A Provision That Restricts the Seller from Competing with the Buyer

question 149

Multiple Choice

A provision that restricts the seller from competing with the buyer in a contract for the sale of a business is

• A) always enforceable because the parties to a contract have the freedom to contract as they see fit.
• B) always unenforceable because any attempt to restrict competition is an illegal restraint of trade.
• C) fatal to the whole contract (i.e., it causes the whole contract to fail).
• D) enforceable if it is reasonable between the parties, which means that it must be limited in time (e.g., one year) but need not be limited in area.
• E) enforceable if it is reasonable between the parties and not contrary to public policy.

---

Definitions:

Accounts Receivable

Money owed by customers to a company for goods or services that have been delivered or used but not yet paid for.

Credit Sales

Sales for which payment is not received at the time of purchase, allowing customers to pay at a later date, thereby creating receivables for the seller.

Cash Sales

Transactions where payment is made in cash at the time of purchase, without the extension of credit.

Inventory

The goods and materials that a business holds for the ultimate purpose of resale or production.