Limits on non-compete and non-solicitation clauses? | ScriptaLegal
Personal Business Packages & Subscriptions
Français About us Create a free account Log in
Interactive legal guides Legal frequently asked questions Legal blog Videos
ONLINE LEGAL DOCUMENTS
Legal blog > Business Law > The non-compete and non-solicitation clauses must be limited

The non-compete and non-solicitation clauses must be limited

The drafting of a non-compete and non-solicitation clause must be tailored to each specific situation. Every lawyer tasked with drafting such clauses must keep in mind the Irish proverb: "One must knead according to the flour."

«Remember to be cautious»
Epicharme

For many, drafting a contract is simply adding one stereotypical clause after another. However, courts regularly remind us that, among other things, the drafting of non-compete and non-solicitation clauses, subject to a penalty clause, must be appropriate and specific to each sale of a business.

Thus, a buyer who has acquired the shares of her co-shareholder in a service company, turns to the Court* to enforce the clauses stipulated in the contract while demanding a certain amount as a penalty.

The court recalls that both non-compete and non-solicitation clauses must be "limited in terms of duration, territorial scope, and prohibited activities." The judge reiterates that such a clause is deemed reasonable "if it does not go further than what is necessary to protect the rights of the buyer."

Although a penalty clause allows the buyer who claims it to avoid "having to prove the damages suffered," the Court concludes that it does not allow her to claim damages without the seller's failure causing her harm or damage. A penalty clause can therefore be considered abusive when there is a disproportion between the provided penalty and the obligation it sanctions.

The drafting of a non-compete and non-solicitation clause must be tailored to each situation. Every lawyer called upon to draft such clauses must keep in mind the Irish proverb: "You must knead according to the flour."

* C.A. Québec 200-09-005695-066

François Forget, notary and legal advisor, along with the entire team at ScriptaLegal, are here to assist you with the preparation of your legal documents and to answer all your legal questions.
Ignorance of the law is not an excuse
Me François Forget - March 24, 2012
Normally, municipal regulations reserve a certain number of parking spaces for disabled people. One must...
Another facet of birth and adoption
Me François Forget - December 5, 2017
The arrival of a newborn, normally a source of joy, can sometimes be a source of administrative hassles. For...
When love has the depth of the wallet of the beloved?
Me François Forget - October 28, 2007
If it is often in small pots that we find the best ointments, it is in the application of the rules established by...
This browser does not support this kind of file. Please download the file to view it: Download the file
An error has occurred.