Opinion ID: 2391841
Heading Depth: 1
Heading Rank: 6

Heading: The Requirement of Consideration.

Text: The court suggests that consideration for a covenant not to compete must exist independently of other consideration provided by the promisee to support the primary purpose of the contract. This is an incorrect application of current Texas law and of the law in any other jurisdiction. A covenant not to compete is enforceable when ancillary to and in support of an otherwise valid contract having a primary purpose unrelated to the suppression of competition between the parties. See Justin Belt Co. v. Yost, 502 S.W.2d at 683-84; 14 S. Williston, A Treatise on the Law of Contracts § 1636, at 102 (3d ed. 1972). See also Potomac Fire Ins. Co. v. State, 18 S.W.2d 929, 934-35 (Tex.Civ.App.-Austin 1929, writ ref'd) (an independent agreement to limit competition is unenforceable). For example, the primary purpose of the contract can be the sale of a business, creation of a partnership to conduct a lawful business, or a contract of employment. So long as there is an exchange of consideration to support the primary purpose of the agreement, the covenant not to compete is ancillary and also supported by that consideration. Gill v. Guy Chipman Co., 681 S.W.2d at 269; Chenault v. Otis Eng'g Corp., 423 S.W.2d 377, 382 (Tex.Civ.App.- Corpus Christ 1967, writ ref'd n.r.e.). Even the Utah Supreme Court in a case subsequent to Robbins v. Finlay, 645 P.2d 623 (Utah 1982), relied upon by the court has held that continued employment [is] adequate consideration for [an employee's] submission to the terms of the covenant. System Concepts, Inc. v. Dixon, 669 P.2d at 426. Here, the franchise agreement in issue contains language typical of franchise agreements in general promising to supply the franchisee with assistance in generating business and goodwill in the licensed area. In addition, the franchisor agreed not to help anyone else develop business or goodwill under the franchisor's trademarks and business format in the licensed area. These provisions set forth the consideration received by the franchisee, Hill, through the franchise agreement. Accordingly, given the fact that the primary purpose of the agreement between the parties was to establish a franchise and adequate consideration is recited for that purpose, consideration for the ancillary covenant not to compete was established. We should not now require a further consideration to support the ancillary covenant.