Before examining the reasonableness of a noncompetition agreement, courts first consider whether the agreement is ancillary, meaning connected and subordinate to another valid contract. If there is no such contract, the court will look to see if there was valid consideration to enforce such an agreement. If there is no adequate or independent consideration present, most courts will refuse to enforce such an agreement. This is to ensure that the noncompetition agreement is not an outright restraint on trade but, rather, the result of a bargained-for exchange that furthers legitimate commercial interests.
When a businessman sells his business, the purchaser may compete with him unless there is a valid restrictive covenant or covenant not to compete. The same is true when an employee leaves the employment of a company and begins soliciting customers of his former employer or competing with his employer in a similar way. When an ongoing business is sold, it is commonly stated in the sales contract that the seller shall not go into the same area or begin a similar business within a certain geographical area or for a certain period of time or both. Such an agreement can be valid and enforceable.
Restrictions to prevent competition by a former employee are held valid when they are reasonable and necessary to protect the interests of the employer. Courts will closely examine covenants not to compete signed by individuals in order to make sure that they are not unreasonable as to time or geographical area.
When a restriction of competition is invalid because it is too long or covers too great a geographical area, Courts will generally do one of two things. Some Courts will trim the restrictive covenant down to a period of time or geographical area that the Court deems reasonable. Other Courts will refuse to enforce the restrictive covenant at all and declare it void.
Caution: Statutory law in a few states completely prohibit covenants not to compete unless the covenant meets the state's statutory guidelines.
A Texas General Non-Competition Agreement is a legally binding contract between an employer and an employee in the state of Texas that aims to restrict the employee from engaging in certain competitive activities during or after their employment term. This agreement serves to protect the employer's business interests, trade secrets, client relationships, and confidential information. Key elements of a Texas General Non-Competition Agreement typically include: 1. Parties Involved: The agreement identifies the employer (referred to as the "Company") and the employee (referred to as the "Employee") who are entering into the agreement. 2. Non-Competition Clause: This clause outlines the prohibited activities or services the employee must refrain from engaging in during the employment term and for a specified period of time thereafter. It may restrict the employee from working for or starting a similar business within a specific geographic area. 3. Scope of Restrictions: The agreement specifies the specific limits or boundaries of the employee's non-competition obligations, such as industries or sectors in which the restrictions apply. 4. Duration: The agreement establishes the length of time for which the non-competition obligations will be in effect. Texas law generally allows non-competition agreements with a duration of up to two years after employment termination. 5. Consideration: Consideration refers to what the employee receives in return for agreeing to the non-competition obligations. Typically, it includes the initial employment offer, access to trade secrets, specialized training, or other valuable benefits. 6. Severability: This provision ensures that if any part of the non-competition agreement is found to be unenforceable, the remainder of the agreement remains valid. It is essential to note that there are different types of Texas General Non-Competition Agreements that employers may utilize based on their specific needs: 1. Employee Non-Competition Agreement: This agreement restricts an employee from joining a competing employer or starting a competing business within a defined geographical area for a specified period of time after leaving the current employment. 2. Vendor Non-Competition Agreement: Companies may use this agreement to prevent vendors or contractors from engaging in the same line of business as the hiring company, particularly if the vendor has access to sensitive information or trade secrets. 3. Partnership Non-Competition Agreement: This agreement is typically used between partners in a business to prohibit one partner from engaging in competition that may harm the partnership's interests. Each of these agreements shares the overall goal of protecting a company's assets, trade secrets, and customer relationships from potential damage or misuse by former employees or business partners.A Texas General Non-Competition Agreement is a legally binding contract between an employer and an employee in the state of Texas that aims to restrict the employee from engaging in certain competitive activities during or after their employment term. This agreement serves to protect the employer's business interests, trade secrets, client relationships, and confidential information. Key elements of a Texas General Non-Competition Agreement typically include: 1. Parties Involved: The agreement identifies the employer (referred to as the "Company") and the employee (referred to as the "Employee") who are entering into the agreement. 2. Non-Competition Clause: This clause outlines the prohibited activities or services the employee must refrain from engaging in during the employment term and for a specified period of time thereafter. It may restrict the employee from working for or starting a similar business within a specific geographic area. 3. Scope of Restrictions: The agreement specifies the specific limits or boundaries of the employee's non-competition obligations, such as industries or sectors in which the restrictions apply. 4. Duration: The agreement establishes the length of time for which the non-competition obligations will be in effect. Texas law generally allows non-competition agreements with a duration of up to two years after employment termination. 5. Consideration: Consideration refers to what the employee receives in return for agreeing to the non-competition obligations. Typically, it includes the initial employment offer, access to trade secrets, specialized training, or other valuable benefits. 6. Severability: This provision ensures that if any part of the non-competition agreement is found to be unenforceable, the remainder of the agreement remains valid. It is essential to note that there are different types of Texas General Non-Competition Agreements that employers may utilize based on their specific needs: 1. Employee Non-Competition Agreement: This agreement restricts an employee from joining a competing employer or starting a competing business within a defined geographical area for a specified period of time after leaving the current employment. 2. Vendor Non-Competition Agreement: Companies may use this agreement to prevent vendors or contractors from engaging in the same line of business as the hiring company, particularly if the vendor has access to sensitive information or trade secrets. 3. Partnership Non-Competition Agreement: This agreement is typically used between partners in a business to prohibit one partner from engaging in competition that may harm the partnership's interests. Each of these agreements shares the overall goal of protecting a company's assets, trade secrets, and customer relationships from potential damage or misuse by former employees or business partners.
