So What Makes a Non-Compete a Valid Contract?

Delaware’s well-known respect for private contracts requires that the covenant not to compete be enforced according to its plain terms where possible. Therefore, the first step in the analysis is to determine whether the covenant is, in fact, a valid private contract.

Like any contract, the covenant requires mutual assent to be enforceable. Usually this means the covenant has been signed by the employee, manifesting his or her assent. So long as there is no valid claim of duress or coercion, mutual assent will likely be found. A defense of ignorance of the terms normally will not suffice. In addition, the doctrine of laches may bar an employee from claiming lack of mutual assent when the issue is raised only after his employment ends.

Next, there must be consideration sufficient to support a valid contract. This requirement is easily met under Delaware law. Generally, mutual promises between an employer and employee constitute lawful consideration for an employment contract. More specifically, the offer of new employment, of a new position, or even of continued employment will all satisfy the consideration requirement. Continued employment may not satisfy the consideration requirement, however, if the employee already had an employment contract with a predetermined date for expiration.

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