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When A Non-Compete Agreement Extends Beyond Death

NonCompete4

Not many things last beyond death. Marriage and alimony do not survive death, and neither should a legal agreement. However, that has happened in an incident involving a non-compete agreement.

In a case in Alabama, the court ruled that the surviving parties to a non-compete agreement still had to make payments even though the recipient had died. Thomas Batey owned Batey & Sanders, Inc., which sold products to the construction and highway industries. In 2006, he sold the company.

The sale involved a noncompete agreement. Under the terms, Batey agreed that he would not:

  • Work for a competitor.
  • Encourage company employees to leave.
  • Divert customers from the company.

For agreeing to these terms, Batey was paid $2.1 million. However, he did not receive all the money upfront. The buyers were to make 120 monthly payments of $17,800 each.

This means that Batey would receive 10 years of payments. However, he died in April 2013, after six years of payments. The buyers stopped making payments in December 2013, even though Batey was still owed more than $640,000.

Batey’s estate, however, felt it was entitled to the balance of the amount and the representative sued the buyers. Because this was not a personal services contract and it did not end when Batey died, the court ruled in favor of the estate. The main factor was Batey’s goodwill, as he agreed to all the terms of the agreement and allowed the buyers to pay off the purchase price over time.

The buyers, however, appealed the decision, and the case reached Alabama’s highest court. The court affirmed the original decision, stating that the surviving parties in the non-compete agreement had an obligation to continue making payments, despite the fact that the other party had died.

The court ruled that Batey’s death did not deprive the buyers of the business’ goodwill, which was the main benefit. The non-compete did not need to state that payments would pass to Batey’s heirs if he were to die. In addition, the estate’s representative had the right to have the agreement enforced.

What This Means

While it would make sense that death would end a contract or agreement, that was not the case in this situation. This court ruling shows that a person’s death does not always automatically end another party’s obligations. That’s why all legal agreements should be carefully looked over by a lawyer before signing. You should always be familiar with the terms of an agreement before signing. Otherwise, surprises like this can pop up.

Learn More About Non-Compete Agreements

Non-compete agreements are often wide-ranging and come with various requirements and restrictions. Each one is unique in nature, which is why all parties involved should ensure that they fully understand the terms.

Non-compete agreements should not be taken lightly. If you are a party to a non-compete, Orlando non-compete agreement lawyer B.F. Godfrey from Godfrey Legal can help you understand what is required of you. To schedule a consultation, fill out the online form or call (407) 890-0023.

Resource:

hrmorning.com/news/noncompete-agreement-contracts/

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