"Covenants not to compete" can cost you if they're breached.
In Sarantopoulos v. E-Z Cash ATM, Inc., Dorothy, Nick and George Sarantopoulos, sold their business to George Lendrihas. In furtherance of the acquisition, Lendrihas executed certain promissory notes, while the Sarantopoulos's signed a covenant not to compete. Interestingly, the parties agreed that Lendrihas could cease paying these notes if the Sarantopoulos's violated the non-compete agreement.
Sure enough, shortly after the business was sold, Lendrihas refused to honor his debt obligations, claiming the non-compete had been dishonored. In a Kings County Supreme Court lawsuit, the judge agreed with Lendrihas, as did the Appellate Division, Second Department. In its decision, the AD outlined the pertinent considerations as follows:
Covenants not to compete which relate to the sale of a business and its accompanying good will, such as the one at issue in this case, may be enforced when they are reasonable in scope and duration, do not unreasonably burden the promisor, and do not harm the general public ... The Supreme Court properly determined that the covenant in this case satisfied these requirements and was valid and enforceable ....
Finding no irregularities with the agreement in this case, Lendrihas was relieved of any further payment obligations under the notes.
Now that's easy cash!
For a copy of the Appellate Division's decision, please use the following link: Sarantopoulos v E-Z Cash ATM, Inc.