Business Purchase Non Compete Agreement

For example, a Texas appeals court recently reformed a non-compete agreement for the sale of a grocery chain, which stated that each site within a 10-mile radius was unreasonably wide and that this radius was reduced to 3 miles, whereas the seller and buyer had initially agreed to a 10-mile radius. As in an employment contract, a non-compete clause in a contract to sell a business must be reasonable in scope. Our Chicago-based trial lawyers are able to assess whether this is the case. The non-competition agreement generally prohibits the seller from working in or be linked to companies in sectors identical or similar to that of the company sold. If the agreement prohibits the seller from working in other unrelated sectors, it is probably considered unenforceable. In addition, the agreement must be geographically limited to the area in which the seller operated and, in due course, to a reasonable number of years. The exact area and time allowed depends on the type of transaction and the transaction for sale. There is a way to avoid in the contract an opportunity to avoid a situation in which a court disagrees with the buyer and decides that a restriction is inappropriate. The objective is to prevent it from being left to the court to find either the whole agreement or the unenforceable provision or the blue pencil removing something.

The parties have begun to apply progressive provisions to increase the predictability and control of the outcome of non-competition agreements. A “step down” rule is formulated in such a way that an initial restriction, for example. B a five-year time limit is set, but offers alternatives if the court finds that the clause is not appropriate. Take, for example, a non-compete clause that prevents the seller from competing for five years. However, if five years were to be deemed inappropriate, the agreement would allow the court to prohibit competition from the seller for three years. In one case in Arizona, it was found that the “step down” provisions must be: for a period of two (2) years from the reference date, the seller may not, directly or indirectly, engage, hold, manage, control, operate, operate through the ownership, administration, operation or control of a business fundamentally similar to the nature of the business, operate, manage, manage, operate, participate or be related to ownership, management, operation or control, somewhere in the United States. If the seller violates this section or threatens to violate this section, the buyer and/or the company are entitled to an injunction and injunction that prevents the seller from violating its provisions. There is nothing in this agreement that prohibits the purchaser from pursuing other available remedies in the event of an infringement or threat of infringement, including the recovery of damages by the seller. Geographical restriction is a complex clause for writing correctly. The typical approach, certainly until the advent of the Internet for commercial purposes, was based on the distance from the location of the company. An appropriate geographic restriction could have been located fifty (50) miles from the location of the business, or a number of miles around the market to which the seller had sold. In the current business environment, it is not excluded that an overall restriction of countries may be justified by circumstances.

Determining “adequacy” is often the greatest challenge for a court in considering non-competitive agreements or clauses. In the words of the Supreme Court of Canada in J.G. Collins Insurance Agencies v. Elsley, “reasonable” is in any case “through “… a comprehensive assessment of the clause, the agreement in which it is found and all the circumstances of the environment.┬áIn common parlity, context is seen as a key factor in deciding the validity of non-competitive clauses or agreements.