Herndon v. Waller

In Herndon v. Waller, 241 Ga. App. 494 (525 S.E.2d 159) (1999) the Court recently addressed the question of how to classify a covenant in a commercial lease prohibiting the lessee from competing with the lessor. Although there was no issue of unequal bargaining power in Herndon, we distinguished sale of business cases because the seller who covenants not to compete generally receives a part of the purchase price in compensation for his promise not to compete. Id. at 495. Noting an absence of evidence that the lessee in Herndon had received any consideration for the covenant not to compete, this court held that since the covenant not to compete was not made by the seller in conjunction with the sale of a business but was made by (a lessee) in conjunction with (the lease of premises . . . ancillary to the operation of) a business, the covenant receives the severe scrutiny given restrictive covenants ancillary to an employment agreement. Id. at 496