2. Johnson and Wilson were the principal shareholders in Matthew Corporation, lo

Question

2. Johnson and Wilson were the principal shareholders in Matthew Corporation, located in the city of Jonesville, Wisconsin. This corporation was engaged in the business of manufacturing paper novelties, which were sold over a wide area in the Midwest. The corporation was also in the business of binding books. Johnson purchased Wilson's shares of the Matthew Corporation and, in consideration thereof, Wilson agreed that for a period of two years he would not (a) manufacture or sell in Wisconsin any paper novelties of any kind that would compete with those sold by the Matthew Corporation or (b) engage in the bookbinding business in the city of Jonesville. Discuss the validity and effect, if any, of this agreement. Please explain. This is a two part question, and both parts must be addressed.

Explanation / Answer

On the buying of the complete owner-ship of the Matthew corporation, both the agreed conditions are valid one. In the case of business buying, the going out parties get into agreement with the buying parties to not to engage in the entitiy's business at the entity's location.

So, as the corporation has establishment in Jonesville, Wisconsin, therefore both the parties get into covenants and restrictive trade agreements and buying party has benefits of "Non-compete agreement", thus:

(a) Wilson, the goingout party, agrees to not to manufacture or sell in the state 'Wisconsin' any paper novelties that will compete with Matthew Corporation.

(b) Wilson also agrees not to engage in any bookbinding business within the city of Jonesville.

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