06 Jan Common Questions About Business Contracts, Part I

Happy New Year!  In our last series of blogs, Edwards Law addressed common questions that clients often have concerning claims for breach of contract, fraud and partnership disputes.  This week we begin a new series of blogs concerning business contracts – what they generally look like, what you should include in every business contract and what you should not agree to include in your business contracts.

What Should My Business Contract Look Like?

The specific content of your business contract will depend on the nature of your business and what concerns you have in your business, so that those concerns are adequately addressed when working with clients and employees.

However, there are certain types of provisions that should be included in any good employee contract.  Here is an outline for a simple employee non-compete/non-solicitation contract.  Please note this a very cursory sample contract and does not address the “General Provisions” that should be included in every business contract such as Governing Law, Waiver, Entire Agreement, Severability or an Attorney’s Fee Provision (more on these in the next few blogs):

Non-compete, Customer and Employee Non-Solicitation, and Confidentiality Agreement

This Agreement is made by and between [name of employer], a [state] corporation (Company), and [name of employee] (Employee). In consideration of Employee’s employment by the Company and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Employee agrees as follows:

1. Background. [Explain here what business the Company is engaged in; that the Company owns, controls and has exclusive access to Confidential and Proprietary Information (as defined in Paragraph 2 below); and that the Employee acknowledges that by executing this Agreement and solely by reason of Employee’s employment by the Company, Employee will come into possession of, have knowledge of and will contribute to Confidential and Proprietary Information.]
2. Definition of “confidential and proprietary information.” [Specific to your industry and should include any and all confidential and/or proprietary knowledge, data or information of the Company like tangible and intangible information relating to items such as formulations, products, processes, know-how, designs, formulas, methods, developmental or experimental work.  This section should also include any information described above that the Company obtains from its clients or any other third party and that the Company treats as confidential, whether or not owned or developed by the Company.]
3. Non-disclosure of confidential and proprietary information. [Explain in this section that at all times during Employee’s employment and for a defined period of time thereafter, Employee will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Company’s Confidential and Proprietary Information (defined in Section 2 above), except [describe exceptions]; Employee will not improperly use or disclose any confidential information or trade secrets from prior employers and will not bring prior employer works unto the premises; and how and what the Employee is to return to the Company upon termination, including cooperating with the Company in completing and signing the Company’s termination statement. This section should also inform the Employee that the Company will not interfere with their NLRA or reporting rights, or any legal rights they may have to disclose trade secrets under the Trade Secrets Act.]
4. Non-solicitation. [Explain here what non-solicitation covenants Employee agrees to during his/her employment with the Company and for what period of time Employee agrees to abide by covenants after employment is terminated.  You should include provisions including Customer non-solicitation and Employee non-solicitation.  This section should also include a provision which states that the  Employee shall not take any act with the intent to disrupt, impair or interfere with the business of the Company in any way, as well as a section that states the Employee warrants that the restrictions in Section 4 will not prevent Employee from earning a living, and that they are necessary to protect the confidential information and/or trade secrets of Company.]
5. Non-competition provisions. [Explain here that Employee will not set up, join or become employed by any enterprise which competes with Company.  Be careful to set a reasonable time frame and geographic radius/territory/restriction for the non-compete restrictions, as well a specific definition for what business would be a competitor for the Company.  This section should also confirm that Employee is not prevented from purchasing or owning a passive investment of  less than a small percentage of any class of the publicly traded securities of any corporation.]
6. Protectable interests. [Explain here that Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to protect the Company’s interests, and that the Company has valid interests to protect (including, without limitation, relationships with customers, goodwill, the protection of Confidential and Proprietary Information, protection from unfair competition, and other protectable interests).]
7. No conflicting obligation. [Explain here that Employee represents his/her performance of all the terms of this Agreement and his/her position as an employee of the Company does not and will not breach any agreement to keep in confidence information acquired by Employee prior to employment.]
8. Legal and equitable remedies. [This section gives the Company the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any of its other rights.]

Signatures

/s/ Mary Jane, as employee of Company

/s/ John Smith, as owner of Company

This sample contract cannot serve as legal advice and should not be used without the advice of counsel.  Contact Edwards Law today for a complimentary initial 20-minute consultation about your business contract needs.

Victoria Edwards is a skilled general business and litigation attorney with 16 years of experience litigating for and advising large banking and financial institutions, insurance/oil & gas/mining companies, construction companies, and various small businesses on complex business matters, including business contracts formation and interpretation, and novel bankruptcy issues.

With this substantial experience, Ms. Edwards now works with small businesses and entrepreneurs to anticipate potential issues with their business matters; draft business contracts; as well as to initiate and manage commercial and civil liability disputes concerning business contracts, commercial law matters, breach of contract and business torts, and unfair competition/unfair business practices/defamation issues.

Ms. Edwards is admitted to practice law in the state courts of Colorado, California, New York, and New Jersey.  She is also admitted to practice in the United States District Court for the District of New Jersey, the Southern and Eastern Districts of New York, the District of Colorado, the United States Bankruptcy Court for the District of Colorado, all of the District Courts and Bankruptcy Courts of California, and the United States Court of Appeals for the Eighth, Ninth, and Tenth Circuits.