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Irreparable injury is presumed from the breach of a noncompetition clause accompanying the purchase and sale of an established business; the remedy at law is presumed to be inadequate.
Plaintiff lender advanced money to defendant borrower to start a business. As security for the loan, the parties agreed to a noncompetition agreement. When the business experienced difficulties, plaintiff advanced more funds in exchange for stock. The trial court found the later agreement was not in conflict with the original business contract, which remained intact. The trial court enforced the contract and enjoined defendant from engaging in the electrical contracting business within a radius of 50 miles of Denver for five years. Defendant appealed.
Was it an error to enforce the noncompetition clause under the circumstances?
In affirming, the court noted that defendant was the only person who possessed the knowledge, skills, and the licenses to make the business a success. He was a member of the executive and management personnel. Accordingly, the noncompetition clause was exempt from Colo. Rev. Stat. § 8-2-113(2)(d)(1973). Further, defendant voluntarily proffered the clause, the parties bargained for it at arm's length, and there was substantial consideration for the agreement. Thus, the exemption of § 8-2-113(2)(a) was not applicable. Because the record contained no evidence dispelling the presumption of irreparable injury, plaintiff was entitled to injunctive relief.