Non Compete Agreement When Buying A Business

What matters is whether an agreement is applicable or not, whether each party has been able to negotiate the terms of the non-competition clause. Much of the non-competition prohibitions are incorporated into employment contracts where new workers sign that they will not compete with their employer. In this case, a new employee has almost no bargaining power to change or decide the terms of the non-competition clause. In addition, these contracts are often designed to prohibit an employee from working for a competitor. Although non-compete clauses such as these have often been found to be unenforceable, this section deals with non-compete clauses in the sale of a business, not contracts for employees. In the case of the sale of a business, all parties have very similar negotiating positions and are, as such, more likely to influence the terms of the agreement. Since both parties have an influence on the contract, a new business owner should not be afraid that a well-designed and professionally implemented non-competition agreement will be unenforceable in the event of a challenge. It is essential to ensure that your non-competition agreement is applicable. Don`t leave it to chance. The best practice is to design a lawyer for the agreement after you have explained what you are trying to get. At least let a lawyer check your non-compete agreement to make sure you have the best chance of considering it enforceable if it is challenged in court. The next serious consideration that the judge must consider is the duration of the competition ban for the seller.

Most non-competition prohibitions prohibit the seller from competing commercially in a given geographic area (see above) for a specified period, such as two years, five years, etc. As you can imagine, this “blue pencil” throws a lot of instability and unpredictability into the mix of non-compete agreements. As such, there is a way to avoid a total loss of the agreement if a judge decides that it is unenforceable and puts control in the hands of the treaty signatories. This method is called step down deployment. A step-down provision is a carefully worded section that defines a primary restriction that, when “blue,” offers alternatives for the dish from which it can choose. For example, there is a non-competition clause that prohibits competition from the seller for seven years. If the judge finds this inappropriate, instead of treating the entire agreement as unenforceable, there is a “back-up” or “step down” system that prevents the seller from competing for four years instead of not doing so. In most cases, the term should reflect the multiple paid to the company to be considered appropriate. The courts are also of the view that the non-compete agreement is likely to have an effect on others, such as customers and other beneficiaries of a business.

If the public has alternative sources for obtaining goods or services provided by the seller, North Carolina courts will be more likely to impose non-competitive restrictions on the seller. However, where a court finds that the elimination of the seller`s competition would be detrimental to the public interest, it is less likely that the agreement will be implemented, even if it would otherwise be appropriate. This is usually due to the natural competition that is created during the process of greater negotiation (everyone wants to win).