Case Study

Acceptability of non-competition clauses in civil contracts with no related damages after expiry

Posted on by Przemek Trepka

Para. 6 Section 4 of the contract:

“Unless agreed by the Client in writing, the Contractor must not directly or indirectly enter into any working arrangement with or submit any quotations for any jobs to any clients of the Client. This restriction shall apply in the course of this agreement and for 12 months since the termination of this agreement and shall not be applicable to clients with whom the Contract had had a relationship or had provided services to based on any contract concluded before the the commencement of work under this agreement. Any violation of the above provisions shall be sanctioned by a fine of PLN 50,000“.

The lawfulness and effectiveness of this provision in a civil contract is to be interpreted differently “during the relationship between the parties under a contract” versus “for 12 months after the termination of such a contract”.

A non-competition clause in a civil contract is permitted if it applies to the duration of the contract, in which case it does not infringe upon the freedom of contract under Article 3531 of the Civil Code1.

A non-competition clause to apply after the termination of the contract may be included in a civil contract but it must be accompanied by a provision that grants damages for the period of non-competition. Otherwise such a clause is contrary to the principles of social coexistence and thus null and void2.

  1. Article 3531 of the Civil Code – Contracting parties may arrange their relationship at their discretion as long as the content or purpose does not contravene the nature of the relationship, or any law or any principle of social coexistence.↵
  2. The Supreme Court ruling of 11 September 2003 (ID III CKN 579/01) provides that it is lawful and in line with the principles of social coexistence to apply non-competition arrangements during the term of a contract or some time after a contract expires but such a limitation of the freedom of contract should be rewarded with some type of damages. The amount of such damages for refraining from competitive engagement has not been regulated for civil contracts.↵