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.The agreement which restricts X's right to set up a business in competition with Y will only be enforceable if it is reasonable and necessary.

Question

Quizplus · Accepted Answer

Restrictive covenants like non-compete clauses are only enforceable if they are reasonable in terms of scope, geographic location, and duration, and if they are necessary to protect the legitimate interests of the business being sold. In this case, since the restriction is limited to a small geographic area and a short period of time, it is likely to be considered reasonable and necessary to protect Y's business interests.

X Sold His Retail Clothing Business to Y