Non-compete agreements can be useful tools when two businesses agree to share information and cooperate with each other. But simply including a paragraph in a contract may not be enough if a disputed contract lands in court. A recent case highlighted the importance of drafting contracts that conforms with all the proper legal elements.
In APR, LLC v. Lomans, the Superior Court in Bergen County considered the validity of a non-compete agreement between a defendant who had been involved in the development of a pharmaceutical, and a laboratory that helped in the development. When the plaintiff began working to develop a competing product, the laboratory sued.
The defendant argued that the laboratory breached the contract first, leaving him free to work on the competing product. But the laboratory countered that the non-compete agreement was independent from the contract.
The basis of the laboratory’s argument was that there was independent consideration for the non-compete agreement. In other words, did the Plaintiff receive something of value, not connected to the allegedly breached contract, in exchange his promise.
The court looked at a number of different factors to determine whether there was independent consideration. It examined the wording of the contract, the contractual agreement as a whole, the intent of the parties, and the existence of any evidence outside of the written contract. Ultimately, the court agreed that the non-compete agreement was valid.
The court’s decision highlights a number of issues to consider when entering into a non-compete agreement. It shows that writing a contract is just one piece to the puzzle. Ensuring that such an agreement remains valid should a dispute arise, it is important to examine the entirety of the arrangement.
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