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Article summary

Commercial analysis: Non-compete covenants must, if they are enforceable at all, be no wider than reasonably necessary for the protection of those legitimate business interests which can be demonstrated as required by the covenantee. Although the authorities have revealed a different approach to enforcement of covenants in commercial agreements as opposed to those in service contracts (for which a more stringent approach is required), ultimately, enforceability is a matter of discretion. Where a solicitor had contracted through a service agreement and a shareholders agreement the court did not categorise the transaction but looked at its substance. It did not approach the shareholder agreement-element of a mixed scenario in the same way as pure business sale agreements, for which a less stringent approach applied, and where freely negotiated, reasonable non-compete clauses are generally enforceable. On the facts, the restriction was enforceable in the service agreement but unenforceable in the shareholder agreement. Written by Joseph Dalby SC, barrister at...