may need protection for as long as it remains secret and economically valuable.


When confidentiality language governs employees, contractors, or consultants, the Defend Trade Secrets Act, (DTSA), also requires attention to statutory whistleblower-immunity notice provisions. The statute treats contractors and consultants as employees for that notice requirement.


A non-circumvention provision needs identifiable boundaries

The weakest non-circumvention language often sounds the strongest. A provision may prohibit a recipient from doing business with “any person or entity introduced directly or indirectly at any time” and cover “any transaction of any kind” for many years. That language may feel protective when it is signed, but it can leave the parties fighting over who was introduced, whether the recipient already knew the contact, which opportunity was protected, and how far the restriction was supposed to reach.

Specificity usually provides more useful protection.


The agreement can identify protected contacts in an exhibit, written notice, email confirmation, deal memorandum, or other record. The covered opportunity can be described by product, project, territory, customer, supplier, transaction, or defined purpose. A practical non-circumvention section should consider:

  • the protected contacts or categories of contacts;

  • the specific opportunity or transaction;

  • whether later introductions are added automatically or through written notice;

  • direct and indirect dealings;

  • conduct through affiliates, employees, agents, nominees, or related entities;

  • preexisting relationships;

  • independently sourced opportunities;

  • unsolicited approaches by the protected contact;

  • transactions outside the defined purpose;

  • the period of protection;

  • compensation or participation rights;

  • the evidence needed to establish a breach.


A written record of the introduction can prevent a later factual dispute. The email introducing the parties, the date of the meeting, the names of the participants, and the opportunity being discussed may become more important than pages of broad contractual language.


Non-circumvention is not the same as non-solicitation or noncompetition

A non-circumvention provision should protect the value of an introduction or opportunity. It shouldn’t automatically become a broad prohibition on competition, hiring, or doing business throughout an industry.


Non-solicitation and no-hire provisions raise their own legal and public-policy concerns. In Pittsburgh Logistics Systems, Inc. v. Beemac Trucking, LLC, the Pennsylvania Supreme Court refused to enforce a no-hire provision in a services contract where the affected employees hadn’t agreed to the restriction and the provision impaired their employment opportunities.


That decision doesn’t make properly drafted commercial non-circumvention provisions automatically unenforceable. It does show why counsel shouldn’t use a confidentiality agreement as a place to hide unrelated restraints.


If the parties also want customer non-solicitation, employee non-solicitation, exclusivity, standstill, or noncompetition provisions, those terms should be identified and analyzed separately.


When both protections belong in the same document

A combined agreement can make sense before the parties know whether they will enter a definitive contract. Common situations include:

  • business brokers and intermediaries introducing potential buyers or sellers;

  • consultants introducing customers, vendors, manufacturers, or financing sources;

  • companies evaluating a joint venture or strategic alliance;

  • distributors and suppliers exploring a new channel;

  • developers discussing a technology integration;

  • founders sharing a business opportunity with a potential partner;

  • investors, lenders, and transaction parties reviewing nonpublic information;

  • companies assessing licensing, manufacturing, or private-label arrangements.


The combined document can define the confidential information, the permitted purpose, and the protected business relationships in one place. The provisions should remain separate enough to understand. A breach of confidentiality may involve unauthorized disclosure or use of information. A breach of non-circumvention may involve completing or pursuing a protected transaction without the introducing party. The facts, damages, and remedies may differ.


The agreement should not force a deal that nobody has approved

Early business discussions don’t guarantee a transaction. The agreement should usually state that neither party must disclose information, continue negotiations, enter a partnership, form a joint venture, make an investment, purchase anything, or sign a definitive agreement. That protects both sides from an argument that the preliminary discussions themselves created a broader commitment.


The disclosing party may also disclaim warranties about the accuracy or completeness of preliminary information, particularly where financial projections, estimates, or incomplete due diligence are involved. Any binding representations can be reserved for the definitive agreement if the transaction proceeds.


The NDA/non-circumvention agreement protects the evaluation process. It shouldn’t become the transaction itself by accident.


Intellectual-property ownership needs separate attention

An NDA restricts use and disclosure. It doesn’t automatically transfer ownership of inventions, code, designs, content, improvements, or other work product. That distinction becomes important when the parties move from talking to collaborating.

