Will Delaware enforce this non-compete, and will a court narrow it if it is too broad?
Delaware reviews non-compete and non-solicit agreements to ensure that they are (i) reasonable in geographic scope and temporal duration, (ii) advance legitimate economic interests of the party seeking enforcement, and (iii) survive a balancing of the equities; enforceability is judged on the entirety of the agreement in light of the employee's position, and consideration is tested at the time of contracting for its existence, not its adequacy, while adequacy may be weighed against the covenant's breadth in the balancing of the equities. Blue-pencilling is a discretionary equitable power, not a right, and the discretion runs both ways. Delaware courts have on several occasions used it to narrow the geographic scope and temporal duration of a covenant to make it reasonable and enforceable, and have done so under circumstances indicating an equality of bargaining power between the parties, where the covenant's language was specifically negotiated, where valuable consideration was exchanged for the restriction, or in the context of the sale of a business. They have declined where the circumstances and equities do not support that relief. So a court may refuse to rewrite an overbroad covenant, and that decision turns on the covenants themselves and the circumstances of their adoption rather than on how egregious the employee's conduct was; what Delaware precedent has historically not allowed is a wholesale reformation that would rewrite the persons a covenant applies to and the type of conduct it restricts. A forfeiture-for-competition provision is analysed differently (where sophisticated parties agree that one who withdraws and then competes forfeits contingent post-withdrawal financial benefits, the provision is not a restraint of trade subject to reasonableness review), and that holding is not confined to limited partnerships. It is not unconditional either: Cantor framed it for provisions 'like the one at issue here', rested it on the Delaware Revised Uniform Limited Partnership Act's express design to give maximum effect to freedom of contract, and said courts should hold such parties to their agreements 'absent unconscionability, bad faith, or other extraordinary circumstances'. LKQ added that a requirement to return benefits already received does not alter the analysis. By statute, a covenant not to compete between or among physicians that restricts the right to practise medicine in a locale or for a period is void, though the rest of the agreement, including damages provisions, stays enforceable.
The trap
Delaware gives the drafter no guaranteed second chance. An overbroad covenant can simply fail: the Supreme Court in Sunder Energy held the Court of Chancery 'well within its discretion' to refuse to blue-pencil, citing with approval a Chancery decision (Kodiak Building Partners v. Adams) that declined to blue-pencil despite a judicial-reformation clause, and held that whether to blue-pencil cannot turn on how egregiously the employee behaved. Read the disposition, which is split: Sunder affirmed the DENIAL of the preliminary injunction and 'reverse[d] only the portion of the court's ruling that determined as a matter of law that the LLC Agreement was not enforceable', so it is not authority that the agreement was void. The way around the reasonableness review is structural rather than verbal: condition a deferred or contingent payment on not competing (Cantor Fitzgerald; not confined to limited partnerships, LKQ) instead of prohibiting competition. And the physician carve-out in 6 Del. C. § 2707 is absolute as to the practice restriction while expressly leaving damages clauses, including competition-related damages, in force.
13 authorities
- casePayscale Inc. v. Norman, No. 297, 2025 (Del. Mar. 19, 2026)Payscale Inc. v. NormanDel.decided 2026
The words that state the rule
To determine whether the restrictive covenant is enforceable, we look at the entirety of the agreement in light of Norman’s position within the company.
- casePayscale Inc. v. Norman, No. 297, 2025 (Del. Mar. 19, 2026)Payscale Inc. v. NormanDel.decided 2026
The words that state the rule
The contract-formation analysis of consideration turns on whether some consideration was exchanged at the time of contracting, not whether that consideration was “adequate” to support the accompanying restriction.
- casePayscale Inc. v. Norman, No. 297, 2025 (Del. Mar. 19, 2026)Payscale Inc. v. NormanDel.decided 2026
The words that state the rule
That is not to suggest that the adequacy of consideration is irrelevant in the context of restrictive covenants; the balancing-of-the-equities inquiry affords the court discretion to weigh the breadth of a restrictive covenant against the consideration that supports it.
The words that state the rule
Delaware courts review noncompete and nonsolicit agreements subject to Delaware law to ensure that they are (i) reasonable in geographic scope and temporal duration, (ii) advance legitimate economic interests of the party seeking enforcement, and (iii) survive a balancing of the equities.
