Perfect Programs Ltd

question 153

Multiple Choice

Perfect Programs Ltd. hired Gill, who had training not only in programming but also in pharmacy management, to create a computer program for use in a pharmacy to take care of all its needs with regard to inventory, billings, prescriptions, etc. The employment contract provided for a three-year term with no provision for early termination and the following covenant: "The employee, upon his leaving the employ of the employer, shall not compete, directly or indirectly, in any capacity whatsoever, within five miles of this place of employment." After Gill had been there for two years and the project was only months away from completion, he was approached by a representative of Big Big Co. (with offices in the same building) , who offered Gill a job with, among other things, a higher salary and more staff to help him complete a program for use by drugstores. Gill accepted. To replace Gill, Perfect Programs Ltd. hired a man from New York with the same training as Gill and sued Gill for breach of contract. Which of the following is true?

• A) Gill will have to pay damages for all the loss that directly flows from the breach no matter how improbable.
• B) Gill is not in breach of contract because the restrictive covenant is illegal, so the whole contract is void.
• C) If Gill knew that there would be a delay before the new employee could reach the level Gill had attained before his departure, the costs of the delay would be factored into the damages.
• D) Perfect Programs Ltd. could get an injunction against Gill, because the restrictive covenant is reasonable in this form.
• E) Perfect Programs Ltd. could have abandoned the project and just sued Gill for the entire anticipated lost profit.

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Definitions:

Required Return

The minimum expected rate of return on an investment deemed acceptable to an investor, taking into account the risk level of the investment.

Payback Period

The length of time it takes for an investment to generate an amount of cash flow equal to the initial amount invested.

NPV

Net Present Value, a financial metric used to evaluate the profitability of an investment or project, calculated by discounting the expected future cash flows to present day values and subtracting the initial investment cost.

Discounted Payback Period

The time required to recoup the cost of an investment while accounting for the time value of money, typically used in capital budgeting to assess profitability.