Distinction between property and professional interest

— See Rakestraw v. Lanier, 104 Ga. 188, 30 S.E. 735, 69 Am. St. R. 154 (1898). 13-8-2 Distinction between restraints on practice of profession and restraints connected with sale of business. — A distinction exists between that class of contracts binding one to desist from practice of a learned profession, and those which bind one who has sold out a mercantile or other kind of business, and the good will therewith connected, not to again engage in that business. In the former class there should be a reasonable limit as to time, so as to prevent contract from operating with unnecessary harshness against person who is to abstain from practicing one’s profession at a time when one so doing could in no way benefit the other contracting party. In the latter class such limit is not essential to validity of the contract, but the restraint may be indefinite. Kutash v. Gluckman, 193 Ga. 805, 20 S.E.2d 128 (1942); Burdine v. Brooks, 206 Ga. 12, 55 S.E.2d 605 (1949). Principle applying to learned professions has been extended to occupations which require special skill. Kutash v. Gluckman, 193 Ga. 805, 20 S.E.2d 128 (1942). Unenforceability due to no time limitation. — When a nondisclosure clause contained no time limitation, the clause was unenforceable. U3S Corp. of Am. v. Parker, 202 Ga. App. 374, 414 S.E.2d 513 (1991). Contract restraining trade upheld when based upon consideration making it reasonable for parties to do so. — Contract in restraint of trade, upon a consideration which shows contract was reasonable for parties to enter it, is good. Whenever a consideration appears to make it a proper and useful contract and such as cannot be set aside without injury to a fair contractor, it ought to be maintained. Scott v. Hall, 56 Ga. App. 467, 192 S.E. 920 (1937); Interstate Sec. Police, Inc. v. Citizens & S. Emory Bank, 237 Ga. 37, 226 S.E.2d 583 (1976). Nondisclosure covenant was held to be void due to the absence of any restriction upon the duration of the nondisclosure provisions and also because it was overbroad in that the covenant forbade disclosure of certain information without regard to whether the information was within scope of the employer’s legitimate business interests. Prudential Ins. Co. of Am. v. Baum, 629 F. Supp. 466 (N.D. Ga. 1986). Nondisclosure covenant executed by parties involved in a failed joint venture agree- 527 13-8-2 Contracts in Restraint of Trade, Generally (Cont’d) 3. Application (Cont’d) ment to develop a multimedia e-mail software program to be marketed to a specific company was void under O.C.G.A. § 13-8-2(a)(2) because it contained no territorial limit or limits on the scope of the restricted activity. OnBrand Media v. Codex Consulting, Inc., 301 Ga. App. 141, 687 S.E.2d 168 (2009). Hospital privileges. — Doctor’s claim that a hospital promised not to report the doctor’s conduct to the National Practitioner Data Bank if the doctor complied with the psychiatrist’s treatment plan was rejected as any such agreement would violate federal law requiring a hospital to conduct periodic appraisals of their medical staff under 42 C.F.R. § 482.22(a)(1) and to report the doctor’s resignation to the data bank under 42 U.S.C.S. §§ 11133 and 11134; any such agreement was unenforceable under O.C.G.A. §§ 13-8-1 and 13-8-2 as against public policy to provide quality health care. Taylor v. Kennestone Hosp., Inc., 266 Ga. App. 14, 596 S.E.2d 179 (2004). Waiver paragraph in contract. — Waiver paragraph in contract, providing that an independent contractor waived all of the contractor’s rights for any recovery against a billboard owner for damages incurred by the contractor, did not violate O.C.G.A. § 13-8-2(b) as the statute applied only to contract provisions purporting to indemnify or hold harmless the promisee against liability for damages, and the paragraph in question did not purport to indemnify or hold the owner harmless from damages. Holmes v. Clear Channel Outdoor, Inc., 298 Ga. App. 178, 679 S.E.2d 745 (2009). Limitation of liability provision enforceable in contract. — Provision in a contract between a developer and an architect limiting the dollar amount of the latter’s liability to the former for errors or professional negligence was not void as against public policy under O.C.G.A. § 13-8-2(b).That statute applied only to contract provisions purporting to indemnify or hold harmless the promisee against liability for damages, while the contract simply established a bargained-for cap on the liability of the architect to the developer. Precision Plan- ning, Inc. v. Richmark Cmtys., Inc., 298 Ga. App. 78, 679 S.E.2d 43 (2009). Limitation of liability provision contained in a contract between a real estate developer and an engineering firm was enforceable because the provision represented a reasonable allocation of risks in an arms-length business transaction and did not violate the public policy underlying O.C.G.A. § 13-8-2(a) or the public policy for professional engineering practice set forth in O.C.G.A. § 43-15-1 et seq. RSN Props. v. Eng’g Consulting Servs., 301 Ga. App. 52, 686 S.E.2d 853 (2009), cert. denied, No. S10C0519, 2010 Ga. LEXIS 249 (Ga. 2010). 4. Territorial Limitation Size of territory restricted not determinitive of reasonableness. — Reasonableness as to territory depends not so much on geographical size of the territory as on reasonableness of the territorial restriction. Moore v. Dwoskin, Inc., 226 Ga. 835, 177 S.E.2d 708 (1970). For discussion regarding territorial limitation necessary for upholding of contracts in restraint of trade. — See Kinney v. Scarbrough Co., 138 Ga. 77, 74 S.E. 772, 40 L.R.A. (n.s.) 473 (1912). Covenant not to compete which applies to entire state is not always void and unenforceable. Interests of the state will be better served by judging reasonableness of territorial restrictions, considering nature of business involved, and facts surrounding each case. Barry v. Stanco Communications Prods., Inc., 243 Ga. 68, 252 S.E.2d 491 (1979). Restriction against doing business with any actual or potential customers of the employer located in a specific geographical area in which the employee had not actually done business is overbroad and unreasonable. Hulcher Servs. v. R.J. Corman R.R., 247 Ga. App. 486, 543 S.E.2d 461 (2000). Partial Restraints of Trade Partial restraints of trade are not void under O.C.G.A. § 13-8-2. — This provision merely declares existing common law prohibiting general restraints of trade, and partial restraints, as heretofore recognized, are not void. Watkins v. Avnet, Inc., 122 Ga. App. 474, 177 S.E.2d 582 (1970). 