If a consultant, developer, employee, designer, or potential partner begins creating work during the evaluation stage, the parties may need an inventions-assignment, work-product, licensing, or development agreement. Waiting until the product is built can produce an expensive ownership dispute.


The same applies to feedback. One party may want the right to use suggestions freely. The other may consider those suggestions part of its confidential business strategy. The agreement should not leave that question to implication.


Return and destruction provisions have practical limits

The disclosing party will usually want its information returned or destroyed when discussions end or upon request. That sounds simple until the information exists in email systems, cloud storage, automated backups, legal files, accounting records, and materials prepared by advisors.


The agreement should address whether archival copies may be retained for legal, regulatory, insurance, or backup purposes. Any retained material should remain subject to the confidentiality obligations. For particularly sensitive information, the disclosing party may request a written certification of destruction. The parties should still be realistic about what can actually be deleted from routine backup systems.


Remedies should be credible rather than "theatrical"

A contract can state that a party may seek injunctive relief for a breach or threatened breach. That language doesn’t guarantee that a court will issue an injunction. The party seeking relief will still need a viable claim, supporting evidence, and the required legal showing. The agreement should not promise that damages are impossible to calculate in one section while establishing a complete monetary remedy in another without considering how those provisions work together.


Attorney’s fees usually need to be addressed expressly if a party expects to recover them. Indemnification and liquidated damages also require careful drafting. A preset damages amount should reflect a reasonable effort to estimate difficult-to-measure loss rather than operate as a punishment.


For non-circumvention claims, the most useful damages provision may connect the remedy to the economics of the anticipated transaction: an agreed commission, percentage, fee, lost participation right, or other measurable benefit. The structure must still fit the applicable law and the actual deal.


What these agreements can’t guarantee

An NDA and Non-Circumvention Agreement can create contractual rights and clarify expectations. It can’t guarantee trustworthy behavior or eliminate the cost of enforcement. The recipient may ignore the agreement. The parties may disagree about the meaning of the protected opportunity. The disclosing party may struggle to prove that the recipient used its information or that an introduction caused the later transaction.


The document also can’t protect information that is already public, independently developed, lawfully obtained elsewhere, or so broadly described that nobody can tell what was supposed to remain confidential. The ideal documentation improves the position:

  • identify the purpose;

  • record the disclosures;

  • confirm introductions in writing;

  • limit access;

  • preserve drafts and communications;

  • use a secure data room where appropriate;

  • update the protected-contact list;

  • document when negotiations end;

  • avoid disclosing more than the recipient needs.


The agreement is one part of the protection. Business discipline supplies the rest.


Why Fractional General Counsel and Outside General Counsel should be involved early

Pre-business discussions often move quickly because the people involved are focused on the opportunity. Legal questions arise before anyone calls the relationship a deal. What can be shared? Who may see it? What happens to the information if the parties walk away? Can the recipient contact the introduced party directly? Who owns anything developed during the discussions? Does the later contract replace the NDA?

Fractional General Counsel and Outside General Counsel can address those questions without turning the first conversation into a major transaction.


The goal is to use the right level of protection for the opportunity: a short mutual NDA, a one-way confidentiality agreement, a confidentiality clause in a larger contract, a combined NDA/non-circumvention agreement, or a more detailed document where the contacts and economics justify it.


Conclusion

Business relationships often begin before the parties are ready for a full contract.

They still may need protection. An NDA protects confidential information and limits its use. A non-circumvention provision protects the value of an introduction, relationship, or business opportunity. When both risks are present, placing both protections in one document may be the cleanest approach.


The agreement should identify the purpose, information, people, opportunity, prohibited conduct, exceptions, duration, and remedies clearly enough that everyone understands the rules before valuable information or introductions change hands.

Todd Nurick and Nurick Law Group, LLC help businesses prepare and review confidentiality agreements, non-circumvention provisions, commercial contracts, and pre-transaction protections through Fractional General Counsel and Outside General Counsel support.


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Disclaimer: This article is for informational purposes only and isn't legal advice. Reading it doesn't create an attorney-client relationship. Todd Nurick and Nurick Law Group aren't your attorneys unless and until there is a fully executed written fee agreement with Todd Nurick or Nurick Law Group.

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