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Case law: Court would not rewrite clear contract clauses in employer's favour

Non-compete clauses and other restrictions in contracts of employment should be reviewed by employers to make sure they work as intended and are unambiguous, following a recent ruling.

Legal Alert

This update was published in Legal Alert – September 2014

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

An employer failed to persuade the Court of Appeal to rewrite a non-compete clause that inadvertently allowed a sales manager to work for a competitor, because the apparent, ordinary meaning of the words was unambiguous and clear.

A sales manager in a computer company left to work for a competitor. The company applied for an injunction to prevent him from doing so on the basis that he was in breach of a one-year non-compete clause in his employment contract.

The manager pointed out that the wording at the end of the clause clearly stated that he was only prevented from working for competitors if his new job involved selling the same product he had been selling for his old employer. However, the software he had been selling for his old employer was unique and no competitor sold it, so if he was right the non-compete clause was meaningless.

The Court of Appeal held that a literal interpretation of the non-compete clause imposed "no material restraint" on the manager. However, the courts could only rewrite a clause to give it commercial sense if it was ambiguous in the first place – otherwise there was "no basis upon which [a court] was entitled to re-cast the parties' bargain".

As this clause was not ambiguous it could not be rewritten by the court to give it a wider effect than its apparent ordinary meaning - the employee was free to work for the competitor.

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