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Vail Daily column: Confidentiality and non-compete agreements

You can agree to nearly anything.

So long as the terms of the agreement are specific, there is sufficient “consideration,” both parties have “legal capacity” to enter into the agreement and the thing agreed to is neither illegal nor immoral, then you can do pretty much whatever you want to do.

OK, a couple of quick terms. “Consideration” does not mean being nice or thoughtful to one another; c’mon, this is the law we’re talking about. Instead, it means that one thing is exchanged in fulfillment of the agreement for another. I give you my car, you give me money; that sort of thing. “Capacity” means that a party is legally qualified to do something legal, in this case, to enter into an agreement. Lack of capacity may be influenced by such things as being under the legal age to enter into an agreement (generally, under the age of 18), under a defect (such as a mental impairment) or other similar condition. In order for a contract to be binding, both parties must have the legal capacity to be bound.



A couple of other quick observations are in order. First, one entering into the agreement must be “seized” with (that is, in rightful possession of the thing) to be exchanged; in other words, I cannot sell you the Brooklyn Bridge if … uh … I don’t own it. One can, however, bind, let’s say, Coca Cola Co., to an agreement if she is duly authorized to bind it.

Secondly, the consideration exchanged must be sufficient. Let’s say I do own the Brooklyn Bridge. It will be hard to hold me to a contract if I sell you the bridge in exchange for goods worth 60 Dutch Guilders (think back, if you will, to the Dutch purchase of Manhattan). Something of value must generally be exchanged for a thing of like or similar value for a contract to be held valid.

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OK, lastly, now; the thing bargained for must not be verboten under the law. I cannot, say, pay you scratch to shoot my neighbor’s dog (mind you, not that I would want to anyway — good puppy).

So among the many things that one might contract for is an agreement not to compete and, similarly, to preserve and protect confidential information.

Generally, such terms may arise in a commercial setting. To be honest, I’m scratching my head to conceive of when they would occur outside of a commercial setting.



Usually, it goes something like this …

Let’s imagine that I want to start a Web-based business but … um … I don’t know squat about the Internet. I know a lot about my product which I want to move via the Internet, but I don’t know a source code from a hole in a Dutch dike. So I go scouting for someone who does. Just for the sake of convenience, say I go looking for a Web designer.

In order for the Web designer to do her stuff, she’s got to take a peek at mine, but hey, I’m just a little sensitive about that. I don’t want to let her see mine until some terms are worked out, preeminent among them that my stuff stays my stuff and that she can’t share it — or share what she learns about it — with anyone unless with my permission.

The way we get around this bugaboo is to enter into a confidentiality agreement. In essence, it will say, I will share with you the secret formula I own if, in return, you promise not to make any use of it (except to build my website) or to share it with anyone and, in exchange, I will pay you for your work.

Another common circumstance in which issues of confidentiality arise is in employment. Let’s say I want to hire you as an employee and in your position, you will learn my business secrets (who my clients are, what my supply chains are, etc). I, of course, consider this proprietary information and want to keep it myself. So, as a condition of your employment, we reach agreement that you will keep my proprietary stuff — my secret sauce — secret. In exchange, I agree that I will faithfully pay you your wage.

A similar concept is an agreement not to compete.

In non-compete agreements, the consideration exchanged is generally that I will offer you employment but, if and when you leave my employment, you cannot directly compete with me. You may not accept a job — or start a business — that goes head-to-head with mine. Let’s say I manufacture a unique brand of furry socks. In exchange for your employment with me, we agree that should you one day leave the furry sock factory, you will not work for — or manufacture on your own — a competing furry sock concern.

Generally, non-compete agreements relate to executive or other “high-level” employees. If you simply work on the furry sock assembly line and are not key to the furry sock brain trust, then it will be more unlikely that I can, or will wish to, restrict you.

In order to be enforceable, “non-competes” must be “reasonable.” An example is in order. Let’s say you play football for the Tampa Bay Buccaneers (although why you would escapes me) and I offer you a non-compete agreement that says you may not play football (assuming that what Tampa Bay is playing has some resemblance to that game) for any other NFL team if and when you come to your senses and take off from Tampa Bay. It is unlikely, to say the least, that such an agreement would be enforceable because it would entirely foreclose you from plying your trade. Instead, to be enforceable, a non-compete must have reasonable parameters. More reasonably, you agree to not work for, or be involved in, a competing furry sock concerns for two years within a 50-mile radius of Furry Sock, Inc.? Now that is something that may stick!

Non-compete agreements and confidentiality agreements make the corporate world go round. And hey, you’re a grown up; you can agree to what you want.

Rohn K. Robbins is an attorney licensed before the bars of Colorado and California who practices in the Vail Valley with the law firm of Stevens, Littman, Biddision, Tharp and Weinberg LLC. His practice areas include business and commercial transactions, real estate and development, family law, custody, divorce and civil litigation. He may be heard on Wednesdays at 7 p.m. on KZYR radio (97.7 FM) and seen on ECOTV 18 as host of “Community Focus.” Robbins may be reached at 970-926-4461 or at either of his email addresses, robbins@slblaw.com or robbins@colorado.net.


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