Ibolya Entered into an Employment Contract with a Toronto Advertising

question 115

Multiple Choice

Ibolya entered into an employment contract with a Toronto advertising firm, VertaNet Ltd. The agreement included a non-competition clause that prevented her from participating in the advertising field in Toronto for five years after termination of her employment. In the event of a breach, the contract provided that Ibolya would have to pay VertaNet the sum of $500,000 as liquidated damages. Ibolya worked for VertaNet for a period of time, then took another job in Vancouver where she worked for four and half years. Six months before the expiry of the five-year period in her VertaNet contract, Ibolya returned to Toronto to take a part-time position at a small advertising firm. Although VertaNet did not suffer any damage, VertaNet sued Ibolya claiming $500,000. What is the likely outcome?

• A) The non-competition clause is likely a penalty and therefore unenforceable.
• B) Although the amount claimed is unconscionable, the clause will be enforced as it is writing.
• C) Non-competition clauses generally are void as not being in the public interest.
• D) Liquidated damages clauses are illegal and therefore void.
• E) Unless the $500,000 had been prepaid, Ibolya has no good defence.

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Definitions:

Standards

Established norms or requirements that dictate the expected quality, performance, or conduct in various fields or activities.

Expectancies

Beliefs or assumptions about the likelihood of future events or outcomes.

Conditions

Specific factors or circumstances that affect situations, actions, or phenomena, determining their outcomes or the manner in which they occur.

Dilemmas

Situations that require a choice between options that are or seem equally unfavorable or mutually exclusive.