Suess Signed a Contract Which Included a Covenant Not to Compete

question 351

Multiple Choice

Suess signed a contract which included a covenant not to compete with his employer for a year if he left the firm. When Suess quit, he went into competition with his former employer and was sued. He argued that the covenant was not valid. The court held:

• A) Suess was right, such covenants are void under federal law
• B) in all states, such covenants violate public policy
• C) such covenant are unconscionable in all states
• D) the covenant was not backed up by consideration, so there was no contract to be violated
• E) none of the other choices

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Definitions:

Percentage Of Sales

A method or analysis tool that expresses components of a financial statement as a percentage of total sales.

Variable Expense

Costs that fluctuate with the level of production or business activity, such as raw material costs and shipping fees.

Break-Even

Break-even is the point at which total revenues equal total costs, resulting in no net profit or loss, indicating the volume of sales needed to cover costs.

Fixed Expense

Fixed expenses are costs that do not change with the level of production or sales volume, such as rent or salaries.