The words that state the rule
Neither side disputes that Delaware courts have the discretionary power to blue pencil overbroad restrictive covenants to align a company’s legitimate interests and an individual’s right to be free from unreasonable restrictions on their livelihood. On several occasions, the Court of Chancery has utilized blue penciling to narrow the geographic scope and temporal duration of restrictive covenants to make them reasonable and enforceable.112 Delaware courts have exercised their discretion to blue pencil restrictive covenants under circumstances that indicate an equality of bargaining power between the parties, such as where the language of the covenants was specifically negotiated, valuable consideration was exchanged for the restriction, or in the context of the sale of a business.
The words that state the rule
On the other hand, Delaware courts have declined to blue pencil when the circumstances and equities do not support that relief. In Intertek Testing Services NA, Inc. v. Eastman, the court refused to blue pencil a non-compete clause in a sale- of-business agreement after finding that doing so would inequitably rescue a sophisticated party from its own unenforceable contract.126 Similarly, in Kodiak Building Partners, LLC v. Adams, the Court of Chancery declined to blue pencil overbroad restrictive covenants despite the presence of a judicial reformation clause within the agreement, reasoning that “[t]he inequities inherent in blue-penciling a noncompete also counsel against enforcing only those portions.”127 Given the factual record in this case—which is undisputed on appeal—the Court of Chancery was well within its discretion to apply that precedent and refuse to blue pencil the Covenants.
The words that state the rule
Whether a court should blue pencil a covenant cannot turn on the egregiousness of the employee’s conduct. Rather, the court’s decision to exercise that equitable power should be based on the covenants themselves and the circumstances surrounding their adoption, as the Court of Chancery did here. This is not to say that Delaware courts should never blue pencil an agreement that is overbroad in some respects. But the relief Appellant sought was a wholesale reformation of the parties’ agreement. It would require the court to craft an entirely new covenant to which neither side agreed. That is, the Court of Chancery could not 32 simply constrain the Covenants’ temporal or geographic scope. The court also would have had to rewrite the persons to whom the Covenants applied and the type of conduct they restricted, which would extend well beyond what Delaware precedent has historically allowed.
The words that state the rule
To sum up, we disagree with the Court of Chancery’s conclusion that forfeiture-for-competition provisions like the one at issue here are restraints of trade subject to review for reasonableness. When sophisticated parties agree in a limited partnership agreement that a partner, who voluntarily withdraws from, and then competes with, the partnership, will forfeit contingent post-withdrawal financial benefits, public-policy considerations weigh in favor of enforcing that agreement.
The words that state the rule
When sophisticated actors avail themselves of the contractual flexibility embodied in the Delaware Revised Uniform Limited Partnership Act—a statute that is expressly designed “to give maximum effect to the principle of freedom of contract and to the enforceability of partnership agreements”4—and agree that a departing partner will forfeit a specified benefit should he engage in competition with the partnership, our courts should, absent unconscionability, bad faith, or other extraordinary circumstances, hold them to their agreements.
- caseLKQ Corp. v. Rutledge, No. 110, 2024 (Del. Dec. 18, 2024)LKQ Corporation v. RutledgeDel.decided 2024
The words that state the rule
We answer the first certified question as follows: Cantor Fitzgerald is not restricted to the limited partnership context.
- caseLKQ Corp. v. Rutledge, No. 110, 2024 (Del. Dec. 18, 2024)LKQ Corporation v. RutledgeDel.decided 2024
The words that state the rule
The fact that the LKQ RSU Agreements require the return of benefits already received does not alter our analysis.
- statute6 Del. C. § 2707enactment date not established
The words that state the rule
Any covenant not to compete provision of an employment, partnership or corporate agreement between and/or among physicians which restricts the right of a physician to practice medicine in a particular locale and/or for a defined period of time, upon the termination of the principal agreement of which the said provision is a part, shall be void; except that all other provisions of such an agreement shall be enforceable at law, including provisions which require the payment of damages in an amount that is reasonably related to the injury suffered by reason of termination of the principal agreement. Provisions which require the payment of damages upon termination of the principal agreement may include, but not be limited to, damages related to competition.
The words that state the rule
IV. CONCLUSION For the foregoing reasons, we affirm the Court of Chancery’s decision denying Sunder’s preliminary injunction motion. We reverse only the portion of the court’s ruling that determined as a matter of law that the LLC Agreement was not enforceable.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.