528 Contract in partial restraint may be upheld provided restraint is reasonable and contract is valid in other essentials. Britt v. Davis, 239 Ga. 747, 238 S.E.2d 881 (1977). Contracts in partial restraint of trade are not void as against public policy, provided those contracts are reasonable. Hood v. Legg, 160 Ga. 620, 128 S.E. 891 (1925). Distinction between general and partial restraints of trade. — See Brewer & Co. v. Lamar, Rankin & Lamar, 69 Ga. 656, 47 Am. R. 766 (1882). Reason for distinction between general and partial restraints of trade is that all general restraints tend to promote monopolies and to discourage industry, enterprise, and just competition; whereas same reason does not apply to special restraints, since, on the contrary, it may even be beneficial to the public that a particular place should not be overstocked with persons engaged in the same business. State v. Central of Ga. Ry., 109 Ga. 716, 35 S.E. 37, 48 L.R.A. 351 (1900). Whether contract in partial restraint of trade is reasonable has reference only to public interest. — Whether contract in partial restraint of trade is reasonable has no reference to contractual rights of parties themselves. It has reference only to interests of the public. Hood v. Legg, 160 Ga. 620, 128 S.E. 891 (1925). Restrictive covenants in employment contracts are considered in partial restraint of trade. Purcell v. Joyner, 231 Ga. 85, 200 S.E.2d 363 (1973); Preferred Risk Mut. Ins. Co. v. Jones, 233 Ga. 423, 211 S.E.2d 720 (1975); Orkin Exterminating Co. v. Pelfrey, 237 Ga. 284, 227 S.E.2d 251 (1976); McNease v. National Motor Club of Am., Inc., 238 Ga. 53, 231 S.E.2d 58 (1976); Fuller v. Kolb, 238 Ga. 602, 234 S.E.2d 517 (1977); Uni-Worth Enters., Inc. v. Wilson, 244 Ga. 636, 261 S.E.2d 572 (1979); Merrill Lynch, Pierce, Fenner & Smith v. Stidham, 506 F. Supp. 1182 (M.D. Ga. 1981), aff ’d in part, vacated in part on other grounds, 658 F.2d 1098 (5th Cir. 1981). Noncompetition and nonsolicitation covenants were reasonable and enforceable, the covenants were of a two-year duration and limited to a seven-county territorial area, and when prohibiting the professional activity of accounting and the solicitation of clients pursuant to the covenant were found to be reasonable in light of the firm’s need 13-8-2 to protect the firm’s investment in defendant’s skills. Habif, Arogeti & Wynne v. Baggett, 231 Ga. App. 289, 498 S.E.2d 346 (1998). What is partial restraint in connection with sale of business. — Restraint is partial when the restraint covers only time and locality during and in which vendee carries on business purchased, and beyond these limitations, seller is at liberty to carry on same business. Cheese Shop Int’l, Inc. v. Wirth, 304 F. Supp. 861 (N.D. Ga. 1969). Contract not to engage in certain business, limited in time and territory, constitutes partial restraint. Bullock v. Johnson, 110 Ga. 486, 35 S.E. 703 (1900). Enforceability of partial restraints of trade. — If a contract is in partial restraint of trade only, the contract may be supported, provided restraint is reasonable and contract is founded on a consideration. State v. Central of Ga. Ry., 109 Ga. 716, 35 S.E. 37, 48 L.R.A. 351 (1900); Bullock v. Johnson, 110 Ga. 486, 35 S.E. 703 (1900); Jefferson v. Markert & Co., 112 Ga. 498, 37 S.E. 758 (1900). Contract only in partial restraint of trade may be upheld, provided restraint is reasonable, and contract is valid in other essentials. Kutash v. Gluckman, 193 Ga. 805, 20 S.E.2d 128 (1942); Orkin Exterminating Co. v. Dewberry, 204 Ga. 794, 51 S.E.2d 669 (1949), overruled on other grounds, Barry v. Stanco Communications Prods., Inc., 243 Ga. 68, 252 S.E.2d 491 (1979); Coffee Sys. v. Fox, 226 Ga. 593, 176 S.E.2d 71 (1970); Federated Mut. Ins. Co. v. Whitaker, 232 Ga. 811, 209 S.E.2d 161 (1974). In deciding whether a partial restraint of trade is reasonable, a court will look to whole subject matter of contract, kind and character of business, the business’s location, purpose to be accomplished by restriction, and all circumstances which show intention of parties, and which must have entered into making of contract. Kutash v. Gluckman, 193 Ga. 805, 20 S.E.2d 128 (1942). While contracts in general restraint of trade are void, a contract concerning a lawful and useful business in partial restraint of trade and reasonably limited as to time and place is not void. Black v. Horowitz, 203 Ga. 294, 46 S.E.2d 346 (1948); Burdine v. Brooks, 206 Ga. 12, 55 S.E.2d 605 (1949); Aladdin, Inc. v. Krasnoff, 214 Ga. 519, 105 529 Partial Restraints of Trade (Cont’d) S.E.2d 730 (1958); Spalding v. Southeastern Personnel of Atlanta, Inc., 222 Ga. 339, 149 S.E.2d 794 (1966). Contracts in general restraint of trade are void but a contract concerning a lawful and useful business in partial restraint of trade and reasonably limited as to time and territory, and otherwise reasonable, is not void. Nelson v. Woods, 205 Ga. 295, 53 S.E.2d 227 (1949); Turner v. Robinson, 214 Ga. 729, 107 S.E.2d 648 (1959); Thomas v. Coastal Indus. Servs., Inc., 214 Ga. 832, 108 S.E.2d 328 (1959); Coffee Sys. v. Fox, 226 Ga. 593, 176 S.E.2d 71 (1970); Moore v. Dwoskin, Inc., 226 Ga. 835, 177 S.E.2d 708 (1970); Federated Mut. Ins. Co. v. Whitaker, 232 Ga. 811, 209 S.E.2d 