Suess Signed a Contract Which Included a Covenant Not to Compete

question 512

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 is probably valid in states that allow them
• E) the covenant was not backed up by consideration, so there was no contract to be violated

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Definitions:

Economic Profit

The discrepancy between sum revenue and sum expenses, taking into account both acknowledged and assumed costs.

Principal-Agent Problem

A dilemma in relationships when one party (the agent) is expected to act in the best interest of another (the principal), but has the potential to act in their own self-interest instead.

Stockholders

Individuals or entities that own shares in a corporation, giving them partial ownership and possibly dividends based on the company's performance.

Profit Maximization

A process or strategy used by businesses to achieve the highest possible profit, considering revenue and costs.