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Marine Contractors Co. v. Hurley - 365 Mass. 280, 310 N.E.2d 915 (1974)

Rule:

Employee covenants not to compete generally are enforceable only to the extent that they are necessary to protect the legitimate business interests of the employer. Such legitimate business interests might include trade secrets, other confidential information, or, particularly relevant here, the good will the employer has acquired through dealings with his customers. Protection of the employer from ordinary competition, however, is not a legitimate business interest, and a covenant not to compete designed solely for that purpose will not be enforced. 

Facts:

Marine Contractors Co., Inc. (Marine) was in the business of performing specialized types of marine repair work in certain specified areas. Thomas F. Hurley (Hurley) qualified as a participant of Marine's employment trust agreement, which provided that benefits would be distributed every five years. Upon employment termination, Marine offered Hurley immediate payment of his vested share of the trust in return for a promise not to compete with Marine for five years and within a certain geographical area. Hurley agreed and received his vested share in the trust, but contrary to the agreement, he started his own business in direct competition with Marine. Hurley argued that the injunction should be vacated because there was lack of consideration and the agreement constituted unreasonable restraint of trade.

Issue:

Did the promise not to compete with Marine lack of consideration and constitute an unreasonable restraint of trade?

Answer:

No

Conclusion:

The court affirmed the injunction. The requirement of consideration was satisfied if there was either a benefit to the promisor or a detriment to the promisee. Agreements not to compete would be enforced only insofar as they were reasonable and what was reasonable depended on the facts of each case. A restraint of trade was unreasonable if it imposes undue hardship upon the person restricted. In this case, Hurley promised to not compete in consideration for the benefits of immediate payment of his vested interest in the trust, which would normally not be distributed until five years later. Hurley had not established any extraordinary hardship, which would be caused him by enforcement of his promise not to compete. Finally, agreement was reasonable in both time and space.

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