161 (1974). Certain agreements in partial restraint of trade are generally upheld as valid, but before the agreements can be upheld the court must find that restraints imposed are reasonably necessary to protect promisee’s business. Thus, restraints must be no broader than necessary to protect promisee, and this surely implies time and place restrictions. Cheese Shop Int’l, Inc. v. Wirth, 304 F. Supp. 861 (N.D. Ga. 1969). Contract in partial restraint of trade is enforceable if it is reasonably limited as to time and territory and not otherwise unreasonable. Watkins v. Avnet, Inc., 122 Ga. App. 474, 177 S.E.2d 582 (1970). Preventing competition and restraining trade were said to be synonymous terms in laws which prohibit general and unreasonable restraints. Limited restraints, however, if not greater than protection which other party requires, are not outlawed. Interstate Sec. Police, Inc. v. Citizens & S. Emory Bank, 237 Ga. 37, 226 S.E.2d 583 (1976). Restrictive Covenants Ancillary to Employment Contracts 1. In General Public policy generally disfavors covenants not to compete ancillary to employment contracts. — Covenants not to compete ancillary to employment contracts must be scrutinized in terms of the public policy generally disfavoring such contracts as restraints on trade and competition. Preferred 13-8-2 Risk Mut. Ins. Co. v. Jones, 233 Ga. 423, 211 S.E.2d 720 (1975). Restraints on future employment must be reasonable as to both time and territory. — Contract without limitation as to space or territory, although limited as to time, not to engage in a particular trade or business, is unenforceable as being against policy of the law. Kinney v. Scarbrough Co., 138 Ga. 77, 74 S.E. 772, 40 L.R.A. (n.s.) 473 (1912); Roberts v. H.C. Whitmer Co., 46 Ga. App. 839, 169 S.E. 385 (1933). Negative covenant in a contract, ancillary to contract of employment, whereby employee is forbidden to enter into employment in competition with one’s employer for a certain period of time after leaving service of employer, but which covenant is not limited as to space or territory, is in general restraint of trade, contrary to public policy of this state, and unenforceable. Vendo Co. v. Long, 213 Ga. 774, 102 S.E.2d 173 (1958). It is essential to validity of restraints on future employment that the restraints be reasonable as to both time and territory. Stewart v. American Home Mut. Life Ins. Co., 107 Ga. App. 105, 129 S.E.2d 367 (1962). With respect to restrictive agreements ancillary to contract of employment, mere fact that covenant is unlimited as to either time or territory is sufficient to condemn the covenant as unreasonable. Cheese Shop Int’l, Inc. v. Wirth, 304 F. Supp. 861 (N.D. Ga. 1969); Coffee Sys. v. Fox, 226 Ga. 593, 176 S.E.2d 71 (1970). Regarding negative covenant ancillary to a contract of employment, it is essential to validity of the contract that the contract contain a reasonable limitation both as to time and territory. Edwin K. Williams & Co. — E. v. Padgett, 226 Ga. 613, 176 S.E.2d 800 (1970). It is essential to validity of an employment contract that a restrictive covenant contain a reasonable limitation both as to time and territory. Heller v. Margaro, 148 Ga. App. 591, 252 S.E.2d 11 (1978). Enforceability of restrictive covenants in employment contracts. — When restrictive clause in contract of employment is supported by sufficient consideration in form of mutual promises and has been rendered definite by performance of main contract, and is reasonable as to time and area, it is 530 not void under this statute or Ga. Const. 1976, Art. III, Sec. VIII, Para. VIII (see Ga. Const. 1983, Art. III, Sec. VI, Para V). Griffin v. Vandegriff, 205 Ga. 288, 53 S.E.2d 345 (1949) (see O.C.G.A. § 13-8-2). So long as a noncompetition provision in an employment contract does not adversely affect interest of public or injure obligor beyond what is necessary to protect legitimate rights of obligee, it is valid under laws of this state. Griffin v. Vandegriff, 205 Ga. 288, 53 S.E.2d 345 (1949). When restrictive covenant of partnership agreement concerns a useful and lawful business, is only in partial restraint of trade, and is reasonably limited as to time and place, the covenant is valid and enforceable. Habif v. Maslia, 214 Ga. 654, 106 S.E.2d 905 (1959). Restrictive covenants in employment contracts are void unless the covenants are reasonable as between parties, serve a proper function, as protection of legitimate interests of employer, and are not specially injurious to the public. Foster v. Union Cent. Life Ins. Co., 103 Ga. App. 420, 119 S.E.2d 289 (1961), overruled on other grounds, Brown Stove Works, Inc. v. Kimsey, 119 Ga. App. 453, 167 S.E.2d 693 (1969). Agreement in restraint of trade, ancillary to a contract of employment, support by a valuable consideration, and limited as to both time and territory, and not otherwise unreasonable, is enforceable. Mike Bajalia, Inc. v. Pike, 226 Ga. 131, 172 S.E.2d 676 (1970). Three separate elements of restrictive contracts are considered in determining whether such contracts are reasonable: (1) restraint in activity of employee, or former employee, imposed by contract; (2) territorial or geographic restraint; and (3) length of time during which covenant seeks to impose restraint. Coffee Sys. v. Fox, 226 Ga. 593, 176 S.E.2d 71 (1970); Britt v. Davis, 239 Ga. 747, 238 S.E.2d 881 (1977); ALW Mktg. Corp. v. McKinney, 205 Ga. App. 184, 421 S.E.2d 565 (1992). As a matter of law, a restrictive covenant in an employment contract is to be upheld if the covenant is not unreasonable, is founded on valuable consideration, and is reasonably necessary to protect interest of party in whose favor the covenant is imposed, and does not unduly prejudice interests of the 13-8-2 public. Moore v. Dwoskin, Inc., 226 Ga. 835, 177 S.E.2d 708 (1970). In determining whether restraints imposed by contract are reasonable, a court will consider nature and