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What is a NCND Non-Circumvention & Non-Disclosure Agreement?

The NCND Non-Circumvention & Non-Disclosure Agreement is intended to protect the rights of occasional intermediaries in international trade that provide certain services (e.g., promotion of business, putting into contact with third parties, assistance in the contract negotiations) and desire to be protected against the risk of being “circumvented” by the other party (i.e., its client) and, consequently, not being paid the commission for its services.

The NCND Agreement is divided into two parts:

Part A:  Special Conditions, setting out the terms that are special to a particular NCND  agreement, and which must be filled in by the parties according to their particular  needs, and;

Part B.  General Conditions, setting out standard terms common to all contracts incorporating the ICC General Conditions for Non-circumvention & Non-disclosure Agreements.

The Parties that sign the Agreement should use both Parts: articles in Part A require a choice between different alternatives (checking the box in each section); articles in Part B are standard conditions that complete Part A.

The main articles of the NCND Non-Circumvention & Non-Disclosure Agreement are summarized below.

Services to be provided by the Intermediary

This article is intended to guide the parties through a number of possible alternatives, such as:

  • Simple communication of information: this first alternative is intended to cover the case where the Intermediary´s activity is limited to a simple supply of information about one or more third parties (e.g., names and addresses of potential customers), a particular deal (e.g. a tender) or a service that does not necessarily imply direct contact between the Intermediary and the third party.
  • Putting into contact with a third party: this second alternative implies a more active involvement of the Intermediary, who agrees to establish actual contact between the third party and the Counterpart. Parties may indicate whether or not the contact should be established merely for possible business or for a particular deal.
  • Assistance in the contract negotiation: in this alternative, the Intermediary´s obligation to assist the Counterpart during the contract negotiation implies that the Intermediary undertakes reasonable efforts to help the Counterpart until the conclusion of the contract.
  • Assistance during performance of the contract: this alternative is adequate especially when the Intermediary can, due to its relations with the third party or its particular knowledge of the local market, help the Counterpart overcome possible problems arising during such stage.

Exclusive rights of the intermediary – Customer protection

When appointing an Intermediary, the Counterpart will normally accept to grant him a certain

level of exclusivity with respect to the business he agrees to promote. With regard to exclusivity the model contract provides three options:

  • Exclusivity with respect to the Intermediary’s promotional activity in general: the common rule is not to grant the Intermediary an exclusivity with respect to the promotional activity it is to perform. So, for example, if a manufacturer appoints an Intermediary to look for customers in a certain country, the manufacturer will normally assume that the Intermediary is non-exclusive and that he will remain free to appoint other Intermediaries or the same type of business as well as to take direct contact with customers of that country.
  • Exclusive rights with respect to the specific deal promoted by the Intermediary: if the Intermediary is to promote a specific deal with a given third party, it will normally be appointed to act on an exclusive basis as middle-man for such deal.
  • Exclusive rights with respect to third parties introduced by the Intermediary (customer protection): the Intermediary enjoys customer protection, i.e., it has certain rights with respect to further business with the third party for which it obtains protection.

Undertaking not to compete

Another important aspect is whether and to what extent the Intermediary should refrain from acting for competitors of the Counterpart. The  contract contains the two alternatives:

  • The Intermediary accepts a non-competition obligation; or
  • The Intermediary remains free to act for competitors of the Counterpart.

If the parties do not expressly agree on the Intermediary’s non-competition obligation, the general rule – as established in General Conditions – says that the Intermediary will be bound not to act for competitors of the Counterpart to the extent it has been granted an exclusive right to a certain business.

The Intermediary´s remuneration

With respect to the Intermediary’s remuneration, the parties may choose between several alternatives: a first option regards the type of remuneration. Although the most common type of remuneration is a commission on the value of the business (contract) entered into through the intermediary’s intervention, parties can also agree on a lump sum. The latter may be appropriate in cases of simple communication of information and, more generally, when the parties wish to limit the extent of their collaboration to a very first stage (e.g., the simple introduction of a third party).

As far as the rate of commission is concerned, the model only provides for a fixed rate. However, this does not prevent the parties from agreeing on more sophisticated solutions, such as different rates of commission according to the amount of the contract. So, it is usual for big deals to agree upon a variable commission (e.g. 5% up to 500.000 USD; 3% from 500.000 to 2.000.000 USD; 2% on the amount exceeding 2.000.000 USD). If the parties choose this solution, they should clearly define which situations should be considered as a single deal and which are to be considered separately for the purpose of such calculation.

It is important that the parties decide whether the Intermediary should be paid for the simple fact that it has performed certain services (e.g., to communicate information, to put the Counterpart into contact with a third party, to the conclusion of the contract), independently of the result obtained, or if, on the contrary, it should be paid only if and to the extent its activity has led to the conclusion of a contract with a third party.

Another important point to be decided is whether the Intermediary should be entitled to remuneration on business entered into by the Counterpart, without the Intermediary’s intervention, with third parties introduced by the Intermediary or falling within the scope of its activity, particularly as it concerns subsequent contracts with third parties introduced by the Intermediary.

Confidentiality and non-disclosure obligations

Each party has an obligation not to disclose any confidential information obtained in the context of the NCND agreement, such as names of customers, sources for contracts, business opportunities made available by the Intermediary; or, on the other side, information given by the Counterpart about its marketing organization, pricing policies, commercial strategies, etc.

Term of the agreement

The model contract contains only the option of a contract for a fixed term, thus excluding a contract for an indefinite term, considering that such solution is almost never used for this type of agreement. The parties may indicate the duration (or expiry date) of the agreement, as well as the conditions for its renewal. If nothing has been agreed, the contract is deemed to be made for a period of one year

Applicable law and resolution of disputes

The model contract is been based on the assumption that it will not be gov­erned by a specific national law, but only by the provisions of the contract it­self and the principles of law generally recognized in international trade as ap­pli­cable to contracts with intermediaries. As it concerns the resolution of disputes, the standard solution proposed in General Conditions is that ICC Arbitration will automatically apply if not otherwise agreed, but other alternatives (such as jurisdiction of ordinary courts) can be chosen.

The NCND Agreement should be used in international trade operations in which the Intermediary acts on an occasional and limited time basis (maximum of one year) for its Counterpart. If the relationship between the two parties is more complete and lasting, the International Commercial Agency Contract should be used.

This model contract is used mainly for the intermediation of international trade operations of different types of products (food, raw materials, and minerals) that are sold in large quantities as well as industrial products (machinery) and services of a high price.

http://www.globalnegotiator.com/blog/wp-content/uploads/2012/09/imgContratosInternacionalesIngles.jpgTo obtain the NCND Agreement template click on:
NCND Non-Circumvention & Non-Disclosure Agreement