Asked by Shreyans Nanavati on Jun 09, 2024
Verified
A provision that restricts the seller from competing with the buyer in a contract for the sale of a business is
A) always enforceable because the parties to a contract have the freedom to contract as they see fit.
B) always unenforceable because any attempt to restrict competition is an illegal restraint of trade.
C) fatal to the whole contract (i.e., it causes the whole contract to fail) .
D) enforceable if it is reasonable between the parties, which means that it must be limited in time (e.g., one year) but need not be limited in area.
E) enforceable if it is reasonable between the parties and not contrary to public policy.
Restraint of Trade
Legal restrictions imposed on businesses to prevent unfair competition, monopolies, or practices harmful to the market.
Sale of Business
The process of transferring ownership of a business entity from one party to another.
Competing
Engaging in an effort to win or succeed against others, often in a business, sporting, or academic context.
- Identify the legal consequences of breaching contracts involving restrictive covenants or competition clauses.
Verified Answer
JM
Julia MerchantJun 12, 2024
Final Answer :
E
Explanation :
Non-compete clauses, such as those that restrict the seller from competing with the buyer in the sale of a business, are generally enforceable if they are reasonable between the parties and not contrary to public policy. This typically means they must be limited in scope (geographical area and duration) and necessary to protect legitimate business interests.
Learning Objectives
- Identify the legal consequences of breaching contracts involving restrictive covenants or competition clauses.