Zach sold a restaurant to Shane for $295,000 . As part of the agreement, Zach promised not to open another restaurant business for three years within a 50-mile radius of the one sold. Is this agreement enforceable against Zach?
Noncompete clauses are often upheld when the clause is ancillary to the sale of a business provided it is reasonable in time, geographic area, and scope of activity. Here the clause is ancillary to the sale of a business. Thus, the issue is whether the clause is reasonable.The clause prevents Zach from opening another restaurant so the scope of activity is reasonable. But, is three years a reasonable amount of time and is the 50-mile radius too broad? Some factors that may be considered are the strength of Zach's reputation and where his customers were from in terms of distance from the restaurant.
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