A non-competitive agreement must meet the basic conditions of a valid contract. These essential elements include supply, acceptance and consideration. Both parties must agree on the terms of the contract and both parties must consider waterproofing the agreement. The non-competitive contract must specify what should be treated confidentially and how the confidential information relates to the relationship between employees, contractors or business customers. In addition, the contract should indicate the duration of the agreement. Owners/managers of small and family businesses such as restaurants or distributors build relationships based on personality and friendship between contractors and customers or suppliers. Buyers of active businesses will clearly want confirmation that the seller is not entering the street or that he is joining a competitor at the conclusion of the transaction. The law assumes that non-competition agreements or agreements apply depending on whether the restriction between the parties is appropriate and is in the public interest. Implicitly, the balance between the interest of public policy in imposing contractual obligations while promoting free and open competition and discouraging inappropriate trade restrictions is implicit. As you can imagine, this “blue pencil” throws a lot of instability and unpredictability into the mix of non-compete agreements. As such, there is a way to avoid a total loss of the agreement if a judge decides that it is unenforceable and puts control in the hands of the treaty signatories. This method is called step down deployment.
A step-down provision is a carefully worded section that defines a primary restriction that, when “blue,” offers alternatives for the dish from which it can choose. For example, there is a non-competition clause that prohibits competition from the seller for seven years. If the judge finds this inappropriate, instead of treating the entire agreement as unenforceable, there is a “back-up” or “step down” system that prevents the seller from competing for four years instead of not doing so.