Non-Circumvention Clauses in NZ

If you run a small business, relationships are everything. You might spend months building trust with a new supplier, introducing a contractor to your client network, or partnering with another business to deliver a bigger project.

Then someone uses your hard-won contacts to cut you out of the deal.

This is exactly the problem a non-circumvention clause is designed to prevent. It’s a practical contract tool that helps make sure the party you’re dealing with can’t bypass you and deal directly with your contacts (or your customers) behind your back.

In this article, we’ll break down what a non-circumvention clause is, when it makes sense for NZ small businesses, how to draft it clearly, and what can affect enforceability.

What Is A Non-Circumvention Clause (And Why Do Small Businesses Use One)?

A non-circumvention clause is a contract term that stops one party from “going around” the other party to do business directly with:

the other party’s client or customer
a supplier, manufacturer, or distributor introduced by the other party
an investor or funding contact
another commercial connection that creates value (like a referral partner)

In plain English: if you introduce someone valuable to a counterparty, the clause aims to stop them from using that introduction to make money while cutting you out.

Non-Circumvention vs Confidentiality: They’re Not The Same

People often confuse non-circumvention clauses with confidentiality clauses, but they’re doing different jobs.

Confidentiality is about keeping information secret (like your customer list, pricing, or strategies).
Non-circumvention is about behaviour: not using your relationships to bypass you and deal directly.

In practice, many well-drafted agreements include both. For example, you might have a Non-Disclosure Agreement that covers confidentiality and also includes a non-circumvention clause if introductions are being made.

What “Circumvention” Can Look Like In Real Life

Circumvention doesn’t always look dramatic. It can be subtle, like:

You introduce a subcontractor to your client for a one-off job, and the client hires them directly for ongoing work.
You introduce a supplier to a business partner, and they start purchasing direct, excluding you from future orders or margins.
You arrange a meeting between a potential customer and a “strategic partner”, and the partner closes the deal without you (even though your introduction was the reason the deal happened).

If your business model relies on being the connector (or the organiser, broker, agency, or intermediary), this is a real commercial risk.

When Should You Use A Non-Circumvention Clause In NZ?

You won’t need a non-circumvention clause for every contract. But it can be a smart move when the main value you’re bringing is your network, relationships, and ability to introduce the right people.

Common scenarios where a non-circumvention clause is useful include:

Consulting and advisory work (introducing customers, suppliers, or strategic partners)
Referral arrangements and finder’s fee deals
Distribution and sourcing arrangements (especially overseas manufacturing or supply chains)
Joint ventures and project-based collaborations
Recruitment and labour hire style arrangements (where you connect talent with businesses)
Business sale introductions (introducing buyers, sellers, investors)

It can also be relevant in longer-form commercial agreements, like a Service Agreement, where you are providing services and also introducing the other party to contacts as part of the engagement.

When It’s Especially Important

A non-circumvention clause becomes particularly important when:

you’re sharing a client name or making a warm introduction before a contract is signed
you’re providing quotes, pricing, or supplier terms that could be used to replicate your offer
you’re entering a short-term trial, pilot, or proof-of-concept where trust is still being built
your margin depends on ongoing involvement (not just the initial introduction)

Just keep in mind: a clause is only as useful as the agreement around it. If you want it to hold up, the broader contract needs to be properly formed and clear on the parties’ obligations (which is why basics like what makes a contract legally binding still matter).

What Should A Strong Non-Circumvention Clause Include?

To work properly, a non-circumvention clause needs to be clear, specific, and commercially reasonable. The biggest problems we see are clauses that are too vague (“don’t go around us”) or too broad (“you can’t deal with anyone in our industry”).

Here are the key pieces to think about.

1) Who Is Restricted?

Start with identifying who the clause applies to. Usually it’s one party (or both), and it may also extend to:

related companies
directors and employees
contractors and agents

This matters because circumvention often happens through “someone else” (for example, a related entity signing the deal).

