Wednesday, February 27, 2013

Illegality of contracts under Texas anti-trust statute - limits on freedom to contract


"As a rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy." In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129 (Tex. 2004) (orig. proceeding). As a fundamental matter, Texas law recognizes and protects a broad freedom of contract. Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 664 (Tex. 2008). However, freedom of contract is not unbounded. Id. The legislature determines public policy through the statutes it passes. Id. at 665.

The purpose of Chapter 15 of the Texas Business and Commerce Code, known as the Texas Free Enterprise and Antitrust Act, is to maintain and promote economic competition in trade and commerce occurring in Texas. TEX. BUS. & COM. CODE ANN. § 15.04 (West 2011).

Contracts in restraint of trade are illegal, and therefore, against public policy. TEX. BUS. & COM. CODE ANN. § 15.05 (West 2011). Unreasonable limitations on employees' abilities to change employers or solicit clients could hinder legitimate competition between businesses and the mobility of skilled employees. Marsh USA, Inc., 354 S.W.3d at 769. The legislature passed the Act to prohibit restrictions on employee mobility that impede competition, while allowing employers and employees to agree to reasonable restrictions on mobility that are ancillary to or part of a valid contract having a primary purpose that is unrelated to restraining competition between the parties. Id. at 770.

SOURCE: TYLER COURT OF APPEALS - No. 12-11-00133-CV 0 2/6/2013

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