Customer protection clauses as protection against competition in Germany

Numerous companies engage subcontractors or cooperating partners for the full or partial execution of contracts for work and services or transport contracts or other services. In doing so, the subcontractors and cooperating partners regularly have direct contact with the principal's end customers.

In this context, there is always a justified concern that the subcontractors will in future enter into a contractual relationship with the end customer instead of their principal. This can cause considerable damage to the principal because he will no longer receive orders from his previous end customer in the future.

How can entrepreneurs protect themselves?

To avoid this situation, many principals include clauses in their contracts with their subcontractors to prevent a subcontractor from working directly for the end client. Of course, the principal has a legitimate interest in preventing the subcontractor from soliciting customers.

Customer protection clause only effective under certain conditions.

According to the case law of the highest German court, customer protection clauses are only effective if they comply with certain restrictions in terms of scope and duration in terms of location, time and subject matter. Furthermore, the subcontractor’s future commercial activity must not be unreasonably impaired by the customer protection clause. Whether a specific customer protection clause has been effectively agreed depends on the individual case. To ensure that a subcontractor or a cooperating partner does not become a competitor, caution must be exercised when formulating customer protection clauses and attention must be paid to the necessary restrictions and the particular circumstances of the individual case. A void customer protection clause, on the other hand, offers no protection against competition from the subcontractor or cooperating partner.

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