Elements of a Contract
Business 670 Legal Environment
January 21, 2013
This paper is a brief analysis of the elements of a contract using a hypothetical of an employment contract.
Elements of a Contract
The issue of whether or not a contract may be enforceable where an employee is hired under a two-year employment contract with Fabulous Hotel and the term is up with a clause in the original signed contract to prevent the employee being hired to the same position, a chef, within the same metropolitan area for two years after their employ with Fabulous Hotel.
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This contract, when signed by the new employee will ensure that he does not leave the employer and take any valuable information with him to a competing company. This type of agreement is usually for a limited time for instance three years. This agreement would not necessarily relate to all the employees in a certain company. “It would mainly relate to those that are in a position to take inside information to a competitor” (Schaefer, 2005). For example, a receptionist may not need to sign this type of agreement, unless they were also a personal assistant to someone that was privy to information. If that were the case, they might have to sign this type of agreement. This type of contract clearly benefits the employer.
It is quite possible the employer wanted this clause included in the original contract, looking more broadly, because by including this clause prevents any need for a non-solicitation agreement. This agreement keeps employees that leave the company from hiring co-workers away. Key individuals in management sign these agreements, such as the position of head chef. Again, the receptionist is less likely to leave and start a position that would require them to hire people. The fear for the employer is that a manager would leave and take his team with him. If this happens, production can drop or even halt completely.
Key principles that almost all states go by when it comes to non-compete clauses are; reasonableness rule, independent consideration, duration, distance, blue pencil rule, and liability for new employers (lawyers.com). All of this is done so that way the company is protected from anyone trying to steal important trade secrets to share with their new employer. Employees may face legal penalties if they violate a non-compete clause. These penalties include money damages or an injunction that prevents further violations. Along with the violating employee, the company that hires her may also face penalties. Any company that helps an employee violate a non-compete clause may have to pay damages. Courts do not want companies to make money from breaches of contracts.
Some factors that a court will consider in determining whether or not this contract is enforceable or not will include: whether the agreement stood alone; length of time involved, and location or distance involved (Seaquist, 2012). It...