The legal business of rivalry
14 May, 2010
Q I’m about to go into partnership with a colleague to start a wine shop. We’ve discussed signing non-compete clauses to prevent either of us setting up a rival business within 12 months of our partnership dissolving. Are such clauses legally valid??A They can be, but courts usually only uphold them if it’s obvious the person setting up on their own is privy to commercially sensitive information which will cause problems for the original company. Then the injured party can sue for damages or obtain a court injunction.
If either of you is simply opening a rival shop across the road, the courts are more likely to take the view that the clause is unenforceable because it amounts to an illegal restraint on trade.
Seek advice from a qualified expert when drawing up your partnership – and think carefully about how much you trust each other. It sounds like you’re already having doubts.