Interference With Future Business Relationships: How NDAs Morph Into Perpetual Restraints on Trade

In our ongoing series examining the 14 Hidden Dangers Lurking in Business Broker NDAs, we have explored numerous provisions that create one-sided obligations and risk allocation. Today we examine a provision that extends broker control far beyond the evaluation period itself: interference restrictions that prohibit buyers from having business relationships with the seller, the seller's employees, customers, vendors, or anyone connected to the business for extended periods (often years) even if the transaction never closes. These provisions modify what should be a temporary confidentiality agreement into a perpetual restraint on trade, functioning as disguised non-solicit and non-compete clauses that violate North Carolina's restrictive covenant law and basic principles of fair dealing.

The Actual Language From Business Broker NDAs that Lead to Restraint on Trade

During our review of business broker confidentiality agreements, we encountered language designed to prevent interference with broker interests that extends remarkably far beyond what would be necessary to protect confidentiality:

"Prospect shall not, directly or indirectly, contact or attempt to contact any owner, officer, employee, agent, customer, supplier, or vendor of the Business for any reason whatsoever during the period of this NDA and for a period of two years following termination of this agreement, unless such contact is authorized by Broker in writing."

This provision prohibits contact with not just the seller, but with the seller's employees, officers, customers, suppliers, and vendors. The restriction lasts for two years after the NDA ends. The contact prohibition applies "for any reason whatsoever," meaning legitimate business purposes are immaterial. And enforcement requires written authorization from the broker for any contact. That modifies the NDA, making the buyer perpetually dependent on broker permission to engage with people and businesses associated with the seller.

Another variant states:

"Prospect shall not engage in any business activities, transactions, or relationships involving the Business, the Seller, or any affiliate, subsidiary, employee, customer, or vendor of the Business during the term of this agreement and for three years thereafter."

This language creates even broader restrictions, prohibiting any business activities or transactions involving not just the identified seller but any affiliate or subsidiary, and extending the restriction to a full three years.

Let's examine what these provisions actually require and why they create serious legal and practical problems.

How These Provisions Function as Disguised Non-Solicits and Non-Competes

To understand why these interference restrictions are problematic, we need to recognize what they actually are: restrictions on soliciting customers and employees, combined with restrictions on competitive activity. These are non-solicit and non-compete provisions masquerading as confidentiality protections within an NDA.

North Carolina law has identified elements when evaluating whether non-solicits and non-competes are enforceable. Under North Carolina General Statutes and case law, such restrictive covenants must satisfy five requirements to be enforceable: (1) be in writing, (2) be supported by valuable consideration, (3) be reasonable as to time and territory, (4) be reasonably necessary to protect a legitimate business interest, and (5) not violate public policy.

Applying these requirements to broker NDA interference restrictions reveals why they likely violate North Carolina law. First, while the provisions are in writing, they appear within NDAs signed to receive information about potential acquisitions, not within employment agreements or business sale agreements where restrictive covenants typically appear.

Second, the consideration problem is a potential issue here. In an employment context, North Carolina courts have held that continued employment provides consideration for restrictive covenants, though some courts have questioned this. But in the business broker NDA context, what consideration does the buyer receive for agreeing to a three-year prohibition on business relationships with the seller and their employees and customers? The buyer receives access to information to evaluate whether to purchase a business. That consideration relates to the evaluation period, not to a three-year prohibition on future business relationships with anyone connected to the seller.

Third, the time period is problematic. North Carolina courts have held that five years is the outer boundary of reasonableness for restrictive covenants, and even that is permitted only in "extreme conditions." A three-year restriction within an NDA is considerably longer than typical confidentiality protections require. A two-year restriction is also lengthy for a confidentiality purpose.

Fourth, and most importantly, these provisions fail the test of being "reasonably necessary to protect a legitimate business interest." The stated purpose of an NDA is to protect confidential information about the business. A prohibition on contact with the seller's employees, customers, and vendors does not protect confidential information. It prevents the buyer from engaging in business relationships. This is the definition of a non-solicit or non-compete provision, not a confidentiality protection.

