Case Study: Defending a claim for breach of Contract

Bell Lax was recently instructed to defend a claim brought against an individual and their company for breach of a ‘non-compete’ clause in their agency agreement.

The Individual (“Client A”) and their company (“Client B”), of which Client A was the sole shareholder and director, entered into an agency agreement with the Claimant in 2021. The contract contained a ‘non-compete’ clause which stated that if our clients terminated the contract with the Claimant, then for the following 6 months our clients were not allowed to:

“a. directly or indirectly compete with the Claimant;

b. deal with, canvass, solicit or endeavour to take away from the Claimant whether directly or indirectly any customers or indirect customers;”

In April 2024, our clients notified their Claimant that they would be terminating the contract. Our clients were informed that this would trigger the ‘non-compete’ clause and that they must comply with the clause until November 2024.

Unfortunately, the industry in which our clients work made it extremely difficult to determine who is or is not a customer or indirect customer of the Claimant. Therefore, our clients unintentionally and unknowingly worked with some of the Claimant’s potential customers.

In August 2024, the Claimant issued a claim for breach of contract against our clients. It was at this point that Bell Lax was instructed to act on their behalf and defend the claim.  

Immediately we noticed that the contract was poorly drafted and did not include definitions of the terms ‘customer’ or ‘potential customer’, nor did it set out how either could be identified by our clients, after they had terminated the contract. We advised our client that based on this, the clause could be seen as too onerous and restrictive by the Courts and therefore the clause could be found to be unenforceable.

Furthermore, we noted that the ‘non-compete’ clause referred only to Client B and not Client A. We informed our clients that this meant the Claimant had potentially brought a claim without a basis for doing so against Client A, and that Client A may be entitled to recover their costs of defending the claim.

We put the above arguments and a settlement offer to the Claimant and informed them that if they did not accept the offer and discontinue their claim, our clients would file a defence putting forward the same arguments. Shortly after, we entered into settlement negotiations with the Claimant, resulting in our clients signing a settlement agreement, which ended the claim against them.  

As a result of carefully reviewing the contract and advising our clients on the defences available to them, our clients were able to settle the dispute on favourable terms.

Please note that individual circumstances vary greatly and that this case study is not intended as a substitute for legal advice. If you, or anyone you know, is experiencing similar issues to those discussed above, please contact us on 0121 355 0011 to see how we may be able to assist you.