As a professional, I have come across many legal issues in my career, and one of the most common ones is the enforceability of restraints in sale of business agreements. Many people believe that these restraints are valid and enforceable, but the truth is that there are many restrictions on their application. In this article, we will discuss the reasons why restraints in sale of business agreements are often unenforceable.
First of all, restraints in sale of business agreements are often seen as anti-competitive. The purpose of these restraints is to prevent the seller from competing with the buyer after the sale. However, this can be seen as an unfair practice and can lead to a monopoly in the market. Therefore, many courts are reluctant to enforce these restraints.
Secondly, the reasonableness of the restraint is a crucial factor in its enforceability. A restraint that is too broad or too long-lasting may be deemed unreasonable. For example, if the restraint period is longer than five years or if it covers a broader geographical area than necessary, it may be considered unreasonable and unenforceable.
Thirdly, the restraint must be necessary to protect the legitimate interest of the buyer. If the restraint is not necessary, or if there are other ways to protect the buyer’s interest, then the restraint may be unenforceable. For example, if the buyer can protect his interest through a non-compete clause, then there may be no need for a restraint.
Finally, the restraint must not be against public policy. If the restraint is against public policy, then it is unenforceable. For example, a restraint that prevents the seller from working in his or her profession may be seen as against public policy because it prevents the seller from earning a living.
In conclusion, restraints in sale of business agreements are often unenforceable due to various reasons. Courts are reluctant to enforce them because they can be seen as anti-competitive and against public policy. Additionally, the reasonableness of the restraint, and whether it is necessary to protect the buyer’s legitimate interest, are also crucial factors in determining its enforceability. Therefore, it is essential to ensure that the restraint is reasonable, necessary, and not against public policy to increase the likelihood of its enforceability.