A broker's legitimate interest would be in preventing the buyer from contacting the seller directly to circumvent the broker and complete a transaction without paying commission. But a blanket prohibition on contact with anyone connected to the business (including vendors who may have nothing to do with the sale, employees who might be unaware of any transaction, and customers who the buyer might encounter through unrelated business activities) far exceeds what is reasonably necessary to protect the broker's commission interests.

The Perpetual Entanglement Problem

Beyond the restrictive covenant analysis, these provisions create what is called a "perpetual entanglement." This is a situation where signing an NDA to evaluate a business creates ongoing control over your business activities and relationships for years after the evaluation period ends, potentially even after you have determined you are not purchasing the business.

Consider an example. Suppose you sign a broker NDA in January 2025 to evaluate a potential business acquisition. You review the opportunity and decide in March 2025 that it is not right for you. Under the interference provision, the NDA continues for the remainder of 2025 and through 2027. For the next two years, you cannot contact the seller, any of the seller's employees, the seller's customers, or the seller's vendors without written permission from the broker.

Now suppose that through your industry networking, you discover that the seller's head of operations is considering starting a consulting firm in your field. You would like to work together on a project unrelated to the business you evaluated. You cannot. You must request written permission from the broker.

Or suppose one of the seller's major customers becomes a vendor to your company through normal business development. You cannot contact them or discuss business matters without broker authorization.

Or suppose you later decide to pursue a business in the same industry or geographic area. The seller's suppliers and customers are part of the industry ecosystem. A restriction on contacting vendors in that field could effectively prevent you from engaging in legitimate business activities.

These examples illustrate how perpetual entanglement works. The NDA ceases to protect confidential information and starts to control your business relationships years after you have moved beyond the evaluation. The broker maintains leverage over your business decisions indefinitely through threat of claiming breach if you engage in perfectly legitimate business relationships.

The Vagueness and Breadth Problem

These interference provisions also suffer from being vague and overly broad. What does "directly or indirectly" contact mean? Why isn't it defined within the contract? If you attend an industry conference where the seller's customer is present, are you in breach? If you have a conversation with someone who mentions they work for a company that is an affiliate of the seller, are you in breach?

What constitutes an "affiliate" or "subsidiary"? Why isn't it defined within the contract? Does the restriction cover distant business relationships? Does it cover vendors that serve many industries and may not know they are vendors to the seller?

This vagueness creates enforceability problems because contracts must be sufficiently definite to be enforceable. Language that is too indefinite to allow reasonable parties to understand what conduct is prohibited is generally unenforceable.

Furthermore, these provisions are so broad that they may violate public policy. North Carolina courts have long disfavored restraints on trade and freedom to engage in business. A provision that restricts your ability to contact anyone associated with a business for years (even people who have nothing to do with the business transaction) stretches the limits of enforceability.

Legitimate Broker Interests vs. Overreach

Brokers do have legitimate interests that warrant some protection through NDAs. Specifically, brokers have legitimate interests in preventing buyers from contacting the seller directly to negotiate around the broker and avoid paying commission. Brokers also have interests in preventing buyers from using confidential business information to compete with the seller or harm the business.

But these legitimate interests can be protected through narrowly tailored provisions that do not extend to perpetual prohibitions on all business relationships. A reasonable non-interference provision would:

Limit the restriction to the seller and people authorized by the seller to negotiate the sale, not to all employees and vendors. The broker's legitimate interest is preventing contact that circumvents the brokerage. A procurement officer ordering supplies from the seller's vendors has nothing to do with circumventing the broker.

Limit the time period to the negotiation and closing period, not to years afterward. Once a transaction is completed or abandoned, the buyer's business relationships cease to be the broker's concern. The confidentiality obligations remain, but contact restrictions should not.

Require authorization from the seller, not the broker, for any contact. If the buyer and seller mutually agree to contact, that should not violate the NDA. The broker's role is to facilitate the initial introduction, not to control the parties' ongoing relationships indefinitely.

Explicitly exclude contact arising from unrelated business relationships. If a vendor or customer of the seller becomes your vendor or customer through separate channels, that should not constitute a breach.

Why These Provisions Reveal Broker Overreach

The inclusion of these broad, long-term interference restrictions in NDAs reveals the true objective of some brokers: not just to protect confidential information, but to control buyer behavior and maintain leverage indefinitely. If the broker's concern were truly limited to protecting commission opportunities, the restrictions would be narrowly tailored to the transaction period.