2) What Contacts Or Relationships Are Protected?

This is where you define the “protected contacts”. You can approach this in a few ways:

Named list (best for certainty): list the customers/suppliers/partners in a schedule.
Category definition: e.g. “any person or entity introduced by Party A to Party B in connection with the Services”.
Hybrid approach: a schedule plus “any further contacts introduced in writing during the term”.

If you’re trying to protect something like a customer list, you might also pair the clause with a well-written confidentiality term (for example, the kind discussed in Confidentiality Clause guidance).

3) What Conduct Counts As “Circumvention”?

You want the clause to spell out what is prohibited. Depending on the deal, this might include restrictions on:

directly or indirectly dealing with the protected contact
approaching, soliciting, or enticing the protected contact
entering negotiations with the protected contact
supplying goods/services to the protected contact outside the agreement
helping a third party to do any of the above

This is also where you define exceptions (for example, if the restricted party already had a genuine pre-existing relationship with that customer, and can prove it).

4) The Time Period (And Why It Needs To Be Reasonable)

Non-circumvention clauses are often time-limited, such as:

during the term of the agreement, and
for a set period after the agreement ends (e.g. 6–24 months)

There’s no one-size-fits-all timeframe. A “reasonable” period depends on your industry, sales cycle, and the purpose of the relationship. If you’re unsure, it’s worth getting advice so the clause protects you without becoming unenforceable due to overreach.

5) The Geography (Sometimes Relevant, Often Not)

In a lot of modern NZ business arrangements (especially online services), geographic limits may not make sense.

But if your relationship is location-specific (for example, a regional distribution deal or local service territory), defining a geographic scope can help keep the clause proportionate and easier to justify.

6) Remedies: What Happens If Someone Breaches?

A well-drafted clause usually sets out consequences, which may include:

injunctive relief (a court order to stop the behaviour, in appropriate cases)
damages (compensation for loss, if you can prove it)
account of profits (in some cases, a claim for profits made from the breach)
liquidated damages (a pre-agreed amount payable on breach, if drafted properly and not a penalty)

It’s also common for the agreement to state that a breach may justify termination (which is why it’s important your contract is clear about ending the relationship and next steps, including Terminating a Contract issues like notice and survival clauses).

Are Non-Circumvention Clauses Enforceable In New Zealand?

Non-circumvention clauses can be enforceable in New Zealand, but enforceability depends heavily on how the clause is drafted and the context.

Because a non-circumvention clause restricts what a party can do, it may be assessed using similar “reasonableness” principles to other restrictive clauses in commercial contracts (and if it goes too far, it may be challenged).

What Helps A Non-Circumvention Clause Hold Up?

Some practical factors that generally improve enforceability include:

Clear drafting: the clause defines the protected contacts and prohibited behaviour in a way that’s not vague.
Reasonable scope: limited to what’s necessary to protect legitimate business interests (not a blanket ban on working in an industry).
Proper contract formation: the agreement has offer/acceptance, consideration (where required), certainty, and intention to create legal relations.
Evidence trail: you can prove the introduction happened, and that the other party used it to bypass you.

Even where your clause is strong, enforcement is rarely “automatic”. You still need to show what happened, what the clause means, and how the breach caused loss (or unjust profit).

Relevant NZ Law (In Plain English)

Non-circumvention clauses sit inside contract law, so they’re often considered alongside broader principles under New Zealand’s commercial contracting framework (including the Contract and Commercial Law Act 2017, which brought together a range of contract-related rules).

Depending on the facts, other legal concepts can also come into play, such as:

Misrepresentation issues if someone made statements to get access to your contacts (for example, saying they wouldn’t approach your client directly, but always planned to).
Fair Trading Act 1986 risks if the conduct involved misleading or deceptive behaviour in trade.
Fiduciary duties (in limited scenarios): some relationships involve heightened duties of loyalty and good faith, but they don’t automatically apply to all commercial dealings-this is why the contract wording matters (and why concepts like Fiduciary Duty are worth understanding when structuring partnerships and agency relationships).