extent of trade or business, situation of parties, and all other circumstances. Preferred Risk Mut. Ins. Co. v. Jones, 233 Ga. 423, 211 S.E.2d 720 (1975). Considerations in determining enforceability. — The scope of activities restricted in employment contracts against competition will be found reasonable when there is a rational relationship between those activities and the activities the employee conducted for the former employer. Wesley-Jessen, Inc. v. Armento, 519 F. Supp. 1352 (N.D. Ga. 1981). In covenants against competition in employment contracts, if the restraint contracted for appears to have been for a just and honest purpose, for the protection of the legitimate interests of the party in whose favor the restraint is imposed, reasonable as between the parties, and not specially injurious to the public, the restraint will be held valid. Wesley-Jessen, Inc. v. Armento, 519 F. Supp. 1352 (N.D. Ga. 1981). Although restrictive covenants are not favored in law, when the contract is not unreasonable or overbroad and there is strong evidence of and necessity for some protection of employer’s expectations from those to whom the employer’s affairs are entrusted, restrictive covenants will not be held against public policy. Puritan/Churchill Chem. Co. v. McDaniel, 248 Ga. 850, 286 S.E.2d 297 (1982). Covenants not to compete are scrutinized to determine if the covenant’s are sufficiently limited in time and territorial effect and are otherwise reasonable, considering the interests to be protected and the effects on both parties to the contract. Rash v. Toccoa Clinic Medical Assocs., 253 Ga. 322, 320 S.E.2d 170 (1984). When restrictive covenants in employment contract are divisible, valid ones may be enforced. — When, in an employment contract, two restrictive covenants are divisible, the first, which is valid, may be enforced even though the second is invalid. Aladdin, Inc. v. Krasnoff, 214 Ga. 519, 105 S.E.2d 730 (1958). Performance of underlying contract of employment is sufficient consideration to 531 Restrictive Covenants Ancillary to Employment Contracts (Cont’d) 1. In General (Cont’d) support ancillary restrictive agreement which is reasonable and otherwise enforceable. Griffin v. Vandegriff, 205 Ga. 288, 53 S.E.2d 345 (1949). Independent covenant in restraint of trade, with one not a party to employment is invalid, even though supported by a consideration. Horne v. Peavy, 224 Ga. 849, 165 S.E.2d 125 (1968). When one party leased the party’s equipment to the other on a long-term basis, the facts were more closely analogous to the covenant not to compete which were ancillary to a franchise or distributorship agreement than the sale of business’ assets. Thus, the alleged noncompetition agreement between the parties, even if found to be a binding contract, were unenforceable under Georgia law when the terms of the agreement were not definite or strictly limited in time and territorial effect. American Equip. Servs., Inc. v. Evans Trailer Leasing Co., 650 F. Supp. 1266 (N.D. Ga. 1986). Mere desire to avoid competition insufficient. — Court will not accept as prima facie valid a covenant related to the territory when the employer does business when the only justification is that the employer wants to avoid competition by the employee in that area. Adcock v. Speir Ins. Agency, Inc., 158 Ga. App. 317, 279 S.E.2d 759 (1981). If one covenant is void, then all such covenants in same contract are void. — If any covenant not to compete, within a given employment contract, is unreasonable either in time, territory, or prohibited business activity, then all covenants not to compete within the same employment contract are unenforceable. Ward v. Process Control Corp., 247 Ga. 583, 277 S.E.2d 671 (1981). A nonsolicitation clause ancillary to an employment agreement was overbroad and unenforceable because the clause did not limit the prohibition to only customers with whom the employee had contact, and lacked a territorial restriction; thus, a noncompetition clause was likewise unenforceable as Georgia did not employ the ‘‘blue pencil’’ doctrine of severability. Trujillo v. Great Southern Equip. Sales, LLC, 289 Ga. App. 474, 657 S.E.2d 581 (2008). 13-8-2 Reasonableness of covenant is question of law. — Reasonableness of the restraints of covenants against competition in employment contracts is a question of law for determination by the court. Wesley-Jessen, Inc. v. Armento, 519 F. Supp. 1352 (N.D. Ga. 1981). Judgment on the pleadings. — The question of reasonableness in determining the validity of a restrictive covenant remains one of law based on the wording of the covenant, and if after taking the well-pleaded allegations of the complaint as true, it appears that a covenant is void on the covenant’s face such that no additional facts could save the covenant, judgment on the pleadings in favor of the defendant is appropriate. ALW Mktg. Corp. v. McKinney, 205 Ga. App. 184, 421 S.E.2d 565 (1992). Protection of employer’s image. — Restrictive covenant in employment contract between defendant broadcasting corporation and plaintiff meteorologist/television personality which prohibited competition ‘‘on air’’ in the Atlanta market for a period of six months after termination of employment was valid since the restriction was reasonably tailored to protection of defendant’s interest in the defendant’s television station’s image. Beckman v. Cox Broadcasting Corp., 250 Ga. 127, 296 S.E.2d 566 (1982). Covenant restricting supervisory work. — Covenant was overbroad because the covenant did not permit an employee to ‘‘assist, aid or abet’’ others, which, in effect, prohibited the employee from working as a supervisor or in other capacities. American Gen. Life & Accident Ins. Co. v. Fisher, 208 Ga. App. 282, 430 S.E.2d 166 (1993). Covenant not to solicit was unenforceable when the covenant prohibited a former insurance representative from accepting applications for insurance from employer’s