I entered into a non-disclosue confidentiality agreement to purchse a exsisting franchise.

Asked over 5 years ago - Chicago, IL

I was provided with P/L statements , I now would like to open another business, a direct competitor to the 1st business with which I signed the confidentiality agreement. Can I be sued by the 1st business due to the fact that they disclosed sensitive information and I am now competing with them. The new business is right next store.

Additional information

The agreement states "information provided on any business offerer by the broker is sensitive, and confidential.Disclosure of this information to others would be damaging to the sellers business and to the brokers fiduciary relationship with the seller,"
"The Term Information shall include the fact that the business is for sale and other confidential data"
The P/L's i've recieved breakdown monthly sales ,breakdown of expenses and net. The new business has similar product at a slightly higher price point I have not shared the information with anyone else, Can I be sued over comperting with them, once I've seen unaudited financial statements

Attorney answers (4)

  1. Mazyar Malek Hedayat

    Contributor Level 13

    Answered . Your question is whether you are in violation of a non-compete/non-disclosure agreement when you looked at confidential financials for a business you sought to purchase and instead opened (or began working for) a competing business right next door.

    The obvious answer is 'yes' if the terms of the non-compete/non-disclosure say what you imply it says. But of course details are crucial when faced with situations such as this; without reviewing that document and parsing relevant law in Illinois, there is no way to obtain a reliable answer.

    To get anything like a solid answer to this question you should sit down with a practitioner in your area and spell out the whole story behind this NC/ND agreement and your subsequent decision to open or work for a competing business.

    I hope this information has been helpful. Feel free to contact us with any questions or follow up.

  2. Arieh Mordechai Flemenbaum

    Contributor Level 12

    Answered . I agree with my colleagues, you should review the terms of the agreement with a business lawyer to determine your rights and how to better insulate yourself from a claim.

    However, you should be aware there is a difference between a non-disclosure/confidentiality agreement and an agreement not-to-compete. The typical non-disclosure agreement restricts a party from disclosing the "confidential information" to other parties, and it may also contain a clause that prohibits the use of the confidential information for the benefit of the recipient. However, this is not the same a non-competition clause.

    A typical non-competion clause is fairly straight-forward and written in clear and direct language so it can easily be understood by the parties. Since you did not cite a provision that states you may not compete, I suspect the non-disclosure does not have one.

    This post is intended for informational purposes only. It is not intended to provide legal advice and does not replace the services of a business lawyer who can assess your situation and provide advice tailored to your particular circumstances.

  3. Jigar K. Patel

    Contributor Level 7

    Answered . Without reviewing the agreement you signed, it is difficult to ascertain what will happen. However, if you signed a document which acknowledged that you are receiving trade secrets, etc., you may be sued under the agreement. In other words, you better see a lawyer prior to opening the competing business.

  4. Kevin Brendan Murphy

    Pro

    Contributor Level 15

    Answered . The non-disclosure agreement prevents you from disclosing the P/L information to others; it does not necessarily prevent you from going into a competing business - unless there is a non-compete clause in the agreement you signed. Even then, to be enforceable, non-competes must be reasonable in time and scope. Your best course of action is to show the agreement(s) you signed to a franchise attorney.

    Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

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