I was recently reviewing the contents of a contract agreement (US Based company) when two parts struck me as being particularly harsh.

The parts of stick out to me in particular are:

Clause 3: "Therefore agrees that during or after the term of this Agreement" – How can a company stipulate a condition after an agreement finished and over. Surely there must be a limit or it will be enforceable for the duration of the persons life.

Clause 4: "If any court refuses to enforce this Agreement, or any provision hereof, because it is more extensive (as to time, definition of business of otherwise) than is necessary to protect the business and goodwill of the Company, Employee agrees that this agreement, or the offending provision hereof, shall be modified to the extent necessary to permit the terms to be enforced in any such legal proceeding" – This seems to state that even if a court decides that some parts are not enforceable, we reserve the right to change them until we can get damages from you in any way. This sounds very harsh.

(Full image of the specific clauses are here and here.)

I was wondering if:

  1. These statements would stand up in a court of law?

  2. Whether companies are allowed to make these types of statements?

  3. Whether employees have the right to push back and ask these to be changed?

  • 1
    The "Clause 4" just means that if some court finds the wording to be outside of the law, they reserve the right to modify the clause as to be within the law but still adhere to the "spirit" behind the clause. I see Clause 3 a lot in contracts that include an NDA so that they can enforce the NDA in perpetuity without having the contract in place.
    – Ron Beyer
    Commented May 22, 2018 at 15:34

1 Answer 1

  1. Yes
  2. Yes
  3. Yes

However, these are pretty standard contract terms.

  1. Many, many terms survive the end of the substantive agreement. For example, terms with respect to ongoing confidentiality, dispute resolution, warranties, termination itself etc.
  2. The second is so common it actually has a named legal doctrine: reading down. In the absence of such a clause, if the contract inadvertently exceeds what the law allows, it preserves the contract rather than leaving both parties without contractural protection.

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