4 ms·
Noncompetes that are tied to equity agremeents, rather than to employment contracts, are different, and often enforceable even in California (subject to various
by _delirium 9y ago
Noncompetes that are tied to equity agremeents, rather than to employment contracts, are different, and often enforceable even in California (subject to various caveats, consult your lawyer, etc. etc.).
The paradigmatic case that California allows is: You own a restaurant that builds up a good reputation. You agree to sell it, with a condition in the sales terms that you won't open a competing restaurant within X miles for Y years. In large part what the buyer is buying here is your existing reputation and customer base, so you agree to a noncompete to facilitate selling these intangible items, which are more valuable if the buyer doesn't have to worry that you're going to sell the restaurant but then turn around and open a near-identical one to try to keep the customer base.
- logicallee 9y agoCan you add a value judgment for what you've stated? I did not include one in my comment, and you answered in legal terms without including a value judgment yourself. For example do you agree with the morality of your restaurant example?
- ghaff 9y agoSeems perfectly moral to me. It's conditions attached to the sale of a business and I would assume such clauses are pretty standard. If I sell a consulting business to you, you'd be pretty crazy not to have some anti-solicitation clause in the sale agreement. If I did open up a competing restaurant next door as soon as the ink was dry on the sale agreement, I think it would be on you and your lawyer not to have covered that eventuality. (Though it would also be kind of sleazy of me IMO.)