Is A Non Compete Binding If There Is No Consideration

I've recently signed a non disclosure agreement that included a non compete clause with a company that I was talking with about a web design project that I was considering undertaking. Although I have had access to their database, I've received no consideration of any kind. If I chose to start a competing company, but did not use any of their data or client information, would the non compete be enforceable?

1 answer  |  asked Apr 4, 2007 3:04 PM [EST]  |  applies to Ohio

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Answers (1)

Neil Klingshirn
Consideration, yes; reasonable, probably not

If the company gave you access to it's database in exchange for the agreement, there is probably sufficient consideration to support the creation of an agreement. As a general rule, courts will not question the adequacy (amount) of consideration. As long as you received something in exchange for signing the agreement, there is probably enough consideration to form a contract.

The next question for a non-compete contract, however, is whether the restrictions in it go beyond those necessary to protect the company's legitimate business interest. In this case, it appears that they do go too far. If a court agrees, it can rewrite the agreement to allow you to engage in business activities that do not impair the company's interests in showing you its database.

The problem you face, however, is that you will be at risk of a lawsuit and can only reform/rewrite your agreement in the context of a lawsuit. In order to examine what that means for you, I suggest a consultation.

Best regards,

Neil Klingshirn

posted by Neil Klingshirn  |  Apr 6, 2007 12:04 PM [EST]

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