policyholders who wished to transfer to the representative’s new company without any solicitation on the representative’s part. American Gen. Life & Accident Ins. Co. v. Fisher, 208 Ga. App. 282, 430 S.E.2d 166 (1993). Trial court erred by not determining, as a matter of law, whether noncompete agreements were enforceable; because the agreements contained neither specific territorial limits nor limited their restrictions to cus- 532 tomers with whom the former employees had contacts during their employment, the restrictions were unreasonable, overbroad, and unenforceable. Fellows v. All Star, Inc., 272 Ga. App. 262, 612 S.E.2d 86 (2005). Choice of law provisions. — When an employee executed a noncompete agreement in Ohio, then worked for the employer in Ohio and then in Illinois, and then moved to Georgia after going to work for a competitor of the employer, the federal district court declined to enforce the agreement’s Ohio choice of law provision, as it was would have operated in contravention of Georgia’s public policy under O.C.G.A. § 13-8-2. Keener v. Convergys Corp., 205 F. Supp. 2d 1374 (S.D. Ga. 2002), aff ’d, in part, rev’d, in part, 342 F.3d 1264 (11th Cir. Ga. 2003). 2. Territorial Limitation Reasonableness of territorial limitation of restrictive covenant in employment contract. — In determining reasonableness of territorial limitation of restrictive covenant in employment contract, courts will consider nature and extent of trade or business, situation of parties, and all other circumstances. Turner v. Robinson, 214 Ga. 729, 107 S.E.2d 648 (1959). Overly broad covenant unenforceable. — Agreement prohibiting a physician from practicing within a 20 mile radius of any of the employer’s medical centers for two years from termination, even centers where the physician never worked and those opened during the physician’s tenure, was overly broad and not enforceable. Davis v. Albany Area Primary Health Care, Inc., 233 Ga. App. 311, 503 S.E.2d 909 (1998). Reasonableness of territorial limitation. — Territorial coverage restriction in a covenant not to compete was overbroad where the 80 mile radius stated in the covenant related to the area in which the employer, rather than the employee, did business and the employer could not show a legitimate business interest for the restriction. Brunswick Floors, Inc. v. Guest, 234 Ga. App. 298, 506 S.E.2d 670 (1998). Restrictive covenant not to compete contained in former employee’s employment agreement with plaintiff-company was overbroad as to territory and scope of activities where the covenant included all of Georgia and Florida, and was not tailored to the job 13-8-2 the employee performed for the company, but instead, prohibited the employee from being connected in any way with a similar business. Ceramic & Metal Coatings Corp. v. Hizer, 242 Ga. App. 391, 529 S.E.2d 160 (2000). Territorial restrictions related to territory in which employee was employed are generally enforced. Merrill Lynch, Pierce, Fenner & Smith v. Stidham, 506 F. Supp. 1182 (M.D. Ga. 1981), aff ’d in part, vacated in part on other grounds, 658 F.2d 1098 (5th Cir. 1981); Adcock v. Speir Ins. Agency, Inc., 158 Ga. App. 317, 279 S.E.2d 759 (1981). Absence of geographical limitation. — Nonsolicitation clause in employment contract prohibiting solicitation of employer’s clients that employee actually contacted while serving employer is enforceable notwithstanding absence of explicit geographical limitation. W.R. Grace & Co. v. Mouyal, 262 Ga. 464, 422 S.E.2d 529 (1992). Specific territory unascertainable at time of agreement. — Territorial restriction was too indefinite on its face to be enforceable because the restriction contained no specific territory ascertainable at the time the agreement was entered. ALW Mktg. Corp. v. McKinney, 205 Ga. App. 184, 421 S.E.2d 565 (1992). 3. Time Limitation Restraint depriving one from practicing profession in restricted territory for all time is unenforceable. — Restraint or inhibition relating to the right of a person to follow a particular profession, and which deprives the person from practicing one’s profession under any and all circumstances in a restricted territory for all time is unreasonable and unenforceable. Stewart v. American Home Mut. Life Ins. Co., 107 Ga. App. 105, 129 S.E.2d 367 (1962). Covenant preventing transactions with entity which did business with employer within 12 months of termination. — When a covenant prevents a former employee from transacting any business with an entity, with the exception of company vendors, which had transacted business with the company within the 12 months immediately preceding the date on which the employment of employee terminated with the company, such covenant is unreasonable regarding the scope of prohibited business activities. Ward v. Process 533 Restrictive Covenants Ancillary to Employment Contracts (Cont’d) 3. Time Limitation (Cont’d) Control Corp., 247 Ga. 583, 277 S.E.2d 671 (1981). 4. Application Restrictions placing greater limitations than are necessary to protect employer render contract void and unenforceable. Watkins v. Avnet, Inc., 122 Ga. App. 474, 177 S.E.2d 582 (1970). Covenant not to compete in an employment contract that was overbroad as to the contract’s territorial coverage and the scope of activity prohibited was unenforceable since the territorial coverage prohibition could not be determined with certainty at the time the employee signed the contract and the activities prohibited included holding stock in other companies working in similar areas. Harville v. Gunter, 230 Ga. App. 198, 495 S.E.2d 862 (1998). Covenant preventing employee from working for competitor in any capacity is unnecessary for employer’s protection. — Covenant wherein employee agreed not to accept employment with a competitor in any capacity imposes a greater limitation upon employee than is necessary for protection of employer and therefore is unenforceable. Uni-Worth