Sam decided to sell his interior design business in Town to Betty.
While reviewing a purchase agreement drafted by Sam, Betty insisted on a covenant by Sam not to compete with her in the interior design business in Town for a period of ten years.
In response to Betty’s request, Sam drafted the following proposed language on the last page of the purchase agreement:
“Sam hereby agrees that he will not perform interior design services in Town for a period of ten years.”
Betty said: “That’s fine. I don’t want to have to compete with your ties to your former clients in Town.” Sam told Betty that he would revise the purchase agreement to ad this covenant.
The following day, Sam sent Betty the original and one copy of the purchase agreement. Betty signed the original without reading it and returned it to Sam along with payment of the purchase price; she kept the copy. Sam never signed the purchase agreement.
Six months later, Betty learned that Sam had recently undertaken four large interior design jobs for clients who lived in Town. When she complained, he explained that, although the clients lived in Town, the jobs were on properties located outside Town. She reviewed her copy of the purchase agreement and discovered that it did not contain the covenant not to compete.
Sam had mistakenly sent her an unrevised version of the purchase agreement.
1. Does the transaction include a covenant by Sam not to compete?
2. Is the purchase agreement otherwise enforceable? Is the covenant enforceable?
3. What remedies should Betty pursue? What should she do?
4. What defenses does Sam have to assert?