A non-compete clause in B2B contracts is understood to be an obligation on the part of the associate not to engage in employment or cooperation with other persons who are in competition with the entity with which he or she is currently working. In the case of the real estate agency industry, on the other hand, such a provision is the order of the day. An agency agreement containing a non-compete clause is concluded for this purpose.
Signing such an agreement with a non-compete clause may lead to not being able to operate in the industry in which services are currently provided for a period of two years from the date of termination of the agreement.
What is a non-compete clause in estate agency?
Let’s take a look at the provision at the outset:
Article 758 of the Civil Code. “by means of an agency contract, the party accepting the commission (agent) undertakes, within the scope of its business activity, to act as a permanent intermediary, for remuneration, in concluding contracts with clients on behalf of the principal, or to conclude them on the principal’s behalf”.
This means that when the Agent sets up his or her own business and receives orders for the sale or rental of properties in and around Warsaw from the principal (Real Estate Office), the Agent will be entitled to act as an intermediary in the rental or sale of these properties. To this end, the Agent shall sign a cooperation agreement with a non-compete clause. It includes a prohibition to perform the sale or rental of real estate in Warsaw and its surroundings during the term of this agreement and after its termination for a period of 2 years without remuneration, and a contractual penalty of PLN 40,000 is imposed for the breach of such prohibition. The agent had doubts whether to sign the contract with such a clause, but he needed to make some money urgently, so he agreed. Is such a clause permissible?
The question arises. since the agent cannot work in his profession and earn money for 2 years after the termination of the contract, is such a non-compete clause allowed?
It is argued in the case law that the introduction of a non-equivalent competition clause in a civil law contract, subject to a contractual penalty for its breach, despite the lack of symmetry, is within the limits of contractual freedom and does not violate the characteristics of this legal relationship. Interestingly, it is possible to come across even different positions of the Court on this issue.
Is remuneration necessary during the duration of the non-compete after termination?
The regulations stipulate that the Estate Agency is obliged to pay the Agent an appropriate sum of money for the restriction of competitive activities during its duration, unless otherwise stated in the contract or unless the agency contract is terminated due to circumstances for which the Agent is not responsible. Therefore, since there is a provision in the contract (or lack thereof) that remuneration is not due, in such a situation the Agent may deprive itself of the possibility of claiming compensation.
The Agent may terminate the concluded contract at any time as a result of circumstances for which our counterparty is responsible and thus release itself from the obligation to comply with the restriction on competitive activities. In order to do so, it is necessary, among other things, to make such a declaration in writing and to fulfil the other conditions.
Ultimately, whether or not a non-compete will apply depends on its construction, as it must meet certain requirements. If one of them is not indicated, it is null and void. We can find many ready-made B2B agreements with non-compete clauses on the internet. When signing such a contract, you are not at all sure whether such a clause is favourably structured for you. Therefore, if you are interested in analysing such an agreement or its drafting, please contact us at [email protected].