Contractual Restrictions

Often a contract will contain clauses that express not an obligation to act in a certain way, but an obligation to either limit or restrain entirely certain actions instead. These contractual restrictions are commonly used to deter any harm that can come about from unintended consequences of the contract itself. In this blog, as Merit Law, we will guide you through these restrictions and help you understand.

Some examples of these forms of restrictions include:

1. Non-Compete Clauses
   • These clauses designate certain periods of time following the mutual assent of both contracted parties wherein a party to the contract may not participate in activities that can be interpreted as competitive to the business of the other party.
     • For example, a manufacturer who signs an agreement with a Vendor may be expected to sign a non-compete clause forbidding the manufacturing of competitive brands for a specified time.

2. Non-Disclosure Clause

• These clauses designate certain periods of time following the mutual assent of both contracted parties wherein a party to the contract may not express or communicate certain knowledge to anyone outside the boundaries of the contract. Non-Disclosure clauses are most famously used to protect trade secrets in many highly competitive markets.

3. Indemnification Clause

• Though an indemnification clause is practically used to hold one party responsible for certain damages in contractual operations, it is in essence a contractual restriction in one party’s ability to hold the other liable for that form of contractual operation.

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