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Understanding restrictive covenants in business contracts

On Behalf of | Dec 28, 2021 | Business Law

Prior to entering an arrangement with another entity, companies in New York and elsewhere may have a variety of topics to address while drafting a contract for the arrangement. One such topic may include the possibility of implementing restrictive covenants. Understanding the possible uses and benefits of restrictive covenants could prove integral to choosing a path that best aligns with the interests and needs of one’s business. 

Restrictive covenants 

According to experts, a restrictive covenant is a type of arrangement that restricts another party from carrying out certain actions. In some cases, similar arrangements may include terms as to the approved use of company property or sensitive company information. While these covenants may be applicable in various scenarios, experts indicate that they may commonly be included in employment contracts. 

Common examples of restrictive covenants could include noncompete and nondisclosure agreements. However, these do not only apply to employer-employee arrangements, as similar terms could also play a role while drafting business partnership contracts. Experts also indicate that such arrangements may also have applicable uses during the sale of a company, or even in real estate transactions. 

Protecting the future of a company 

Business owners in New York who wish to know how best to use restrictive covenants to safeguard company interests could find it helpful to consult with legal counsel for guidance. By speaking with an attorney, a client could obtain much needed advice in addressing all his or her available options and on making informed decisions about each in turn. An attorney can help a client better understand every vital topic to address and assist in preparing to take every possible measure to protect the future of his or her company. 


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