I'm wondering what the limits of these statements would be and additionally if they would be considered reasonable in the merchant referral industry.

  • Company - An interim between a merchant backend (such as FirstData, Chase Paymentech, etc.) and a merchant (such as Walmart, Target, gas station, etc.).
  • Partner - Some provider of a software that provides integration to software provided by the Company which allows payments to be made.
  • Referred Merchant - The merchant that was referred to Company by Partner.
  1. During the Term of this Agreement and for sixty (60) months following its termination, Partner (a) will not solicit any Referred Merchant for services similar to or competitive with the Services; and (b) will not engage, retain, assist, or cooperate with any other party to solicit the Referred Merchants pursuant to the foregoing prohibitions (the “Non‐Solicitation Obligation”). Should Partner breach the Non‐Solicitation Obligation, it will be immediately liable to the Company for liquidated damages equal to thirty (30) times the average monthly revenue of any Referred Merchant that has been moved by Partner, directly or indirectly, for the trailing six (6) months prior to such breach, and the Company has the right but not the obligation to offset this revenue against any Residuals Partner may be entitled to hereunder.

  2. The parties acknowledge and agree that the payment required by this [legal agreement section] for a breach of the Non‐Solicitation Obligation is a reasonable forecast of the damages likely to result from such breach and is not a penalty of any kind. Partner further agrees that the payment of liquidated damages shall not be construed as a release or waiver by the Company of the right to prevent the continuation of any such breach of this Agreement in equity or otherwise and shall not preclude or be construed to preclude the Company from making a showing of irreparable injury or any other element that may be necessary to secure injunctive relief. Partner shall be liable for all of the Company’s attorneys’ fees and costs that it may incur in any suit to enforce the Non‐ Solicitation Obligation.

More specifically:

If a Referred Merchant decided that they wanted to switch to another merchant company and that that merchant company was, say, advertised on the website of the Partner, or mentioned during the sign-up process of the merchant to the Partner's software or service, then would the Partner be held liable for a breach of this Non-Solicitation Obligation section?

Are these term lengths unreasonable? Is sixty months after the termination of the overall Agreement too long? It only applies to the merchants which are already referred and are mutual clients of Company and Provider, but if the agreement was terminated would not the Provider want to switch to a different merchant company and take their clients with them, and in a case like this the Partner would have to refuse service to the client in order to avoid the clause, and yet if the client chose to use a company which is partnered with the Partner then, even though the Partner did not "solicit" them to switch, it would appear that the Partner is held liable for the solicitation of the switch and the thirty times fee would come in to effect. Is this accurate?

Under what circumstance could a Referred Merchant switch to another merchant service provider which was partnered with and advertised by the Partner and not cause the Partner to have breached the Non-Solicitation Obligation section?

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