Question

Suppose that the Fabulous Hotel hires you as head chef under a two-year employment contract. After two years, another hotel wants to hire you. However, in the original employment contract you signed with the Fabulous Hotel, the following paragraph appears:

“The below-signed agrees not to work as a chef for another hotel in the same metropolitan area for a period of two years after leaving our employ.”

Describe and analyze the five elements of a contract that must exist for this agreement to be enforceable.

Explain why this contract is governed by common law or the Uniform Commercial Code (UCC).

Examine at least two circumstances in which this non-compete agreement would be unenforceable.

Answer 1

The five elements of a contract that must exist for this agreement to be enforceable are:

1. Offer - Yes, the element exists as Fabulous Hotel offered to hire me as Head Chef.

2. Acceptance - Yes, the element exists as I accepted their offer and signed the contract.

3. Consideration - Yes, the element exists as I have accepted the offer in exchange of salary and benefits.

4. Competence and Capacity - Yes, the element exists as I was perfectly in my senses and mentally competent while signing the contract. Also, I am not a minor and capable of entering into contracts.

5. Lawful purpose - Yes, the element exists as the contract was signed to accept employment as Head Chef and there is no illegal element about the job.

Employment contracts are governed by Common law. When you hire an employee, a common law employment contract is formed irrespective if there is a written contract or not.

NOTE - *Common law governs contractual transactions with real estate, insurance, services intangible assets, and employment.*

The two-circumstances in which this non-compete would be unenforceable are:

• Time-bound - Two years is a long time for an employee such as Chef. A Chef can have limited employment options and two years becomes too limiting.
• Location or distance involved - If the metropolitan area is too huge, the contract would be considered too limiting and void. Assume you start working as Chef on other ends of the metropolitan area in another hotel more than 100 miles apart from the Fabulous hotel. These two hotels may or may not be direct competitors though they are in same industry.