Chapter 10 - Legality, Constent, and Writing

Chapter 10 - Legality, Constent, and Writing - Chapter 10...

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Chapter 10: Legality, Consent and Writing Legality Restraint of Trade To be valid, an agreement not to compete must be ancillary to a legitimate bargain “Ancillary”: Noncompetition agreement must be part of a larger agreement The two most common settings for legitimate noncompetition agreements are the sale of a business and an employment relationship Sale of a Business When a noncompete agreement is ancillary to the sale of business, it is enforceable if reasonable in time, geographic area, and scope of activity Employment When signing an employment contract, the document may contain a noncompeting clause A noncompete cause in an employment contract is generally reasonable – and enforceable – only to the extent necessary to protect o Trade secrets o Confidential information o Customer lists developed over an extended period King v. Head Start Family Hair Salon, Inc. Facts: o Kathy King worked as a hairstylist for 25 years o Worked at Head Start for 16 years o Quit Head Start to work as a manager of Sports Clips, located in the same mall o Head Start files a claim saying she was violating the noncompetition agreement that prohibited King to work at a competition business within a 2 mile radius for 12 months after leaving the company Trial Court: o Issued an injunction enforcing the noncompete o King appealed King’s Argument: o The geographical restriction contained in the agreement imposes an undue hardship on her o That is the only industry she is skilled and can find employment in o Head Start has 30 different locations throughout the county making it virtually impossible for her to find employment in the hair care industry that does no violate the terms o Geographic restriction constitutes a blanket prohibition on practicing her trade Head Start’s Argument: o Valid concern that King would be able to attract many of her former Head Start customers if without limitations Appeal
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o Reversed and remanded Exculpatory Clauses A contract provision that attempts to release one party from liability in the event the other is injured An exculpatory clause is generally unenforceable when: o It attempts to exclude an intentional tort or gross negligence
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Chapter 10 - Legality, Constent, and Writing - Chapter 10...

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