Restrictive Covenants in Business Law

This assignment explores the legal implications of restrictive covenants in business contracts. It analyzes two Canadian Supreme Court cases: Shafron v. KRG Insurance Brokers and Payette v. Guay inc. The analysis examines the type of covenants at issue, the court's decisions, and the reasoning behind those decisions, highlighting factors considered when determining the reasonableness of such restrictions.

Running head: BUSINESS LAW
Business Law
Name of the student
Name of the university
Author note

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BUSINESS LAW
Case 1
Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, [2009] 1 S.C.R. 157
Type of restrictive covenant at issue
The restrictive covenant which was at issue in the given case stated that the employee would not
be allowed for a period of three years to carry on direct or indirect work or be employed in or
permit in his name being used or be interested in relation to the business of insurance which was
carried out by him for the employer within metropolitan city of Vancouver.
Decision of the court
The court in this case held that the restrictive covenant which had been imposed by the employer
on the employee was ambiguous and therefore unreasonable overturning the decision of the
court of appeal.
The reason behind the decision
In this case it was stated by the court that there was an error on the part of the court of appeal to
state that the restrictive covenant was valid. The court was not provided with any evidence which
suggested that there would have been an unquestioned agreement between the parties in relation
to the removal of the word “Metropolitan” without altering other provisions of the contract or
changing the bargain otherwise. In addition there was no indication given by the parties in
relation to an agreement on a fact and mistakenly agreeing to some other fact in relation to the
contract in writing. In addition this could not be used to established the reasonableness of the
restrictive covenant.

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BUSINESS LAW
Case 2
Payette v. Guay inc., [2013] 3 SCR 95, 2013 SCC 45 (CanLII)
Type of restrictive covenant at issue
The restrictive covenant at issue in this case is that Payette was restricted from competing with
its employer for a period of five years in province of Quebec when his employment is
terminated. In addition Payette was restricted to solicit customers and employees of the employer
without any geographical restriction for a period of five years. These restrictions had been
imposed while she had to work only for a period of six months for the employer. The terms had
been expanded for a number of times and she had been employed for four years.
Decision of the court
In relation to the first clause it was held by the court the clause is reasonable as its purpose was
to provide protection to the investment made by the employer.
In relation to the non soliciting clause also it was held by the court that the clause is reasonable.
The reason behind the decision
The above decision had been made by the court because of the nature of crane business. The
nature of the business was such that for its protection a five year restriction period may be
considered reasonable. In addition the employee had acquired the goodwill of the employer
during the employment. In relation to the no geographical restriction clause the court held that in
modern day there is no geographical limit on the customers and imposing a territorial limit which
was done traditionally is not obsolete.

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BUSINESS LAW
References
Payette v. Guay inc., [2013] 3 SCR 95, 2013 SCC 45 (CanLII)
Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, [2009] 1 S.C.R. 157