Robinson Cole LLP
High Contrast Mode
April 5, 2023 - Article

Delaware Court Again Strikes Down Restrictive Covenant in the Sale of Business

Share this page:

In the article, Curtis and Trevor summarize the recent finding of the Delaware Court of Chancery that a restrictive covenant entered into in connection with the sale of a business was not enforceable. Restrictive covenants must be narrowly tailored to the geographic area reached by the seller and serve the buyer’s legitimate economic interests. The authors discuss the ramifications of the decision, which has only advanced a developing trend in the Court of Chancery to scrutinize and refuse to enforce facially overbroad restrictive covenants in the context of the sale of a business. The authors note that purchasers in M&A transactions should not assume that courts applying Delaware law will automatically blue-pencil facially overbroad restrictive covenants, instead giving careful consideration to geographic scope and temporal duration. View the article.