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ANALYSIS: Narrowing of Noncompetes Spreads to Business Deals

Nov. 18, 2022, 5:35 PM

In Delaware, noncompetition and nonsolicitation restrictive clauses in business transactions are set to become less restrictive and more narrowly drawn after a recent Court of Chancery ruling. Could this case signal that sale-of-business noncompete agreements, like their employment-related cousins, will be viewed with increasing disfavor by reviewing courts?

In the October ruling, the court rejected restrictive covenants that it held to be overbroad because they sought to protect more than the legitimate economic interests of the purchaser in the sale of a company.

Although there was a provision in the restrictive covenant agreement waiving the parties’ right to contest ...