Five Year Non-competition Covenant Across Canada Is Upheld As Reasonable

Non-competition covenants are regularly included in commercial agreements related to the purchase of a business and are critical in ensuring that the vendor of a business does not compete following the sale. However, even in commercial agreements, to be enforceable, non-competition covenants must be reasonable in geographic scope, length of time and the scope of the activity prohibited. Recently, in Ruel v Rebonne, 2023 ABCA 156 (CanLII), the Court of Appeal of Alberta upheld a non-competition covenant that prohibited competition in Canada for a period of five years following the sale of the business.

Background facts

As background, Down the Beaten Path was a home décor business that imported home décor items from Mexico for distribution to customers in Canada. In 2014, the plaintiff purchased the business from the defendant pursuant to a Share Purchase and Sale Agreement (the Agreement). The Agreement included a non-competition covenant prohibiting the defendant