overly restrictive non-compete clauses WAS: [asterisk-biz] Fascinating conversation with a prospective customer

[Paul]

Trixter aka Bret McDanel wrote:

> On 1/7/07, *Paul* <ast2005 at 9ux.com <mailto:ast2005 at 9ux.com>> wrote:
>
>     I was thinking more about unreasonable restrictions placed on the
>     future
>     livelihood of the worker. Let's assume he does nothing unfair or
>     underhanded. He has proper respect and regard for IP rights. The
>     customer wants a non-compete clause that prevents him from doing any
>     development work for competitors of the customer.
>
>
> if you enter into a contract without intent on upholding all clauses,
> then that is considered by some to be underhanded.  If the customer
> wants a non-compete clause, then its on you to not agree to that, and
> either get it removed, amended or walk away from the deal.

I agree for the most part. However, people with good intentions don't
always understand the full impact of every clause. If things are
lopsided, I tend to sympathize with the person who signs a contract that
the other party produced. There are converse situations where
consultants produce "standard" agreements disclaiming reality in
general. I might be just as sympathetic to the customer.

Either way, let's try to remember that many of these contracts are
composed by copy/paste. The editor doesn't think carefully about the
elements. He might fax it to his attorney for review and then disregard
the advice that follows. Same would apply to the landlord who buys a
"standard" legal form. He needs to read it or pay his attorney to read
it before implementing it. I have seen many of these used that were
contrary to state and local laws.

The judge might view the landlord as a cheapskate lawyer-hating idiot.
Not a good way to impress the court.

>     My understanding is that the courts apply this policy to people, not
>     companies. You can contract with a corporation and impose all
>     kinds of
>     one-sided non-compete restrictions. The owners, officers and employees
>     of that corporation could wind up ignoring those restrictions. You can
>     go after the corporation for breach of contract if it still exists
>     and
>     has assets.
>
>
> There are other things that can affect a contracts validity as well. 
> In some countries indefinite contracts are not legally valid, there
> must be some way to terminate the contract at some point.  Either by
> saying 'no more' (with or without notice depending on the contract) or
> whatever.  This can allow for a company to opt out in some cases,
> although generally a non-compete is 'for X years after termination of
> this agreement'.  That way if there is a breech for any reason the
> non-compete or whatever clause still holds.  Microsoft for example is
> currently under a non-compete clause with citrus or whomever and the
> most they can do is remote desktop, although that is about to expire. 
> NT4 was delayed for a similar clause.
>
An attorney told me that anything over 3 years of non-compete is
extremely difficult to enforce without good compensation for the
privilege. He said up to 10 years is possible, but the courts will
expect more consideration and protection for each year added. His
reasoning is that things like copyright, patents and trademark laws
already provide longer term protection.