The big takeaway is that a non-circumvention clause works best when it’s part of a carefully structured agreement, rather than a rushed one-liner copied from a template.

Common Mistakes To Avoid (So Your Clause Actually Protects You)

A non-circumvention clause is only helpful if it’s realistic, readable, and tailored to how you actually do business. Here are some common pitfalls we see for small businesses.

1) Being Too Broad (And Accidentally Making It Unreasonable)

Clauses that try to stop the other party from dealing with anyone in your “industry” or anyone you’ve “ever spoken to” often create enforceability headaches.

Instead, focus on:

specific named contacts, or
contacts introduced during the relationship, for a defined purpose

2) Not Defining The “Introduction”

Was it an email? A meeting? A shared spreadsheet? A casual mention at a networking event?

If your clause relies on introductions, define what counts as an introduction and consider requiring that protected contacts be confirmed in writing (even if it’s just an email).

3) Forgetting About Exceptions

If the other party already had a relationship with the contact, they’ll likely push back.

A fair clause often includes exceptions like:

relationships established before the agreement (if they can prove it)
relationships developed independently, without using your introduction or confidential info

This kind of balance can make negotiations smoother and can also make the clause more defensible later.

4) Relying On A Standalone Clause When You Need A Full Agreement

Non-circumvention clauses often appear in NDAs, but many business relationships need more than that-like clear commercial terms, payment, scope, and IP ownership.

If the relationship involves ongoing services, deliverables, or payment structures, a broader contract (such as a Service Agreement) can reduce disputes because it sets the whole context around the clause.

5) Not Aligning The Clause With Your Revenue Model

Before you draft, ask yourself: what are you trying to protect?

If you earn a commission, the agreement should clearly state when commission is payable and how it’s calculated (so the non-circumvention clause supports an actual payment obligation).
If you earn profit through reselling, make sure the contract covers exclusivity/territory/customer allocation, not just non-circumvention.
If you’re acting like an agent or intermediary, your agreement should define your role and authority.

This is also why getting legal eyes on the whole deal (not just one clause) is usually the best approach.

How To Use A Non-Circumvention Clause In Negotiations (Without Scaring People Off)

It’s normal to worry that asking for a non-circumvention clause will sound aggressive.

In reality, many reasonable counterparties understand the commercial logic-especially if you explain it in a calm, business-focused way:

You’re investing time and effort to make introductions.
You’re sharing goodwill and relationships you’ve built over years.
You just want clarity on how everyone behaves and gets paid.

A Practical Way To Position It

You can frame it as:

relationship protection, not control
fairness, not distrust
commercial clarity, not legal posturing

And if the other party pushes back, it can help to offer compromise levers like shorter time periods, a narrower list of protected contacts, or clearer exceptions.

Key Takeaways

A non-circumvention clause helps stop the other party from using your introductions (customers, suppliers, partners, investors) to bypass you and deal directly.
Non-circumvention is different from confidentiality: confidentiality protects information, while non-circumvention restricts certain conduct and dealings.
Strong clauses clearly define who is restricted, what contacts are protected, what conduct is prohibited, the duration, any geographic scope (if relevant), and what happens if there’s a breach.
Enforceability in NZ depends heavily on drafting and reasonableness-overly broad or vague clauses can be difficult to enforce.
Non-circumvention clauses work best as part of a properly structured agreement (often alongside confidentiality and clear commercial terms), rather than as a quick template add-on.
If your business relies on relationships and introductions, getting the clause tailored to your revenue model and deal structure can save major headaches later.

If you’d like help drafting or reviewing a non-circumvention clause (or building it into a broader commercial agreement), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.

Non-Circumvention Clauses In NZ: Protecting Commercial Relationships