Ibolya Entered into an Employment Contract with a Toronto Advertising

question 154

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 as 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.