Non competition clause
Pragandh Ketkale
(Querist) 09 September 2015
This query is : Resolved
XIV. Business Partner shall not, directly or indirectly, develop, manufacture or distribute any products similar to or competitive with the Product in the Territory or elsewhere during the agreement period and Two(2) Years from Termination of Distributor/ agent relationship with “Company".
Non Competition clause is valid or not
Anirudh
(Expert) 09 September 2015
Please appreciate it is not the company unilaterally restricting anybody. BUT THE OTHER PARTY WILLINGLY AGREE TO SUCH A TERM IN THE CONTRACT. THEN SUCH A CLAUSE WILL BE BINDING.
Kumar Doab
(Expert) 09 September 2015
In case of Non Compete Clauses in cases of other than Employer-Employee relationship may be valid to some extent, however the entire set of documents/events/precedents should be looked into.
One option is that each company may open its Exclusive owned and operated store in each town where it wants to operate.
Other option is that it shall look for and allure others to be its Stockist/Distributor etc!
In the later case say a pharma distributor/stockist/CFA can't be in pharma distribution after the company or it initiates separation due to any reason?
It is such a simple thing to understand that the company drafts the contract that it wants to sign.
It is also simple to understand company can claim that the contract was signed by free will and no one can rescind the contract signed by it and company can approach court of law.
Assuming that it is say pharma sector that has distributor/stockist/CFA associations...........................that are formidable.......................does insertion of such a clause have any meaning or value...................It may not have a value even equal to the worth of paper on which it is written.
ON the contrary the company can be virtually shunted out of business.
If the law of the land, circumstances around such agreements do not permit such clauses or render these unconscionable/unreasonable/VOID then what is the use of inserting such clauses.
Kumar Doab
(Expert) 09 September 2015
This query is also posted at:
http://www.lawyersclubindia.com/forum/Non-competition-clause-126831.asp#.VfA0dH1-jMo
The wording of the query posted in Forum section is more elaborate.
If the wording of the query posted in Forum section is taken then I shall be tempted to post:NO!
Even if the counsels of the company that have drafted such agreement or have prompted the company to approach court of law.......................claim that the distributor has accepted the clause and it is binding....................it is likely to be rendered unconscionable/unreasonable/VOID.
The precedents may be looked into.
The there is a risk of reaction and action by the associations.
