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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
Satisfied Customers: 44327
Experience:  Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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I need someone to review a draft agreement .

Customer Question

I need someone to review a draft agreement for me.
Submitted: 1 year ago.
Category: Employment Law
Expert:  Ben Jones replied 1 year ago.
Hello, my name is***** am a solicitor on this site and it is my pleasure to assist you with your question today. Can you please provide more details of your situation?
Customer: replied 1 year ago.

Hi Ben, I have been given a draft agreement with lots of clauses in it including payment amounts, restrictions etc and I need someone to look at it and give me advice on it.

Expert:  Ben Jones replied 1 year ago.
What is the agreement for?
Customer: replied 1 year ago.

I am a doctor and this is for me to set up and run an online medical service for another company.

Expert:  Ben Jones replied 1 year ago.
ok I could certainly look at this but it really depends on what advice you need on it. Are there specific clauses you want looked at?
Customer: replied 1 year ago.

  1. Costs - is the 4% usual

  2. Renumeration - does this seem fair

  3. Business opportunities - what if a completely different company offers me some work

  4. Intellectual property - is this normal

  5. Restrictive covenants - thoughts please

  6. Termination

They want me to do this for them because I already work in this field for myself and for other companies. I don't want to be in the position where I am stopped from working for myself or anyone else during or after this.

Expert:  Ben Jones replied 1 year ago.
ok I can certainly take a look but it would not be covered by the amount you have currently selected - we are a Q&A site where we just discuss your legal position on legal matters but when it comes to reviewing documents and taking additional time to read a number of clauses, it would be considered an additional service. So I can price that up for you and submit a proposal for you to consider and proceed as you wish?
Ben Jones, UK Lawyer
Category: Employment Law
Satisfied Customers: 44327
Experience: Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
Ben Jones and other Employment Law Specialists are ready to help you
Customer: replied 1 year ago.

yes please. There are 8 pages A4 to review.

