Restrictive Covenant Re-Written to Make it Work 2

Restrictive Covenant Re-Written to Make it Work

 

UK Law – Hogan Lovells – The applicant employer in Prophet plc v Huggett sold specialist computer software for use in the fresh produce industry.  The defendant was employed by Prophet as its most senior sales manager.  When he moved to a competitor his employer tried to enforce a post-termination restriction in his contract which purported to prevent him from competing with, or working for a competitor of, Prophet either during or for 12 months after leaving employment.  The restrictive covenant ended by stating  

Provided that this restriction shall only operate to prevent the Employee from being so engaged, employed, concerned or interested in any area and in connection with any products in, or on, which he/she was involved whilst employed hereunder.”

The highlighted words were potentially fatal.  Read literally, they made the covenant worthless, because the competitor would never be using software systems produced by Prophet.  What the covenant was meant to do was to cover products similar to the ones the employee had been involved with.  

The High Court was prepared to correct the drafting error by looking at what a reasonable person would have understood the parties to have meant.  Merely adding the words “or similar thereto” did the trick.  The Court went on to uphold the full 12 month restriction (which tied in with the annual renewal of Prophet’s contracts with clients) on the basis that there was a legitimate interest to protect and other covenants in the contract were not sufficient.

This is not a decision employers will want to rely on – it is often the case (particularly with more junior employees) that ambiguous drafting will be construed against the party seeking to rely on it.  But it is refreshing to see a court using a common sense approach to restrictive covenants, along the lines of the “blue pencil” principle of deleting offending words leaving the rest of a restriction intact.

See: Hogan Lovells

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