Non compete agreements: When Selling a Business

In my Non-Compete FAQ I mentioned that Indiana courts treat differently a non-competition agreement as part of a sale of a business. Here are the reasons for the is difference:

1. there is more likely to be equal bargaining power between the parties;
   
2. Unlike an employee, the seller has the proceeds of the sale to support themselves without the need of entering the job market to survive;
3. A seller is usually paid a premium for agreeing not to compete with the buyer.
   
4. When buying a business' good will, then a broad noncompetition agreement may be necessary to assure that the buyer receives that which he purchased. . . .

How do Indiana courts judge covenants not to compete ancillary to the sale of a business?

1. the covenant is deemed to be reasonable where it is limited to the area of the business involved.
   
2. Reasonableness is again measured in terms of time, space, and prohibited activity.
3. Where the interest to be protected relates to the goodwill of the business, then the restraint can be no greater than necessary to protect the goodwill.

Remember, if you still have questions about non-competition agreements to check out the other articles on this blog. Just click here to see the other articles.

If you think you have a case (in Indiana), please give me a call.