Validity of a non-compete clause without time limitation

Facts

Decorta AG entrusted the management of its furniture store to Hubert Villiger through a written employment contract dated 7 October 1965. The contract contained a non-compete clause without time limitation in the cantons of Uri, Schwyz and Unterwald. Villiger terminated the contract on 30 June 1969 and subsequently filed an action to declare this non-compete clause null and void or non-existent. Subsidiarily, he requested that the duration of the clause be limited to one year.

Considerations

The Federal Tribunal considers that the non-compete clause is valid, although it is not limited in time. According to case law, such a clause is not entirely null and void, but is valid within the permissible limits set by Art. 357 CO. This provision restricts contractual freedom by requiring the clause to be limited in time, space and subject matter, in order not to excessively impede the economic development of the person subject to the non-compete obligation.

In the present case, the Federal Tribunal considers that a duration of three years is reasonable, given the fact that Villiger had full access to Decorta AG's clientele and had the opportunity to maintain personal relationships with it. The risk that clients will follow Villiger if he opens a competing…