The difficulty of enforcing a non-compete clause in a contract is inversely proportional to the good faith of the parties.
It frequently happens that certain individuals, after selling their business, do not respect the non-competition clause contained in the sales contract.
A Distributor who sold his business to a Corporation acquires a direct competitor of the Corporation, despite his commitment to not operate a similar distribution business for a period of five years. It should be noted that the Corporation also wanted to acquire this competitor.
The Corporation addresses the Court* and requests compensation for loss of profits. The Court declares that in business, it is "not acceptable to profit from one's bad faith". Indeed, the Distributor, knowing that he was violating the non-competition clause, did not concern himself too much under the pretext that exemplary damages cannot be awarded in Quebec.
The Court orders the Distributor to pay several million dollars to the Corporation. The acquisition was made in violation of the Distributor's commitment and provided him with an advantage in the market that inevitably caused a loss for the Corporation.
It must be remembered that the difficulty of enforcing a non-competition clause is inversely proportional to the good faith of the parties.
*C.A. 500-05-010190-930, 2002-09-09