Enters., Inc. v. Wilson, 244 Ga. 636, 261 S.E.2d 572 (1979). Three year and world-wide restrictions unenforceable. — Covenant prohibiting former employee from working in any capacity in the world in the business of developing or selling electronic firearm systems for three years following the employee’s termination was overbroad in terms of territorial coverage, the scope of prohibited activity, and substantially limited former employee’s right to earn a living. Consequently, the trial court did not err in concluding that the covenant at issue was an unreasonable restraint on trade and therefore unenforceable. Firearms Training Sys. v. Sharp, 213 Ga. App. 566, 445 S.E.2d 538 (1994). Noncompetition agreement alone not personal service contract. — While a noncompetition agreement joined with affirmative promises is a personal services contract which terminates upon the death of the promisor, a noncompetition agreement 13-8-2 standing alone, with no affirmative promises, is not. Mail & Media, Inc. v. Rotenberry, 213 Ga. App. 826, 446 S.E.2d 517 (1994). Protection of customers by employers. — While it might have been reasonable to prohibit an employee from selling or soliciting memberships in other motor clubs in territories in which the employee had worked for a period of three years following termination, it was unreasonable to prohibit an employee from engaging in motor club or automobile association business without restricting the employee as to kind and character of activity in which the employee could not engage. McNease v. National Motor Club of Am., Inc., 238 Ga. 53, 231 S.E.2d 58 (1976). Arguments can be made that a covenant is not too indefinite to be enforced where it merely prohibits employee from calling upon or taking away customers or accounts of employer solicited or contacted by employee during employee’s term of employment. Uni-Worth Enters., Inc. v. Wilson, 244 Ga. 636, 261 S.E.2d 572 (1979). Court will enforce an agreement prohibiting an employee from pirating a former employer’s customers served by the employee, during the employment, at the employer’s direct or indirect expense. Adcock v. Speir Ins. Agency, Inc., 158 Ga. App. 317, 279 S.E.2d 759 (1981). Restrictive covenant in employment prohibiting competitive activity within 50-mile radius was overly broad. — A contractual provision which prohibited employee, upon termination of employment, from entering into competitive activity within 50-mile radius of where employer was operating was overly broad and unreasonably restrained trade due to chilling effect that may be had upon post-employment competitive activity because of employee’s inability to forecast with certainty the territorial extent of duty owing the former employer. Durham v. Stand-By Labor of Ga., Inc., 230 Ga. 558, 198 S.E.2d 145 (1973). Protection of confidential business information. — When a duty has been imposed upon an employee pursuant to contract not to disclose confidential business information upon termination of employment, public policy is swung in favor of protecting these commercial intangibles and of preventing unfair methods of exploiting them in breach 534 of duty. Wesley-Jessen, Inc. v. Armento, 519 F. Supp. 1352 (N.D. Ga. 1981). Law firm fee schedule based on stage of litigation. — Fee schedule between the attorney and the law firm based on the stage of litigation of each case was inextricably linked with the agreement not to compete and as such constitutes an unenforceable restraint on trade because the agreement not to compete contained no limitation on duration. William N. Robbins, P.C. v. Burns, 227 Ga. App. 262, 488 S.E.2d 760 (1997). Overly broad noncompete clause. — Employment contract which contained noncompete and nonsolicitation clauses was deemed unenforceable, pursuant to Ga. Const. 1983, Art. III, Sec. VI, Para. V(c) and O.C.G.A. § 13-8-2, because the noncompete clause was overly broad in that the clause attempted to preclude the former employee not only from performing painting services for prior clients, but also from acting as a sales person in the decorative or faux painting business; there was no evidence that the employer had employed ‘‘sales persons’’ or that the employee had ever acted in that capacity on behalf of the employer, and summary judgment to the employee was proper. Whimsical Expressions, Inc. v. Brown, 275 Ga. App. 420, 620 S.E.2d 635 (2005). Noncompetition agreement that provided that an employee of a drug and alcohol testing service would not compete with the employer ‘‘in any area of business’’ of the employer’s, including solicitation of existing accounts, was unreasonable as overly broad and indefinite; when read as a whole, the agreement was plainly intended to prevent any type of competing activity whatsoever, with the reference to solicitation merely being illustrative of one type of prohibited activity. Stultz v. Safety & Compliance Mgmt., 285 Ga. App. 799, 648 S.E.2d 129 (2007), cert. denied, 2007 Ga. LEXIS 812 (Ga. 2007). Nonsolicitation of customer covenants not overly broad. — Trial court erred in striking down nonsolicitation of customer covenants in an employment contract between former employees and their employer as the restrictive covenants were reasonable, limited in scope, and not against public policy under Ga. Const. 