This article is written by THIRUNAHARI SRINIJA,Padala Rama Reddy Law College,4th year,BALLB Student during an internship at LeDroit India.
KEYWORDS:
- Protection
- Confidentiality
- Trade Secrets
- Unfair Trade Practice
- Competition
- Legality
- Contractual obligations
- Business Interests
INTRODUCTION:
The Roles of Non Compete Clauses in business.
Business contract is a contract in which ,it is a Legally binding agreement between two parties regarding the buying and selling of goods or
Services.There are essential elements of contracts. They are Consideration,Offer and Acceptance,free Consent and Capacity.
A Non Compete Clause is a legal agreement;there are contractual provisions that restricts an individuals ability after leaving a company;that engages in certain business activities.These clauses are commonly used in contracts,business partnerships and sale of business agreements.
PURPOSE OF A NON COMPETE CLAUSE:
It protects business interests of sellers and employers from using their knowledge,skills,and experience to compete against them.
Non Compete Clauses protect the business Interactions of the employers or sellers by
preventing the individual or entity from using their knowledge and skills.Non Compete Clause prevent unfair competition by prohibiting individuals or entities from using confidential information or trade secrets to gain unfair advantages.
Non Compete Clause can encourage by allowing employers or sellers to invest in research development without fear of their competitors by stealing their ideas.
TYPES:
There are three main different types of clauses. They are :Non Competition Clause,Non Solicitation clause,Non disclosure Clause.
1.Non competition clause:This type of clause prohibits an individual or entity from engaging in any business activity that competes with employer. 2.Non Solicitation clause:This type of clause prohibits an individual or entity from engaging in any business from soliciting customers .
3.Non disclosure clause:This type of clause prohibits an individual or any entity from engaging in any business from disclosing confidential information about the employer or seller.
CASE LAWS:
- Tesch v General motors corp (2001):The court upheld a Non compete clause it was reasonable and necessary to protect the company trade secrets.
- Pepsi co,Inc v Redmond (1995):The court ruled that a Non compete clause was enforceable,even though the employee had acknowledged the Clause in email.
EXAMPLES:
- Coca Colas secret formula-Coca Colas Employees required to sign Non disclosure Agreement to protect companys secret formula.
- Microsofts NCC:Microsoft requires its employees to sign NCC to prevent them from working for the competitors.
ILLUSTRATIONS:
- Confidential Agreement-A company hires a new employee and allowed them to sign a non disclosure agreement (NDA) to protect trade secrets.
- Non compete clause:A business partner signs a
NCC agreeing not to start a competiting business within a specific area in a specific period.
- Sale of business:A company sells its assets to another company and the seller agrees to a NCC to prevent them from starting a similar business.
CONCLUSION:
Non compete clauses play a crucial role in business contracts by protecting business interests, preventing unfair competition and .However,this Non compete clauses varies by jurisdictions,and courts will only enforce clauses that are reasonable in duration and this are very necessary to protect business interests.so,Businesses can ensure that their clauses are enforceable and effective in protecting their business interests.
REFERENCE:
- Pepsico,Inc. v.Redmond (1995)
- The Role of Non –Compete Clauses in Business Contracts by Forbes.
- Journal of Contract law
