Question

On May 2, 2018, Tanya signed a two-year employment contract with Restaurant X, a Nashville restaurant business, and began working there. The contract obligates Tanya to perform many managerial duties for Restaurant X and states that Restaurant X cannot fire Tanya without cause for the two-year period, ending on May 1, 2020. A couple of months after Tanya begins work there, Restaurant X realizes that the contract does not contain a non-compete clause. As a result, Restaurant X writes a covenant not to compete, which states that in exchange for her continued employment through May 1, 2020, Tanya promises not to compete against Restaurant X anywhere in the U.S. for a period of 30 years. Tanya signs the covenant not to compete. Is the covenant not to compete a valid contract? (Whether your answer is “yes”, “no”, or “it depends", please elaborate on all the reasons you have come to that conclusion. This question is best answered using Issue, Rule, Apply, Conclude: IRAC.)

Answer 1

Issue: Is the covenant not to compete, signed by Tanya, a valid contract?

Rule: The covenant not-to-compete is a non-compete clause in the contract law. This is a restrictive covenant, which makes the employee agree that he will not enter a competitor’s business once they get relieved or terminated from their current duties.

The applicability of this covenant varies from region to region and is also based on the type of employment. To enforce this covenant as a contract, there must be a consideration included while it was being signed. The covenant must protect the employer’s sanctity and the business interest.

Apply: When Tanya signs this not to compete covenant, no consideration was included in the agreement. Hence, this covenant can’t qualify as a valid contract.

Conclude: Tanya signs a invalid contract and therefore is not binded by it.