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Roger, Attorney
Category: Business Law
Satisfied Customers: 31687
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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I sold my internet business to a person in Texas. In our agreement

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I sold my internet business to a person in Texas. In our agreement it states that the seller for a period of at least five years shall not directly or indirectly engage (e.g., ass owner, employee, officer, director, etc.) in any internet business (Type of business), except for the sole benefit of the buyer. Is there a loop hole here? Can I get out of this as I am in a different state and the internet is such a broad area.
Hi - my name is XXXXX XXXXX I'm a Business litigation attorney. Thanks for your question.

The courts in New Mexico have determined that non-compete agreements are enforceable if the terms are reasonable and necessary to protect a legitimate business interest of the employer. Factors considered when determining reasonableness include the hardship an agreement puts on the person, its effect on the general public and the restrictions placed on time, territory and activity of the former employee, how long and over what geographic area the restrictions apply.

Thus, there are certainly ways to challenge the agreement, and in your case, the biggest thing is the 5 year restriction. 1-2 years is usually enforceable, but 5 years is likely too long. Also, the fact that there is no geographical limitation on the agreement may make it unenforceable.

Usually, a legal challenge is required to get out of a non-compete agreement, but it is possible to challenge the enforceability of the agreement.
Customer: replied 4 years ago.

The agreement was signed on August 2011. This puts it right at 2 years. I have already created a similar website, however I have not received anything in writing challenging the site. I know that he is aware of my presence and he is looking to enforce the agreement. You stated that there is no geographical limitation, however the transaction was for a website. Does geography come in to play when we are talking about the internet?

The law doesn't carve out an exception for internet businesses, so a geographical limit is still a consideration courts will make when determining whether the agreement is enforceable.

As I said, the length of the agreement is the most obvious thing that could cause the agreement to be found as unenforceable.
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Customer: replied 4 years ago.

I have established an LLC. Now that I have an LLC with insurance would I be protected incase I am taken to court based on this non-compete clause? It is important that I protect myself. Do you have any suggestions on ways of protecting myself.

If you signed the non-compete individually, setting up a new LLC will not protect you from individual liability under the agreement because you're operating through the new company.

However, you would still have the ability to challenge the agreement on the grounds we discussed above.

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