Suing to enforce a non competition agreement is similar to suing to enforce other contracts. The person bringing the suit must prove the defendant breached the agreement and the plaintiff suffered actual damages as a result. Some parties try to do away with the necessity of proving actual damages by stipulating to an amount of liquidated damages.
The employer in Willard Packaging Company, Inc. v. Javier inserted a liquidated damages provision in a non-compete agreement. The provision states in the event a breach, the departing employee will pay "$50,000 as . . . liquidated damages." Willard Packing entered into non-compete agreements with all of its sales staff. The salespeople marketed the company's line of packaging materials to businesses in the Mid-Atlantic. Willard sued one of its former salesmen, Javier, after the Company discovered he was working for a competitor.
During a bench trial, the Court held that Willard proved Javier breached the non-compete agreement. But, the Court held, Willard did not prove it suffered actual damages. Finally, the Court invalidated the liquidated damages provision because it unfairly penalized Javier.
On appeal, the Court of Special Appeals affirmed the trial court. Because the parties posses unequal bargaining power and because the liquidated damages provision bore no relation to Willard's actual damages, the Court held the provision constituted an unenforceable penalty.
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