1983, Art. III, Sec. VI, Para. V(c) and O.C.G.A. § 13-8-2; the covenants only 13-8-2 included current, existing clients and not former customers of the employer, the employees were only prohibited from soliciting the current customers that the employees had served during their employment, and the employees were only prohibited from selling the customer’s insurance or employee benefit plans that were offered by the employer during the employee’s employment. Palmer & Cay of Ga., Inc. v. Lockton Cos., Inc., 284 Ga. App. 196, 643 S.E.2d 746 (2007), cert. denied, 2007 Ga. LEXIS 503 (Ga. 2007). Restrictive Covenants Ancillary to Sale of Business 1. In General Greater latitude is allowed for covenants relating to sale of business than those relating to employment. Watkins v. Avnet, Inc., 122 Ga. App. 474, 177 S.E.2d 582 (1970). Covenants not to compete incorporated in agreements for sale of a business or the business’s assets have been given greater latitude and broadness in their interpretation and enforcement by Georgia courts than those noncompetition covenants ancillary to contracts of employment. Farmer v. Airco, Inc., 231 Ga. 847, 204 S.E.2d 580 (1974). Latitude of restrictive covenants greater in business deals. — In determining the reasonableness of a restrictive covenant, greater latitude is allowed in those covenants relating to sale of a business, or dissolution of a partnership, than in those covenants ancillary to an employment contract. Orkin Exterminating Co. v. Dewberry, 204 Ga. 794, 51 S.E.2d 669 (1949), overruled on other grounds, Barry v. Stanco Communications Prods., Inc., 243 Ga. 68, 252 S.E.2d 491 (1979); Foster v. Union Cent. Life Ins. Co., 103 Ga. App. 420, 119 S.E.2d 289 (1961), overruled on other grounds, Brown Stove Works, Inc. v. Kimsey, 119 Ga. App. 453, 167 S.E.2d 693 (1969). Restraints valid in sale of business may be unreasonable in employment contract. — Restraints which would be valid in sale of a business may be found to be unreasonable where employer seeks to restrain employees from further employment. Stewart v. American Home Mut. Life Ins. Co., 107 Ga. App. 105, 129 S.E.2d 367 (1962). 535 13-8-2 Restrictive Covenants Ancillary to Sale of Business (Cont’d) 1. In General (Cont’d) Noncompete agreement. — When partners filed a breach of contract action against a doctor, who was a minority shareholder in a corporation that was party to a joint venture, one of the partners, the trial court improperly used the middle level of scrutiny to evaluate whether the noncompete agreement was an impermissible restraint of trade under O.C.G.A. § 13-8-2 because the agreement was entered into incident to the sale of a partnership interest; hence, summary judgment was improperly granted to the doctor as to the doctor’s liability under the agreement. West Coast Cambridge, Inc. v. Rice, 262 Ga. App. 106, 584 S.E.2d 696 (2003). enforceable. — It has been settled by this court that a contract in reference to selling the good will of the vendor, and stipulating that the vendor will not enter into or engage in a similar business, if reasonable as to time and place, is enforceable. Rakestraw v. Lanier, 104 Ga. 188, 30 S.E. 735, 69 Am. St. R. 154 (1898); Jefferson v. Markert & Co., 112 Ga. 498, 37 S.E. 758 (1900). Duty not to compete for customers existing at time of sale of business is reasonable. — Duty not to compete for customers is reasonable and definite where it extends only to those customers existing at time of sale as shown by seller’s accounts receivable. Farmer v. Airco, Inc., 231 Ga. 847, 204 S.E.2d 580 (1974). Gambling and Wagering Contracts 1. In General 2. Territorial Limitation Covenant prohibiting vendor from competing within territory to which vendee plans to extend may be valid where area which it embraces is not greater than that which parties may fairly anticipate the extended business will cover. Orkin Exterminating Co. v. Dewberry, 204 Ga. 794, 51 S.E.2d 669 (1949), overruled on other grounds, Barry v. Stanco Communications Prods., Inc., 243 Ga. 68, 252 S.E.2d 491 (1979). Restriction related to sale of business may, where appropriate, extend to all territory covered by such business. — Restrictive covenant which affords a fair protection to party in whose favor covenant is made, and is not injurious to the public may extend to all territory covered by business, the good will of which has been sold. Farmer v. Airco, Inc., 231 Ga. 847, 204 S.E.2d 580 (1974). 3. Application Covenant connected with sale of business limited as to time but not territory is unenforceable. Seay v. Spratling, 133 Ga. 27, 65 S.E. 137 (1909); Bonner v. Bailey, 152 Ga. 629, 110 S.E. 875 (1922). Covenant not to reenter business like that sold within a limited territory is binding. Holtman v. Knowles, 141 Ga. 613, 81 S.E. 852 (1914); Morris-Forrester Oil Co. v. Taylor, 158 Ga. 201, 122 S.E. 680 (1924). Restrictive covenant in contract selling good will, reasonable as to time and place, is Gambling contract or one based upon a gaming consideration is void and unenforceable. Tatham v. Freeman, 51 Ga. App. 477, 180 S.E. 871 (1935). Gambling transactions contravene public policy of Georgia and constitute obligations unenforceable in Georgia courts. Gulf Collateral, Inc. v. Morgan, 415 F. Supp. 319 (S.D. Ga. 1976). Gambler shall not be protected in the gambler’s unlawful gains. Gulf Collateral, Inc. v. Morgan, 415 F. Supp. 319 (S.D. Ga. 1976). In gambling contract, one party is certain to lose. — In an ordinary contract both parties may ultimately gain by entering into agreement; where in a gambling contract one of the parties is certain to lose, and by terms of such contract consideration must fall to one or the other upon determination of specified event. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). Absence of purpose to deal with actual property marks distinction between legal and gambling contracts in reference to sale of personal property. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). Mere insertion of provision for forfeiture does not constitute gambling, nor make of agreement a gambling contract. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). Contracts known as options are not to be classed as gambling contracts under laws of 536 Georgia, nor are the contracts otherwise condemned as unlawful for any reason. