Opinion ID: 894789
Heading Depth: 1
Heading Rank: 3

Heading: Today's Departure From Light

Text: We agree with Light's recitation of basic contract law in footnote six that [i]f only one promise is illusory, a unilateral contract can still be formed; the non-illusory promise can serve as an offer, which the promisor who made the illusory promise can accept by performance. Upon further review of the Act and its history, however, we disagree with footnote six insofar as it precludes a unilateral contract made enforceable by performance from ever complying with the Act because it was not enforceable at the time it was made. At the outset, this language in Light was not essential to the holding in that case. Light held that the agreement in issue was not a unilateral contract but was an enforceable bilateral contract when made because, as the court construed the employer's promise to provide training in that case, the employer had made a promise to provide initial training that was enforceable when made. Even if Light had resigned or been fired after this agreement was executed, United would still have been required to provide the initial training. Light, 883 S.W.2d at 646. As explained above, the fatal defect in the agreement in Light was not that it was unenforceable when made, but that there was no ancillary promise by the employee, such as a promise not to disclose confidential information, that the covenant not to compete was designed to enforce. Revisiting the issue of what the clause at the time the agreement is made in the Act means, we conclude that we must disagree with Light's view that a unilateral contract can never meet the requirements of the Act because such a contract is not immediately enforceable when made. Section 15.50 states that a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made. . . . Simply reading the text, the clause at the time the agreement is made can modify either otherwise enforceable agreement or ancillary to or part of. No amount of pure textual analysis can tell us unequivocally which preceding clause is modified. Light stated that the agreement must be enforceable at the time the agreement is made, and therefore concluded that at the time the agreement is made must modify otherwise enforceable agreement. We now conclude, contrary to Light, that the covenant need only be ancillary to or part of the agreement at the time the agreement is made. Accordingly, a unilateral contract formed when the employer performs a promise that was illusory when made can satisfy the requirements of the Act. There is no sound reason why a unilateral contract made enforceable by performance should fail under the Act. We understand why the Legislature and the courts would not allow an employer to spring a non-compete covenant on an existing employee and enforce such a covenant absent new consideration from the employer. [A]n agreement not to compete, like any other contract, must be supported by consideration. DeSantis, 793 S.W.2d at 681 n. 6. The Act, as we now read it, addresses this concern. The covenant cannot be a stand-alone promise from the employee lacking any new consideration from the employer. See, e.g., Martin v. Credit Prot. Ass'n, Inc., 793 S.W.2d 667, 669 (Tex.1990) (holding employment agreement consisting entirely of a covenant not to compete unenforceable because the covenant must be supported by valuable consideration). But if, as in the pending case, the employer's consideration is provided by performance and becomes non-illusory at that point, and the agreement in issue is otherwise enforceable under the Act, we see no reason to hold that the covenant fails.