SW Legal Educational Publishing

Equitable Remedy May Be Extension of Non-Competition Agreement
Description In case of first impression for Michigan, appeals court held that the extension of a noncompetition agreement, in the case of two companies, may be an equitable remedy that best resolves a violation of the agreement.
Topic Contracts
Key Words Noncompetition Agreement, Equitable Remedy, Specific Performance
C A S E   S U M M A R Y
Facts Alpha was owned by Borzym. Thermatool bought Alpha for $2,350,000 and agreed to pay Borzym five percent of annual sales above $2.5 million after the sale as part of a five-year noncompetition agreement. Borzym collected $1 million under this provision. He sued Alpha before the five years ended, requesting declaratory judgment that the agreement was unreasonable and unenforceable. Thermatool countered that Borzym had violated the agreement because his new company was in competition with Thermatool. Trial court held Borzym in breach and extended the term of the noncompetition agreement by 18 months. Parties appealed.
Court of Appeals Decision Affirmed on this issue. This is an issue of first impression in Michigan. "[T]he better view is that, in appropriate circumstances, the terms of a noncompetition agreement may be extended after its expiration. Specific performance of an agreement may be an appropriate remedy where enforcement of the promise is necessary to avoid injustice."
Citation Thermatool Corp. v. Borzym, 1998 WL 17796 (Ct. App., Mich.)
575 N. W. 2d 334 (Ct. App., Mich., 1998)

Back to the Contracts Listing.

©1997-2000  South-Western, a division of Cengage Learning, Inc. Cengage Learning is a trademark used herein under license.