The Magic Words Lose Their Power

For decades upon decades the law in Pennsylvania has been that if a contract includes the “magic words” of “intend to be legally bound” then no further consideration was required to make the contract enforceable. That has now changed, at least with regard to non-compete agreements.

In Socko v. Mid-Atlantic Systems of CPA (No. J-40-2015) (December 1, 2015) the Pennsylvania Supreme Court held that a non-compete agreement was unenforceable for lack of consideration even though the contract contained the “magic words” of “intend to be legally bound”. The court reasoned that the unique nature of employee and employer relationships and the more stringent review given to employment agreements by the courts, mandated that new and valuable consideration be given when a non-compete agreement is effectuated.

Thus at least in Pennsylvania the magic words of “intend to be legally bound” have lost some of their force and effect. Employers and employees take note – non-compete agreements in Pennsylvania require new and valuable consideration to be effective.

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