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As the novel coronavirus spreads around the world, a chaotic market for N95/KN95 masks, Personal Protective Equipment (“PPE”) such as gloves, thermometers, ventilators, hospital beds, testing kits, hazmat suits, hand sanitizer, goggles and other desperately sought-after medical supplies vital to the fight against COVID-19 has sprung up.

 

Numerous brokers or businesses around the world have joined the gold rush for this year’s most sought-after commodities. Urgent late-night inspections at mask factories, hurried million-dollar wire transfers to secure PPEs, and more. In this frenzied, pandemic-driven market, many different types of commercial agreements are involved. Entrepreneurs in international commodity trading, especially bulk commodities, often come across documents like Non-circumvention, Non-disclosure Agreements (“NCNDA”), International Master Fee Protection Agreement (“IMFPA”), Commission Agreements, and other documents. However, the legitimacy and protection these documents afford are yet to be determined.

 

What are NCNDAs and Why You Should Consult an Attorney Before Signing One

 

An NCNDA is an agreement that is commonly used in the preliminary stages of a business transaction where the seller and buyer do not know each other but are brought into contact with each other by one or more intermediaries or brokers to fulfill the transaction. The purpose of such agreement is to ensure that (1) the intermediaries or brokers who brought the buyer and seller together are not by-passed and (2) the information disclosed during the negotiations is not revealed to any external or unauthorized party. These agreements are usually valid for a specified term.

 

In this frenzied market, as the manufacturers making these desperately sought-after medical supplies are making huge profits by supplying bulk commodities to whoever can pay the most and pay fastest, a strong and well-drafted NCNDA is vital to anyone involved in these deals to protect their interests and ensure that they are not circumvented.

 

Some key terms of an NCNDA include:

  1. Non-Circumvention Clause, which is used to prevent the contracting parties from cutting each other on any businesses covered in the agreement. A clear definition of the covered business is critical.
  2. Non-Disclosure Clause, which aims to protect any information the contracting parties intend to be held confidential. A good NCNDA will need clear language to ensure important information that the party wants to prevent from disclosure are covered.
  3. Term, which defines how long the NCNDA will run.

 

Navigating this chaotic, “Wild West” PPE market can seem daunting. It is always helpful to enlist the assistance of a professional business attorney. At Carbon Law Group, with our extensive experience in providing legal guidance to businesses in contracting and negotiation, we are confident that we can serve as strong legal support for your business. Find out how Carbon Law Group can help you protect your intellectual property rights by scheduling a meeting with us using this link.

 

We can help with:

  • Reviewing Contracts
  • Drafting strong NDAs and Non-circumvent Agreements
  • Answering compliance questions
  • Due Diligence
  • Paymaster Services

❒ Get it in writing.

In business it is important to get all agreements in writing that clearly spells out each party’s rights and obligations upfront. This ensures there is no confusion or disagreement later on down the line.

❒ Keep it simple.

A contract does not need to be filled with legal jargon. Instead, create clear and concise sentences. Use numbers and headers to alert the reader what contents are in each section.

❒ Deal with the right person.

Make sure the person you negotiate with has the authority to bind the business and has a vested interest in making sure the business performs its obligations under the agreement.

❒ Identify each party correctly.

You need to include the correct legal names of the parties to the contract so it’s clear who is responsible for performing the obligations under the agreement.

❒ Spell out all of the details.

The body of the agreement should spell out the rights and obligations of each party in detail.

❒ Specify payment obligations.

Specify payment terms including when each payment will be due, on what terms, and what method of payment will be used.

❒ Agree on circumstances that terminate the contract.

It makes sense to set out the circumstances under which the parties can terminate the contract. For instance, if one party misses too many important deadlines, the other party should have the right to terminate the contract without being held legally responsible for breaching the contract.

❒ Agree on a way to resolve disputes.

Write into your agreement what you and the other party will do if something goes wrong. You can decide that you will handle your dispute through arbitration or mediation instead of going to court, which takes up a lot of time and money.

❒ Pick a state law to govern the contract.

If your business is located in more than one state, you will want to specify which state you will be dissolving the business, and ensure you are adhering to all of the laws that apply to that state.

❒ Have a Lawyer Assist You:

It is a good idea during to consult a lawyer when you have questions about contracts.  At Carbon Law Group we are here to assist you with any questions you may have and get your contracts on track.

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