Asked by Arcie Robyn on Jun 08, 2024
Verified
Al, an accountant, has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sale contract, he agrees that he will refrain from practicing accounting anywhere within a 60-mile radius of Redwood City for a period of two years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home. In this case:
A) Al is in violation of the sale agreement, which contained restrictions that would probably be held to be valid.
B) the agreement is invalid, because it is an illegal restraint on trade.
C) the agreement is illegal, because it is a violation of public policy.
D) the two-year provision is likely to be held invalid, because it is too long a period of time.
Accounting Practice
The procedures and guidelines followed by accountants to record, report, and manage financial transactions and positions.
Illegal Restraint
Actions or measures that unlawfully restrict freedom or movement, often referring to anticompetitive practices or personal liberties.
Public Policy
Government policies designed to address public issues and create laws that reflect the attitudes and beliefs of the general public.
- Gain an understanding of the rules pertaining to the validity of covenants not to compete included in agreements of selling a business.
Verified Answer
LK
Liridona KelmendiJun 09, 2024
Final Answer :
A
Explanation :
The agreement between Al and Able and Baker, which restricts Al from practicing accounting within a 60-mile radius of Redwood City for two years, is a common type of non-compete clause often found in the sale of a business. Such clauses are generally considered valid if they are reasonable in scope, geography, and duration to protect the legitimate interests of the buyer. In this case, the restriction seems reasonable to prevent Al from directly competing with the business he sold, and thus, his actions of meeting with clients in his home within the restricted area would likely be seen as a violation of the agreement.
Learning Objectives
- Gain an understanding of the rules pertaining to the validity of covenants not to compete included in agreements of selling a business.