What is a competition clause in commercial relations and why is it important

How do competition clauses between businesses work?

The law distinguishes between two types of competition clauses:

1. Competition clause in commercial agency: This type is specific to commercial agency contracts where the agent works as an independent businessman for the represented party (for example, a company) and undertakes to broker business. Stricter rules apply to this competitive clause.
2. General competition clause: This applies to all other types of contractual relationships and has slightly different rules to the competition clause in a commercial agency.

Rules for competition clauses

• It must be clearly identified to which territory or persons the clause applies.
• It must be specified what competitive activities are prohibited.
• The duration must not exceed 2 years for commercial agency and 5 years for general competition clauses.
• The clause must be balanced, i.e. it must not unduly restrict one of the parties.

What happens if the rules are not followed?

If a non-compete clause does not meet all the legal requirements, it may be declared invalid. This means that it will be disregarded and cannot be enforced in court. It is therefore important that the competition clause is carefully worded and respects all legal requirements.

Conclusion

A competition clause is an important tool for protecting commercial interests, but care must be taken to ensure that it is properly drafted and that the statutory requirements are complied with. A properly drafted competition clause can prevent many problems and disputes that could arise after the end of the contractual relationship.

If you are also dealing with any issue related to a competition clause, do not hesitate to contact us - we will be happy to help you.