Opinion ID: 894789
Heading Depth: 1
Heading Rank: 2

Heading: The Ancillary Relationship

Text: Because a covenant not to compete is a restraint of trade, at common law the covenant was unenforceable as against public policy unless it arose from a valid transaction or relationship, such as the purchase and sale of a business, and employment relationships. Light v. Centel Cellular Co. of Tex., 883 S.W.2d 642, 644 n. 4 (Tex.1994) (citing DeSantis, 793 S.W.2d at 681-82). The transaction or relationship had to create a legitimate interest worthy of protection, such as business goodwill, trade secrets, and other confidential or proprietary information. DeSantis, 793 S.W.2d at 682. Thus, for example, an agreement between two strangers in which a covenant not to compete was supported merely by a payment of money was unenforceable. See, e.g., RESTATEMENT (SECOND) OF CONTRACTS § 187 cmt. b. Following the common law, section 15.50(a) does not permit the covenant to stand alone. Hence, the covenant must be ancillary to or part of an enforceable agreement. TEX. BUS. & COM.CODE § 15.50(a). In Light, we dissected the ancillary relationship with a two-part test. [1] The relationship is satisfied if the covenant arises within or alongside an agreement to transfer and safeguard a legitimate business interest. A confidentiality agreement is a model because its purpose is to provide the employee with confidential information in return for his promise not to disclose it. [2] If the covenant is ancillary to such an agreement, it is not a direct restraint of trade in violation of public policy because it protects a legitimate business interest. The agreement must, however, be supported by consideration.