GA Supreme Court Strikes Down In-term Non-competition Covenant

In a June 29, 2009 opinion relevant to all franchise businesses in Georgia, the Georgia Supreme Court held that a covenant in a franchise agreement prohibiting a franchisee from competing with the franchisor during the term of the agreement is judged under the same standards as a post-termination covenant not to compete, and is unenforceable under Georgia law unless it is reasonably limited in territory and in scope of restricted activities. By contrast, earlier in the year, the Georgia General Assembly passed a bill which, if enacted through passage of a proposed Georgia constitutional amendment in 2010, would make it easier to enforce a restrictive covenant in Georgia and would specifically permit enforcement of in-term restrictive covenants without limitations on scope of activity, duration, or territory.

18 minute read July 28, 2009 at 03:14 PM
By
Mark S. VanderBroek and Perry McGuire
GA Supreme Court Strikes Down In-term Non-competition Covenant

In a June 29, 2009 opinion relevant to all franchise businesses in Georgia, the Georgia Supreme Court held that a covenant in a franchise agreement prohibiting a franchisee from competing with the franchisor during the term of the agreement is judged under the same standards as a post-termination covenant not to compete, and is unenforceable under Georgia law unless it is reasonably limited in territory and in scope of restricted activities.

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