Can a business enforce a “non-compete” agreement on a non-profit organization thereby preventing it from going with a less expensive competitor?

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Can a business enforce a “non-compete” agreement on a non-profit organization thereby preventing it from going with a less expensive competitor?

Our non-profit booster club has been purchasing retail coupon cards through a supplier for the past 5 plus years and selling them as our main fundraiser. When we were approached by another provider who can offer us more profit for the same selling effort, we approached our current vendor to terminate our arrangement. We were informed that as part of our agreement we cannot sell a competitive card or create our own coupon card for 2 years after terminating our existing arrangement. Is this enforceable?

Asked on July 13, 2011 under Business Law, New Hampshire

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Generally speaking, business and organizations--including non-profit clubs--are bound by the agreements they sign, including non-competition agreements. Therefore, from what you write, it would seem that the vendor could enforce the agreement against you. However, that is just a general answer; for a specific answer, you need to consult with an attorney who can evaluate the precise language of the agreement and situation for you. For example, various types of non-competition agreements are often "blue penciled" by courts to make them less restrictive (e.g. apply for a shorter period of time) if it is the case that the agreement is too far-reaching. Also, if there was some breach by the vendor, some misrepresentation by them during the negotiation of the agreement, and/or some confusion between the two parties as to what was being agreed too, that may suffice to provide grounds to void or at least modify the agreement. It is therefore worthwhile to consult with an attorney, to see what your rights and recourse may be.


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