If we are selling our controlling half of a bar to our partner and he has suggested we sign a no-compete clause, can he do that and how do we stop it?

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If we are selling our controlling half of a bar to our partner and he has suggested we sign a no-compete clause, can he do that and how do we stop it?

We own 51% of a bar used primarily as a live music venue. We are selling our half to our partner and he suggested we sign a no compete contract. We intend to open another bar without live music. It will have a kitchen instead. What steps can we take to keep him from blocking us?

Asked on December 21, 2011 under Business Law, Iowa

Answers:

Michael Duffy / Duffy Law, LLC

Answered 9 years ago | Contributor

If you don't want to sign the no-compete agreement, don't sign the no-compete agreement. Alternatively, you cans tructure it in such a way that all parties can live with it. For example, make sure the language is such that it would allow what you want to do, while preventing anything the other partner might be afraid of. It's perfectly undestandable that the other partner doesn't want to purchase the remaining share of the business just to have you open another location right across the street and drain his business. However, you probably don't want to do that either. Negotiate a non-compete agreement you both understand and can live with. I hope you have an attorney guiding you through this process - otherwise you are virtually guaranteed to have very costly litigation down the road after an unwise or unaddressed term in the agreement becomes a point of contention and subsequently litigation.

In any case, non-compete agreements must be reasonsble to be enforceable, in scope, geographic location and duration. You couldn't be held to an excessive agreement anyway.


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