Question

Tony works for Rachel's CPA firm. As part of the employment contract, they agreed that if Tony left Rachel's employment, he would not be able to try to obtain clients from Rachel's to become his clients in another CPA firm. This is an example of which of the following?

A) Confidentiality agreement.
B) Noncompetition clause.
C) Nonsolicitation agreement.
D) Exculpatory clause.

Answer 1

C) Nonsolicitation agreement.

Tony's agreement with Rachel's CPA firm is an example of a Nonsolicitation agreement, which is enforceable in a legal system that supports strong contractual and property rights to prevent economic slowdown.

Step-by-step explanation:

Tony and Rachel's employment contract includes a provision that prevents Tony from soliciting Rachel's clients if he leaves her employment.

This type of agreement is an example of a C) Nonsolicitation agreement. Such agreements are designed to protect a business's relationships and goodwill with its clients by limiting former employees' ability to use those relationships to their advantage and the disadvantage of their former employer.

In a society that upholds strong contractual rights and property rights, such arrangements are enforceable through the legal system. Without enforcement of contracts, there would be a higher risk of noncompliance, making people reluctant to enter into agreements, which in turn could impede business transactions and slow economic growth.