LEGALDOCS - Non-Competition Agreement
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This is an example of a completed Non-Competition Agreement.
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matters important to you are covered in the Non-Competition Agreement
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Non-competition agreements are usually used in the context where one party sells a business, and the Buyer wants to make sure the Seller does not go across the street and open business similar to the one just sold. In that context, the Seller, due to market awareness, popularity, etc., would undermine the "goodwill" which was a part of the purchase price paid by the Buyer. As more fully explained below, non-competition agreements are generally disliked by the courts, because they have the effect of preventing someone from earning a living.
To create a Non-Competition Agreement, complete this Questionnaire.
INFORMATION REGARDING THE PARTIES
For this agreement, we will call the person benefitting from the non-compete agreement the "Beneficiary", and the person giving, or burdened with the non-compete agreement the "Grantor".
The Beneficiary is a:
The Grantor is a:
SPECIFIC TERMS OF THE NON-COMPETITION AGREEMENT
Non-competition clauses are generally frowned upon by courts, because they effectively limit a person from working or making a living in any particular field. Therefore, many states prohibit them except in very specific situations. For example, in California a non-compete contract is generally not effective unless it is to prevent a current employee from working with a competitor employer, or if the non-compete clause is to prevent the seller of a business from competing with the business just sold.
Even in those instances in which a non-compete clause or contract is valid, courts will construe them narrowly. This means that if the scope of the clause (i.e., duration and area involved) is too broad, the court may void that particular provision, leaving the "protected party" with no protection. (The court usually has no power to "modify" the clause to limit its scope - it can only void the entire clause.) For this reason, it is important to limit the scope to what can be demonstrated as reasonable. For example, a valid non-compete following the sale of a pizza restaurant may be 3 years with a three square mile radius, while a non-compete for an linen company supplying restaurants throughout the county may be 3 years with an area encompassing the entire county. A very unique business taking years to become established may warrant a longer non-compete time than a business in an already saturated market.
Description of Non-Compete
Describe in detail what kind of business or services Grantor will be prohibited from doing. Be specific, because (i) an overly broad designation ("work in the food service industry") would be voided by a court, and (ii) the court will limit to whatever extent possible the scope if the wording allows a limitation (for example, "open a restaurant named "Tony's" in this County" may allow your seller to open a restaurant named "Anthony's".)
Some examples or wording you may use are: Grantor will not directly or indirectly own, manage, operate, or conduct any business ...
- engaged in the construction, re-construction, manufacturing or installation of interior cabinetry and home furnishings;
- engaged in the furnishing of food and beverage to the public in any restaurant, bar, eatery or other similar establishment;
- consisting of retail sales of paints, solvents, cleaning materials or similar materials currently sold by (name of business being sold).
Finish the following sentence: Grantor will not directly or indirectly own, manage, operate, or conduct any business ...
Duration of Non-Compete
Enter the duration of during which time the Grantor may not engage in the described prohibited activities. For example, "5 years", or "12 months", etc. Finish the following sentence.
Grantor may not engage in the described prohibited activities for a period of .
Area of Non-Compete
Enter the area in which Grantor may not engage in the described activities. For example, "within a radius of 3 miles from (address)", or "within the city limits of Longmont, Colorado", or "within the 772-xxxx telephone pre-fix area", or "within the 80503 zip code area", or "within the area bounded by A street on the north, B street on the south, Elm street on the east and Maple street on the West, in the City of xxxx", etc. Be specific. A description of the "Boulder, Colorado area" would be difficult for a court to interpret at a later date. A better description would be "in the county of Boulder, Colorado". Finish the following sentence:
Grantor shall not engage in the described prohibited activities within
An attorney's fees provision provides that, in the event any legal action is taken to enforce the provisions of this contract, the prevailing party will be entitled to recover their attorney's fees from the other party. Do you want this Agreement to contain an attorney's fees provision?
Provide the following information about the place where this Agreement will be signed:
Enter the name and title of the person who is signing this agreement on behalf of Beneficiary. For example, John Smith, President. .
Enter the name and title of the person who is signing this agreement on behalf of Grantor. For example, Deborah Hanson, President. .
This completes the information input for your Non-Competition Agreement. When you Send this Form, this program will prepare a Summary of the Non-Competition Agreement for your review. Make sure that all facts stated in the Summary are correct in all respects.
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