What is an NCNDA?
NCNDA · Non-Circumvention, Non-Disclosure Agreement
An agreement not to bypass an introducing party or disclose what it has shared. Widely used by intermediaries to protect a commission, and considerably harder to enforce than its popularity suggests.
Key points
- The confidentiality half is enforceable; the non-circumvention half is much weaker.
- Template NCNDAs often lack governing law, jurisdiction or a defined term.
- Taking title protects a margin far better than a promise not to be bypassed.
At a glance
| What it is | Combined confidentiality and non-circumvention undertaking |
|---|---|
| Enforceable | NDA half yes; non-circumvention half is difficult |
| Typical term | One to three years, where a term is stated at all |
| Common defects | No governing law, no jurisdiction, unnamed parties, undefined "introduction" |
| Stronger alternative | Contract as principal and take title |
Two agreements in one document
The non-disclosure half is ordinary and enforceable: the recipient will not pass on confidential information — producer names, pricing, contract terms — and will use it only to evaluate the transaction. Courts handle confidentiality obligations routinely.
The non-circumvention half is the contested one. It says the recipient will not deal directly with a party it was introduced to, for a stated period, without paying the introducer. That is an attempt to create a property right in a relationship, and it is a much weaker thing than it looks on paper.
Why non-circumvention is difficult to enforce
The obstacles are practical. The introducer must show the relationship would not have arisen otherwise, which is hard when the parties are both well-known participants in a small market. It must show a breach occurred, which requires visibility into a transaction it has been excluded from. And it must sue, usually across borders, for a commission that is often smaller than the cost of the case.
Drafting compounds it. Many NCNDAs circulating in commodity markets are copied templates with no governing law, no jurisdiction, no defined term, no named parties beyond a signature block, and a definition of "introduction" broad enough to be meaningless. An agreement with those defects is difficult to enforce anywhere.
What actually protects a fee
Being in the transaction rather than beside it. An intermediary that contracts as principal — buying and reselling — is paid because it holds title, not because someone promised not to go around it. That is why trading houses take positions instead of collecting introduction fees.
Where a fee arrangement is genuinely the right structure, a short, properly drafted agreement with named parties, an identified transaction, a defined term, a governing law and an agreed forum is worth more than a long template signed by everyone in a chain. Specificity is what makes it enforceable.
Frequently asked questions
- Is an NCNDA legally binding?
- The confidentiality obligations generally are, provided the document names the parties and states a governing law. The non-circumvention obligation is binding in principle but hard to enforce in practice, and many circulating templates are too vague to rely on.
- Do commodity trading houses sign NCNDAs?
- Confidentiality agreements, routinely. Broad non-circumvention undertakings, often not — a house already dealing with most producers in a market cannot promise not to contact them, and signing such a term would be misleading.
- How can an intermediary protect its position without one?
- By taking a principal position: buy from the seller, sell to the buyer, and earn the difference. The margin then depends on holding title and carrying the risk, not on a promise that has to be litigated to be worth anything.
Related terms
A non-binding note from a buyer setting out what it wants to buy and on what terms. It commits nobody to anything, and its real function is to open a conversation in enough detail that the seller can tell whether the enquiry is serious.
The contract itself — the first document in the sequence that actually binds the parties. Everything exchanged beforehand is superseded by it, and any term not carried into it has no effect.
Know Your Customer and Know Your Business: verification of identity, ownership and sanctions status of a counterparty before contracting. A cargo can be frozen mid-voyage over a party that should never have entered the chain.
A long-term contract under which a buyer commits to purchase an agreed share of a project’s future production. For a mine, an offtake is often what makes financing possible, because it converts uncertain future output into contracted revenue.
Trading this, or trying to price it?
CommoFlow sources, buys, sells and ships physical commodities from the Middle East, Central Asia, the Caucasus, Africa and Australia. If a contract term is deciding your economics, our desk deals with it daily.
Contact our desk