Delaware is viewed as being friendly to corporations. It is the state when it comes to forming new companies, and its reputation anecdotally extended to its courts.
But over the past several years, several decisions have raised questions as to that anecdotal reputation, and Delaware's courts are making clear that they will not just rubber-stamp what a business includes in its purchase documents. To that end, the Delaware Chancery Court has issued several recent opinions, including two this year, in which it rejected restricted covenants contained in agreements arising in the sale-of-business context.
This article examines these decisions and warns corporations to draft their restrictive covenants carefully under Delaware law, because they may just be unenforceable.