Expert:  Ben Jones replied 1 year ago.
Thank you, ***** ***** please upload the document on here or supply a download link where I can access it
Customer: replied 1 year ago.
Expert:  Ben Jones replied 1 year ago.
Here are my comments on the agreement:
Costs and remuneration
It is very difficult to say whether this is usual or fair. There is no set rate against which you can compare this. Every agreement would be different and each industry and specific practices or services on offer may attract different levels of costs and fees. As such this is not really something that is appropriate for legal advice – it is a business issue, something which you must consider as a business and whether it reflects your business plan/model. You need to consider these costs and whether they would be reasonable and acceptable considering the nature of the business, your expected profit, if you can meet these in the circumstances, etc. The legal part ids whether these can be included in the contract and charged and the answer is yes, they certainly can as long as they have been agreed between you. Therefore, you would need to consider if your business is willing to accept working under such charges and if necessary – negotiate them before the agreement has been accepted. You may have to discuss this with others working in the same industry under similar agreements and see if these costs are competitive, however as mentioned this is not a legal matter, rather a business one.
Business opportunities
It looks like if you become aware of any opportunities connected to the specific nature of the business (defined right at the beginning), you would be obliged to advise the company of this and allow them to bid for it. Similarly, you are expected not to enter into these business activities with others, without the consent of the company. Any existing work you do is not included so this only covers future opportunities that may arise whilst you are working with this company. The key is how likely you believe it would be that you will be offered such opportunities and would like to take them up whilst still working with the current company. Even with this clause in place, you have to think about its potential enforceability – if you were to provide such work and it does not affect the services you provide to this company, they would not have been interested in it and in general it has no effect on their business, then it may be difficult for them to rely on it or try to claim that you have breached the contract by taking up such work or not telling them of it. But it depends on the effects your actions will have on their business.
Intellectual property
Yes this is somewhat common, because generally by law you retain the IP rights to any work you do if you worked as a consultant or self employed. So this clause goes on to ensure that this is not the case but that the client retains any such IP. How important this is depends on what IP you would be creating and how important it is. In general it could likely just include copyright, such as any templates of documents, business plans, etc which means that if you were to terminate your services, they can retain these documents and ensure their business is not adversely affected if they do not have the important information to continue running it. If you have any specific IP which you wish to retain then you may want to define that in the clause.
Restrictive covenants
Post-termination restrictive covenants are a rather common occurrence in employment relationships. A party would want to protect their business such as knowledge, business connections, influence over remaining staff, etc. However, a covenant that restricts another party’s post-termination activities will be automatically unenforceable for being in restraint of trade, unless the client can show that it was there to protect a legitimate business interest and did so in a reasonable way.
Legitimate business interests (LBIs) are commonly accepted to include:
• Goodwill (including supplier and customer connections)
• Trade secrets and confidential information
• Stability of the workforce
A client cannot apply a restrictive covenant just to stop someone competing with their business, but it can seek to stop that person using or damaging their LBIs by using a reasonably drafted covenant. There are a few different types of restrictive covenants that can be applied, these being:
1. Non-solicitation covenants are there to prevent a party from enticing away the customers of their ex-client and as long as they are reasonable are the most commonly enforced type of restriction. Solicitation generally means “directly or indirectly requesting, persuading or encouraging contacts/customers of the former client to transfer their business to their new business". To be valid, the covenant should be restricted to customers with whom the contractor had contact during a specified period before leaving. Other relevant factors may include the extent of the contractor’s role in securing new business and the length of similar restrictions in the contracts of competitors.
2. Non-dealing covenants are a wider restriction and not only restrict solicitation but any other general contact with clients. The enforceability of a non-dealing covenant will depend on the interest being protected and can be influenced by a substantial personal connection the contractor enjoys with a specific client. However, such a covenant will not be enforceable if it prevents any sort of contact with the client. The restriction must be focused on the specific type of contact that would directly affect the client’s business.
3. Non-competition covenants prevent a party from working with a competing business or setting up to work in competition with their ex-client. Such general restrictions are seen as a restraint of trade and will be difficult to enforce. They will only be seen as reasonable if in the process of working in competition, the contractor uses trade secrets or sensitive confidential information belonging to their ex-client, or their influence over clients is so great that such a restriction is necessary. The length of the restriction and its geographical coverage will also be relevant.
Whilst restrictive covenants are mainly used as a scare tactic by clients, if a contractor has acted in breach of a covenant and the client is intent on pursuing the matter further they can do so. The following are potential outcomes if the client takes legal action:
• Obtain an interim injunction preventing the contractor from doing certain things that would make them in breach of the restrictive covenant
• Seek compensation for damages that have directly resulted from the breach of the covenants
As you can see there are no hard and fast rules on restrictive covenants. Whether a specific restriction is enforceable will always depend on the individual circumstances, the interest being protected and whether it has been reasonably drafted. The above principles are what the courts will consider when deciding whether a restriction is going to be legally enforceable.
On the whole this is a completely normal clause and allows the immediate termination without notice in the event of certain events, such as serious breach of contract, insolvency, death, professional suspension, etc. The only thing is the notice period and if you are happy for the 3 months to be the notice period to terminate this under normal circumstances. Again, there is no set rule for the length of notice period and it can be whatever the parties agree between themselves. It depends on how important you believe it is to be released from this contract and if 3 months is too long for you to leave. Similarly, if they were terminating would 3 months be enough for you, for example would it be long enough to allow you to find another client for your services or make other arrangements to replace the work you are about to lose. In general 3 months is not unreasonable and can be a fair notice period but you would still need to consider it to your personal circumstances and needs.
Customer: replied 1 year ago.

Is it usual to have this 'after tax and expenses' inclusion?

1.1.1 a fee equal to 10% of the net profit after tax achieved by the Business in each quarter, as shown by the management accounts to be prepared by the Company;

1.1.2 in the event of a sale of all or any part of the Business by the Company, a fee equal to 10% of the net proceeds of such sale, after deduction of tax and legal and other expenses.

Expert:  Ben Jones replied 1 year ago.
Hello, again it is not really a legal matter - if its is specifically included then it can be applied. Whether it is usual will depend on the industry practices - this is something that only a person working in the industry would know, someone who has been involved in the provision of such services. From a general point of view you cant say if it is usual or not as there are an infinite number of variations you can have in a service agreement and you really need to compare this in your specific industry, which means discussing it with others who have worked under similar agreements.

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