Employment Agreement · Non-Compete
The Non-Compete That Collapsed in Delaware Chancery
A private equity-backed distribution company acquired a regional competitor and inherited its standard non-compete package — 36 months, nationwide, covering any "substantially similar" business activity. Counsel was retained eighteen months later, after the acquired CEO resigned and launched a competing firm forty miles away. The company's attempt to enforce the clause lasted eleven days in Delaware Chancery Court.
Employee shall not, directly or indirectly, engage in any business activity substantially similar to or competitive with the Company's business operations within the United States for a period of thirty-six (36) months following termination of employment for any reason...
"The clause was drafted for a different state, a different industry, and a different decade. By the time it reached my desk it was legally inert — the geographic scope alone would have failed in Delaware regardless of any other defect."
Counsel Analysis
The redline on this clause went through four iterations before the parties reached language both sides could defend in court. The original draft shifted all consequential damages risk to our client — a position no sophisticated counterparty should accept in a commercial agreement of this size.
Non-Compete Jurisdiction Guide
PDF · 4 pages · Free
Acquisition Agreement · IP Assignment
The IP Assignment Clause That Saved a $40M Acquisition
Three weeks before closing on a $40M software acquisition, due diligence surfaced a contractor services agreement signed four years earlier. The agreement contained an IP assignment clause that was facially valid but contained a carve-out for "work product created primarily using contractor's own tools and methodologies." The target company's core algorithm had been built entirely by that contractor.
Contractor hereby assigns to Company all right, title, and interest in and to any Work Product created pursuant to this Agreement; provided, however, that such assignment shall not apply to any work product developed by Contractor primarily through use of Contractor's proprietary tools, frameworks, or pre-existing methodologies...
"Four words — "primarily using contractor's" — created an ambiguity large enough to void the entire assignment. We had eleven days to resolve it before the acquisition fell apart. The counterparty knew exactly what they had."
Counsel Analysis
The redline on this clause went through four iterations before the parties reached language both sides could defend in court. The original draft shifted all consequential damages risk to our client — a position no sophisticated counterparty should accept in a commercial agreement of this size.
IP Assignment Clause Checklist
PDF · 4 pages · Free
Free Resource
The Contract Risk Checklist
47 clauses that routinely cost companies seven figures. Annotated with real redline language, jurisdictional flags, and the questions your counterparty hopes you won't ask.
- Indemnification scope and carve-outs
- Limitation of liability caps — and when they fail
- IP assignment vs. license — the $40M distinction
- Force majeure: what actually qualifies post-2020
- Non-compete enforceability by jurisdiction
Enterprise SaaS Agreement · Limitation of Liability
The Limitation of Liability That Held Under Litigation
A mid-market SaaS vendor faced a $14M breach-of-contract claim after a platform outage during a client's fiscal year-end close. The vendor's standard MSA included a mutual limitation of liability capped at fees paid in the prior twelve months — approximately $340,000. The client's counsel argued the cap was unconscionable given the known criticality of the deployment. The cap held.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES... EACH PARTY'S TOTAL CUMULATIVE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT SHALL NOT EXCEED THE FEES PAID OR PAYABLE BY CUSTOMER IN THE TWELVE (12) MONTHS PRECEDING THE CLAIM...
"The cap survived because it was mutual, reasonable relative to the contract value, and the client had been explicitly warned about the outage risk in the MSA's exhibit. Courts enforce what sophisticated parties negotiate. The language was unambiguous because we made it unambiguous."
Counsel Analysis
The redline on this clause went through four iterations before the parties reached language both sides could defend in court. The original draft shifted all consequential damages risk to our client — a position no sophisticated counterparty should accept in a commercial agreement of this size.
SaaS Liability Cap Framework
PDF · 4 pages · Free
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