Geographical mistake invalidates non-compete clause: Supreme Court of Canada

The Supreme Court of Canada has ruled in Shafron v. KRG Insurance Brokers (Western) Inc. that a geographic  description which is not legally recognized invalidates a non-compete clause.

The non-compete clause in question prevented Morley Shafron from competing with KRG within the “Metropolitan City of Vancouver”, British Columbia.  “Metropolitan City of Vancouver” is not the legal name of any region within British Columbia, nor was it a term defined in the agreement, nor . KRG sued Shafron for breaching the non-compete clause when Shafron left KRG to work with an insurance broker in Richmond, a Vancouver suburb which is part of the Greater Vancouver Regional District.

The B.C. Court of Appeal originally upheld KRG’s claim, defining the “Metropolitan City of Vancouver” as an area including Vancouver, the University of British Columbia endowment lands, Burnaby and Richmond. However, the Supreme Court rejected that definition and also refused to amend the agreement by striking the word “Metropolitan” from the clause. The Supreme Court, following the doctrine that an ambiguous restrictive covenants  are unenforceable, found that there was no evidence that the parties agreed on a specific geographical area and then mistakenly included another area in the contract.

The lesson? Make sure non-compete clauses include the legal names of the geographical area(s) to which the non-compete applies. Otherwise you may have an unenforceable non-compete clause on your hands.

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