But by extending restrictions years beyond the transaction and applying them to all business relationships with anyone connected to the seller, brokers demonstrate they are attempting to use NDAs as control mechanisms rather than confidentiality protections. The interference clauses function as punitive provisions. If you ever have unauthorized contact with anyone associated with the seller, the broker can claim breach and demand compensation or use that breach as leverage in other disputes.

This transforms the NDA from a document protecting legitimate business interests into a tool for broker harassment and control. It is precisely the type of overreach that courts scrutinize carefully under restrictive covenant law.

Protecting Yourself From Interference Restrictions

If you are presented with a broker NDA containing broad interference restrictions, you should immediately object and propose substantial modifications. Here are specific steps to take:

First, propose that contact restrictions apply only to the seller and authorized negotiators, not to all employees, customers, vendors, or affiliates of the business.

Second, propose that interference restrictions expire when the evaluation period ends or when the transaction is completed or abandoned, not years thereafter.

Third, propose that interference restrictions do not apply to business relationships that develop through separate, unrelated channels. If you meet a vendor or customer of the seller through unrelated business dealings, you should not be restricted from engaging with them.

Fourth, propose that the seller, not the broker, must authorize any contact between you and people connected to the business. This aligns the restriction with its stated purpose, the buyer should not circumvent the broker, rather than giving the broker perpetual control.

Fifth, propose that the interference restrictions are limited to contacts intended to circumvent the broker's commission, not to all contacts regardless of purpose. If your contact with someone connected to the seller is entirely unrelated to the business you evaluated, it should not constitute breach.

Sixth, add explicit language stating that these restrictions are in addition to, not in substitution for, standard confidentiality obligations. The buyer remains bound by confidentiality obligations; the question is why contact restrictions should extend years beyond confidentiality obligations.

If the broker refuses to narrow these provisions, recognize this as a significant red flag. A broker demanding perpetual control over your business relationships and contacts is demonstrating that their priority is maintaining leverage over you, not protecting legitimate business interests.

If you have already signed an NDA with broad interference restrictions, document your position that the provisions are unreasonable restraints on trade that likely violate North Carolina law regarding restrictive covenants. If the broker later claims you violated the interference provisions, you have strong arguments that the provisions are unenforceable because they exceed what is reasonably necessary to protect legitimate broker interests.

Moving Forward With Reasonable Restrictions

Interference restrictions in broker NDAs represent another example of brokers using contractual language to impose controls on buyers far beyond what is necessary to protect legitimate business interests. These provisions transform NDAs into perpetual entanglement devices that restrict your freedom to engage in business years after you have moved beyond the evaluation period.

Fair interference restrictions would be narrowly tailored to the legitimate purpose: preventing buyers from circumventing brokers during negotiations. They would not restrict contact with unrelated vendors, would not extend years beyond the transaction, and would not give brokers control over business relationships that have nothing to do with the original opportunity.

Insisting on reasonable limitations to interference restrictions is essential to protecting your freedom to conduct business, network with industry contacts, and pursue legitimate business opportunities without perpetual broker oversight. NDAs should protect confidentiality, not control your business relationships for years.

Important Legal Disclaimer: This article provides general educational information about interference restrictions in business broker NDAs and North Carolina law on restrictive covenants. It does not constitute legal advice for any specific situation. While North Carolina law on non-solicits, non-competes, and restrictive covenants is discussed here, state laws vary and the enforceability of specific provisions depends on the facts and circumstances of each case. Many states share North Carolina's concerns about overly broad restrictive covenants, though specific applications vary. Reading or relying on this article does not create an attorney-client relationship with Howard Law. If you have questions about interference restrictions in a specific NDA or need assistance modifying or challenging such provisions, contact Howard Law at www.ehowardlaw.com for professional legal consultation.

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Howard law is a legal and M&A advisory firm providing experienced representation for buyers and sellers navigating business transactions nationwide. We specialize in protecting client interests from unqualified or unethical intermediaries while ensuring successful deal completion with appropriate professional standards. Contact us at www.ehowardlaw.com for consultation on your business acquisition needs.