Restrictive covenants—like noncompetition and nonsolicitation provisions—are common. A recent decision by the Delaware Court of Chancery is important to understanding how restrictive covenants can be used and makes clear that the covenant cannot be overly broad, even if the parties have agreed that it is “reasonable.”

Taking a step back, Delaware law generally takes a hands-off approach to business. For example, “Delaware is strongly contractarian in its law” and “respects the right of parties to freely contract and to be able to rely on the enforceability of their agreements.” See Ascension Insurance Holdings v. Underwood, 2015 WL 356002, at *4 (Del. Ch. Jan. 28, 2015). Delaware also discourages “artificial obstacles to competition” and values “the interests of people’s natural right to follow any trade or profession anywhere they please and in any lawful manner.” See Kodiak Building Partners v. Adams, 2022 WL 5240507, at *7 (Del. Ch. Oct. 6, 2022) (cleaned up).

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