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Disputes regarding non-compete agreements

In a past post, we discussed how it is sometimes possible to ask another business not to compete with a business-to-business non-compete agreement. These agreements are especially common in two scenarios:

  • when one business purchases another business and the buyer asks the seller to enter a non-compete contract
  • when two or more companies enter a joint venture and agree not to use each other's confidential information in competition

Generally speaking, these contracts can be enforceable, so long as they are not giving one business complete dominance in the market and they are not overbroad in reaching their intended purpose.

When disputes arise

Like with any contract, though, non-compete agreements between businesses are often the cause of disputes. Often, one party accuses the other party of not adhering to what was agreed upon in the contract. The other party, in response, might argue that the agreement was too strict and should not be enforced.

  • For example, let's say the owners of bakery decide to buy the ice cream shop next door. If a non-compete agreement between the bakery owners and the ice cream shop sellers stated that the sellers could not sell ice cream anywhere in California for five years after the sale, the sellers could argue that the contract was invalid because it was unreasonably broad.
  • In another example, let's say the agreement stated that the ice cream shop sellers could not open up another ice cream store within a certain number of miles of the shop that was sold. If the sellers then start an ice cream truck business, a dispute might exist over whether the ice cream truck business was in violation of the non-compete agreement, even if it wasn't another ice cream store, exactly.

As you can see, disputes often arise because of technicalities that need to be sorted out with the help of an experienced attorney and, sometimes, the court, through litigation.

The first call to make when dealing with a dispute involving a business-to-business non-compete agreement is to an attorney who is familiar with the numerous types of contracts that define business relationships.

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