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). Georgia courts have jurisdiction if gaming contract is made or bet is laid in Georgia. — Fact that loser of bet resides in England and that money is paid from that country does not necessarily render matter not within the jurisdiction of the courts of this state; it is sufficient if gaming contract is made or bet is laid in State of Georgia. Tatham v. Freeman, 51 Ga. App. 477, 180 S.E. 871 (1935). Wagering contracts are against policy of the law and are unenforceable. Gulf Collateral, Inc. v. Morgan, 415 F. Supp. 319 (S.D. Ga. 1976). Suit to enforce gambling debt judgment of another state. — O.C.G.A. § 13-8-2 did not preclude giving full faith and credit to a New Jersey judgment entered to enforce a gambling debt, where the Georgia suit was not on the gambling debt itself, but was rather a suit to domesticate a valid judgment of a sister state. Hargreaves v. Greate Bay Hotel & Casino, 182 Ga. App. 852, 357 S.E.2d 305 (1987). Wagering contract defined. — Wagering contract has been defined to be one in which parties in effect stipulate that the parties shall gain or lose upon happening of uncertain event in which the parties have no interest, except that arising from possibility of such gain or loss. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). So long as something is actually bought, sold, or contracted for, there is no wagering, not even if thing contracted for does not then exist. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). Purely speculative contract is not necessarily a wagering contract. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). Speculation is not per se unlawful. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). 2. Application Betting upon a game of golf is gaming. Tatham v. Freeman, 51 Ga. App. 477, 180 S.E. 871 (1935). Side bet placed upon ultimate outcome or final result of any game whatever constitutes gaming. Tatham v. Freeman, 51 Ga. App. 477, 180 S.E. 871 (1935). 13-8-2 Betting that one game competitor, among many, will win is a side bet upon a game. Tatham v. Freeman, 51 Ga. App. 477, 180 S.E. 871 (1935). Fact that gaming contract is made by insurance company does not render contract valid. — Fact that loser of a bet is an insurance company and that contract is made by such company does not render such contract valid and not a gaming contract. Tatham v. Freeman, 51 Ga. App. 477, 180 S.E. 871 (1935). Bet upon rise or fall of price of stock or merchandise constitutes a wager. — When there is no real transaction, but only a bet upon rise or fall of price of stock or article of merchandise in exchange or market, one party agreeing to pay if there is a rise, and the other party agreeing to pay if there is a fall in price, the agreement is a pure wager. Martin v. Citizens’ Bank, 177 Ga. 871, 171 S.E. 711 (1933). 3. Insurance Contracts Policy of insurance which contemplates anything beyond indemnity is a mere wager. Fireman’s Fund Ins. Co. v. Pekor, 106 Ga. 1, 31 S.E. 779 (1898). Contract insuring life of one in whom party beneficiary has no insurable interest is void. — Contract for insurance upon life of another party taken out by one without any insurable interest is a wagering contract contrary to public policy and is therefore null and void. West v. Sanders, 104 Ga. 727, 31 S.E. 619 (1898). Contract of insurance entered into between one named as beneficiary therein and an insurance company, insuring another in whose life the beneficiary has no insurable interest, is void from the contract’s inception, being a wagering contract and against public policy. Wilson v. Progressive Life Ins. Co., 61 Ga. App. 617, 7 S.E.2d 44 (1940). Courts should not concern themselves with disposition of proceeds of ‘‘wagering’’ insurance policies. Exchange Bank v. Loh, 104 Ga. 446, 31 S.E. 459, 44 L.R.A. 372 (1898); West v. Sanders, 104 Ga. 727, 31 S.E. 619 (1898). Rule restricting execution of insurance contracts to persons having insurable interests is founded on public policy. Gordon v. Gulf Am. Fire & Cas. Co., 113 Ga. App. 755, 149 S.E.2d 725 (1966). 537 Contracts of Maintenance or Champerty Contracts of maintenance or champerty are void and cannot be enforced. — This rule applies alike to implied contracts. Sapp v. Davids, 176 Ga. 265, 168 S.E. 62 (1933). What constitutes a champertous contract. — There are two essential elements of a champertous agreement: first, there must be undertaking by one person to defray expense of whole or part of another’s suit; second, agreement or promise on part of latter to divide with former proceeds of litigation in event the litigation proves successful. Anderson v. Anderson, 12 Ga. App. 706, 78 S.E. 271 (1913); Clark v. Harrison, 182 Ga. 56, 184 S.E. 620 (1936). Champerty is the unlawful maintenance of a suit in consideration of a bargain to have part of thing in dispute, or some profit out of the litigation, and promise to pay expenses or costs, seems to be essential to such a contract. Sapp v. Davids, 176 Ga. 265, 168 S.E. 62 (1933). Champerty is defined as a bargain by a champertor with a plaintiff or defendant for a portion of the matter involved in a suit in case of a successful termination of the ac- 13-8-2 tion, which champertor undertakes to maintain or carry on at champertor’s own expense. Such a contract is unenforceable between parties. Brown & Huseby, Inc. v. Chrietzberg, 242 Ga. 232, 248 S.E.2d 631 (1978). When there is no contract of employment, there can be no champerty or maintenance. Clark v. Harrison, 182 Ga. 56, 184 S.E. 620 (1936). Contract for fee to be paid out of proceeds of suit is not champertous. Twiggs v. Chambers, 56 Ga. 279 (1876). A contract between client and attorney, wherein it is stipulated that attorney shall receive a certain percent for collection of claim, upon or out of amount collected, is not champertous, there being no agreement on part of attorney to bear expenses of litigation, or to save plaintiff harmless from costs, as is essential to make out common-law offense of champerty. Moses v. Bagley & Sewell, 55 Ga. 283 (1875). Prohibition of champertous contracts does not affect pending cause of action underlying such contracts. Ellis v. Smith & Bussey, 112 Ga. 480, 37 S.E. 739 (1900).