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In Reply to: Why would the owner agree to a non-compete for his own company? posted by Caymus on October 09, 2004 at 13:23:26:
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particularly where it can be shown the ex-owner was, in fact, what the purchaser was buying.In general, non-competes with ex-owners are the ONLY kind that will stand up in court.
Has not held up in court in cases when ex-owner produces another simular product. You see, a person has the right to make a living, a right to support ones self with their skills be it working for another or self employed.
"a person has the right to make a living, a right to support ones self with their skills be it working for another or self employed. "Yes, all true, however, if a person whose company is found to be essentially themself sells it to someone else, they are effectively selling the right away, or else there would be nothing of value to sell. You can't take the money and then render the asset worthless.
I don't suppose the ex-owner, who sells based on a multiple of earnings representing future profits, ever wishes to return that sale price back to the buyer?
At any rate, courts find these types of non-compete agreements perfectly valid. There is NO restriction of anyone's ability to earn a living, after all, the future earnings of the ex-owner were PAID FOR IN ADVANCE by the new owner!
In general, the duration of the non-compete in such cases - where the ex-owner is fired - will be no longer than the severance period.
I disagree & read individual cases. If I sold a business that produced amps or power supplies, I can still manufacture amps or power supplies with a different name & different design. A non-compete clause will not hold up as long as the same exact product is not produced.There have been cases where this clause had not held up under the above circumstances. You see, everyone has the right to make a living & that does hold up in court.
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