Contractual restriction?

[downsouth]

Does the panel deem this clause over restrictive?

The Consultancy shall not for a period of six months following the termination of the Assignment by xxxxxxxxxxxxx supply its services directly, or through any other person, firm or company, to the Client for whom it has carried out the Assignment save in the case of supply through xxxxxxxxxxx

XXXXXXXXXXX is not an agency in this case rather a consultancy so no opt in/out relevant in this instance

Reason i ask is that a large manufacturing company has several projects elsewhere in the organisation that i've been approached for but this clause is causing concern for both parties (MyLtd company and client) as the original consultancy are wanting MyLtd to engage through their channels who inturn are trying to completely re-engineer the work to become projects in their own right.

I have issues with

1. 6 months duration
2. Restriction of providing services through any other person, firm or company,

Thoughts?

[Sockpuppet]

Very unlikely to be legal. In any case it says the consultancy (your co) not you. So just form a new ltd or use a brolly.

[Wanderer]

Tell them that you were already introduced to the client and there is no way that you are accepting a restraint of trade like that in your contract. Ask the client to speak to the consultancy if you can't get them to budge.

Also will you be working for and under the direction of the consultancy or are they acting as an "Employment business" and you are working under the direction of the client?

[SueEllen]

I have issues with

1. 6 months duration
2. Restriction of providing services through any other person, firm or company,

Thoughts?

My thought is that you should have dealt with this when you took on the original contract.

Now you can tell the consultancy that it's restrictive but unless you are prepared to pay a lawyer to back you up, then the client will avoid using you as it's too much trouble.

I'm surprised the client haven't got their own legal team to look at this clause and threaten the consultancy with no more work if they invoke it.

[downsouth]

Both points were raised during initial discussions and unfortunately consultancy would not agree to change but personally did not believe that this would be invoked as never havei been subjected to this clause and it not be worked out amicably or not invoked at all.

Suffice to say i'm not impressed in the slightest

[ASB]

Both points were raised during initial discussions and unfortunately consultancy would not agree to change but personally did not believe that this would be invoked as never havei been subjected to this clause and it not be worked out amicably or not invoked at all.

Suffice to say i'm not impressed in the slightest

Yes, but things are in the contract for when things can't be resolved amicably...

However, some thoughts.

1. I don't personally think that clause is overly restrictive, provided the initial contract was for a reasonable duration. You could get a legal opinion - only go for it on the likely validity. But it will be full of if's and but's and cost a few hundred in all likelihood.

2. Just break it, if you believe it's excessive. The ball is in their court. They might shout and go a bit legal, but ultimately they have to be prepared to take you to court. Generally you can probably dick them around so much they'll settle for a fairly small sum or give up altogether.

3. Set up NewCo and use that. The clause as written and published fails to cover the scenario. If they try it on they still have all the hurdle of 2 and will also have to persuade the court that you are somehow covered personally by it. However, be cautious. Read the contract, the schedules everything with a fine tooth comb. It is not uncommon to find there is something in it which will make you personally liable.

So that covers your end of things. Do you feel slightly lucky and will the client take the risk?

The answer is probably not. Firstly clients don't generally like this sort of thing, they think they may come under attack themselves.

This is with some justification. What is in the supply agreement between xxxx and the Client? It is highly likely that there is some sort of anti poaching type clause. So the client does have to be prepared for the risk of going legal. If you can get the client on side there is a good chance it can be settled, but you may have already failed in that.

Whatever is in the contract between xxxx and the client is much more likely to be found acceptable. This is more likely a "proper" commercial contract.

It may well be that you can compromise somehow. Perhaps "Well we'll use him through you for this initial 3 months but we insist on the removal of the restriction". Then after that you're free to rearrange.

[TheFaQQer]

My thought is that you should have dealt with this when you took on the original contract.

Now you can tell the consultancy that it's restrictive but unless you are prepared to pay a lawyer to back you up, then the client will avoid using you as it's too much trouble.

I'm surprised the client haven't got their own legal team to look at this clause and threaten the consultancy with no more work if they invoke it.

I agree. Providing that the contract with the consultancy was of a reasonable length, I don't think 6 months is restrictive and I think the OP would struggle to prove otherwise in court.

[downsouth]

I agree. Providing that the contract with the consultancy was of a reasonable length, I don't think 6 months is restrictive and I think the OP would struggle to prove otherwise in court.

Engagement was 9 months in duration and works came to a natural close

[TheFaQQer]

Engagement was 9 months in duration and works came to a natural close

The argument in law would come down to whether the consultancy can prove that they have a legitimate business interest to protect in entering the clause into the contract. If they don't, then the clause is invalid.

The clause would also need to be no more than is necessary to protect those interests.

Restraint of trade / non-compete clauses are a nightmare to argue and tend to go down to whoever blinks first in the argument. However, if there is the prospect of a legal wrangle, expect the end-client to go elsewhere rather than get drawn into an argument.