Question 1

Are non-circumvention agreements enforceable in Canada?

Accepted Answer

Yes, non-circumvention agreements are enforceable in Canada when they meet the reasonableness requirements for restrictive covenants. Following the Supreme Court of Canada's decision in Shafron v. KRG Insurance Brokers, the scope, duration, and geographic limitation must all be reasonable and clearly defined.

Question 2

How long can a non-circumvention agreement last in Canada?

Accepted Answer

Canadian courts generally consider durations of 2-5 years to be reasonable for commercial non-circumvention agreements, depending on the nature of the business relationship and the industry. Indefinite restrictions are more likely to be struck down. The duration must be proportionate to the legitimate business interest being protected.

Question 3

What is the Shafron v. KRG decision and how does it affect non-circumvention agreements?

Accepted Answer

Shafron v. KRG Insurance Brokers (2009 SCC 6) is a Supreme Court of Canada decision establishing that ambiguous restrictive covenants are unenforceable and courts cannot use notional severance to rewrite them. The agreement must clearly define its scope, duration, and geographic limitation from the outset to be enforceable.

Question 4

Can I seek injunctive relief for a breach of a non-circumvention agreement in Canada?

Accepted Answer

Yes. Canadian courts may grant injunctive relief for breach of a non-circumvention agreement if the applicant demonstrates: a serious issue to be tried, irreparable harm that cannot be compensated by monetary damages, and that the balance of convenience favours the injunction. Courts have recognized that diversion of business contacts can cause irreparable harm.

Question 5

Does the Competition Act affect non-circumvention agreements in Canada?

Accepted Answer

Yes. The Competition Act (R.S.C., 1985, c. C-34) prohibits agreements that unduly restrict competition, fix prices, or allocate markets. A non-circumvention agreement must not be used to divide markets or restrict competition between the parties. The agreement should be drafted to protect legitimate business relationships without contravening competition law.

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