A Non-compete Agreement is a document that may be used by individuals or business organizations to prevent another person that may be engaged with them in a business relationship, employer-employee relationship, or any other professional relationship, to compete with them whether directly or indirectly. In this agreement, there are two parties, one is the protected party and the other is the restricted party.
The protected party is the one who will be protected from competition by the acts that may be performed by the restricted party for the duration of their agreement or engagement and for a certain period thereafter. Acts that are competitive in nature are acts in which business secrets, trade secrets, and other confidential business information belonging to the protected party are used by the restricted party within another business that engages in the same or similar activities which leads to competition with the protected party. The restricted party in entering a Non-disclosure agreement must obtain or receive a consideration whether in the form of money, employment opportunity, or any other economic advantage.
This Agreement is especially useful in businesses or engagements that involve sensitive and technical data or information or in industries that are highly competitive such as technology, marketing, and sales.
The following are the common circumstances in which a Non-compete Agreement will be useful:
Employer-employee Relationship: If an employee obtains confidential information or trade secret from his employment with the employer, he may be restricted or prohibited from using that information for his own benefit or for the benefit of a third party, whether by being employed or involved in other businesses engaged in activities similar to that of the employer.
Business Relationship: If the relationship is brought about by two companies or business owners, acts that are competitive in nature may pertain to the usage of trade secrets and confidential information obtained during the relationship, for purposes of gaining a competitive advantage over the one who shared such information. This may either be performed by opening up another business to compete with the other party or the protected party, or by being a stakeholder in such business.
These common situations may be prevented through the use of a Non-disclosure Agreement whereby the restricted party may be liable for monetary damages once the covenants in the Non-disclosure Agreement are violated.
This Agreement should be completed by providing the identities and personal circumstances of the parties who may either be individuals or business organizations. The date and place of signing the agreement may also be provided. The following are the provisions of this agreement:
After completing the document, the parties may acknowledge the same before a notary public, in which case, they must complete the relevant details, print at least 3 copies, and sign the same in front of the notary public. Each party must keep a copy and leave one copy to the notary public.
The general laws on Contracts and Obligations found in the Civil Code of the Philippines are applicable. The Intellectual Property Code (Republic Act No. 8293), the Securities Regulation Code of 2000, the Philippine Competition Act, and the Revised Penal Code are some of the laws that offer protection against competitive acts. Further, in case of an employer-employee relationship, the Labor Code is also applicable.
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Non-Compete Agreement - sample template - Word and PDF