June 2016

Post image for Whelan Security Co. v. Kennebrew Update: Noncompetes in Missouri

In this 2013 post, I blogged about Whelan Security Co. v Kennebrew, an important Missouri case involving an employee noncompetition agreement. In that case, the Missouri Supreme Court enforced a general noncompetition agreement and modified a non-solicitation agreement against out-of-state former employees.

Specifically, the Court held that a general restriction on competition within a 50-mile radius was enforceable. However, a covenant restricting the employees from soliciting the employer’s customers for two years after termination of employment was too broad as written, because the covenant was not limited geographically and there was no other language that would have limited the scope of the provision (such as restricting the prohibition to customers with which the employees had contact during the course of their employment). The Court modified the covenant accordingly. The Court also held that a covenant restricting the employees from soliciting prospective customers was too broad, not to mention the fact that the Missouri Supreme Court questioned in Healthcare Services of the Ozarks, Inc. v. Copeland whether an employer has a legitimate interest in prospective customers.

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Post image for Signing a Personal Guarantee Can Be Surprisingly Costly

When you own a small business, signing personal guarantees often seems like a necessary evil. Unless your company has strong credit, landlords, lenders, and others will often require you to personally guarantee your company’s obligations to them. One of the most harrowing experiences I had when I set up my own law firm was signing a merchant services agreement so I could accept payment by credit card — which of course required a personal guarantee.

Although business owners can protect their personal assets from their business’s liabilities by doing business through a corporation or a limited liability company, your company can’t shield you from liability arising out of your own actions. Also, you’ll be on the hook for company debts that you personally guarantee.

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Post image for Signing Quotations

I’ve advised people for years not to sign the other side’s purchase orders, acceptances, quotations, and other ordering documents unless the documents have been fully negotiated. That’s because it puts you at a huge disadvantage in the battle of the forms.

I’ve also advised people to negotiate terms that are essential — even if they don’t sign a fully-negotiated contract — and have both parties sign a document setting out those terms, because you can’t win the battle of the forms. So if — as a seller — a 12-month limited warranty and liability cap in the amount of your product’s purchase price are important to you, you should make sure that you and your buyers sign contracts agreeing to those terms. Otherwise, you’ll probably end up with a broad, four-year warranty and unlimited liability (the defaults under Article 2 of the Uniform Commercial Code, which governs contracts for the sale of goods).
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