X sold his retail clothing business to Y. The business was located in a small town, and most of the customers lived within a radius of eight kilometres of the clothing shop. As a part of the sale agreement, X agreed not to set up a similar business in competition with Y for a period of five years or within a radius of eight kilometres of the shop. A court will strike down an unreasonable restriction, and thereby leave the purchaser unprotected from competition from the seller.

Question

Quizplus · Accepted Answer

Courts generally enforce non-compete agreements if they are reasonable in scope, duration, and geographic area. If deemed unreasonable, a court may strike down the restriction, leaving the purchaser unprotected.

X Sold His Retail Clothing Business to Y