Legal Question in Business Law in California

Re: Non Circuvention Agreements

I would say it is largely untrue.

I just skimmed a bunch of cases dealing with non-circumvention agreements. None of them questioned the validity of the contracts as such, although in some cases the party attempting to enforce the agreement lost for other reasons.

Obviously, "Non Circumvention Agreement" plastered across the top of a contract won't determine whether it is enforceable or not. The real determining factor is what the parties are agreeing to do, or not do.

However an agreement is labeled, it will not be enforced if the subject matter or objectives are contrary to public policy. Frequently-seen examples of unenforceable contracts because of public policy, or statutes proclaiming public policy, are non-compete agreements in which someone is restrained from engaging in a lawful business, trade or occupation, or price-fixing (anticompetitive) agreements.

A court would examine the real substance of the non-circumvention agreement and enforce it or not on the basis of whether the person seeking to enforce it was trying to produce an unfair result or a result in conflict with public policy.

A frequent use of non-circumvent agreements is where someone with knowledge of where to obtain scarce raw materials or products will offer to import and sell them to you, but only if you agree to buy only through the finder/supplier and not go direct to the source. I think such agreements can be enforced in California if carefully written, based on the fact that California allows "requirements" contracts in which X agrees to buy all the widgets he needs from Y. This would keep X from dealing directly with Z, Y's source.

Re: Non Circuvention Agreements

I would say it is largely untrue.

I just skimmed a bunch of cases dealing with non-circumvention agreements. None of them questioned the validity of the contracts as such, although in some cases the party attempting to enforce the agreement lost for other reasons.

Obviously, "Non Circumvention Agreement" plastered across the top of a contract won't determine whether it is enforceable or not. The real determining factor is what the parties are agreeing to do, or not do.

However an agreement is labeled, it will not be enforced if the subject matter or objectives are contrary to public policy. Frequently-seen examples of unenforceable contracts because of public policy, or statutes proclaiming public policy, are non-compete agreements in which someone is restrained from engaging in a lawful business, trade or occupation, or price-fixing (anticompetitive) agreements.

A court would examine the real substance of the non-circumvention agreement and enforce it or not on the basis of whether the person seeking to enforce it was trying to produce an unfair result or a result in conflict with public policy.

A frequent use of non-circumvent agreements is where someone with knowledge of where to obtain scarce raw materials or products will offer to import and sell them to you, but only if you agree to buy only through the finder/supplier and not go direct to the source. I think such agreements can be enforced in California if carefully written, based on the fact that California allows "requirements" contracts in which X agrees to buy all the widgets he needs from Y. This would keep X from dealing directly with Z, Y's source.