When is a non-solicitation agreement invalid and unenforceable?

I own a small company, Company B. We provide services to Company A, who in turn has clients. My company provides a set of services to Company A’s clients through them essentially as a sub-contractor. The client could hire us directly for those services and not go through Company A. However, in the agreement between us (Company A and Company B), Company A wanted a non-solicitation clause. I have seen non-solicitation clauses in employment contracts, but never between two companies. Is this legally valid and enforceable? What if one of the clients contacts us and asks to hire us directly?

Asked on November 10, 2011 under Business Law, Virginia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

A non-solicitation clause between two companies is completely valid and enforceable. It's not even that uncommon, in circumstances such as you describe, where the services are ostensibly provided by A, but A has subcontracted them to B; in that case, A will not want B to steal its clients away.

As for what happens if a client initiates the contact and approaches you--that depends on:

1) What exactly does the clause say? Does it bar you from doing any work for these clients, or just from "soliciting" or seeking work?

2) The facts (and also company A's view of them)--say the clause bars solicitation--that is, it bars you from reaching out to them. You claim the client instead reached out to you. Is that true? Will company A believe it? If they don't believe it, they may bring a legal action, in which case you'd then have to defend your self and show that the client contacted you first.


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