Table of contents
When the wording of the contract makes all the difference
In business acquisition transactions, non-competition agreements are an essential tool for protecting the purchaser. Their purpose is to prevent the seller, after receiving the purchase price, from re-entering the market to compete with the business being sold and thereby eroding its economic value, particularly where the customer base or know-how forms the core of the asset.
However, Supreme Court Judgment 17/2026 highlights that the mere inclusion of such clauses does not guarantee their effectiveness. Their scope depends crucially on their wording and judicial interpretation, particularly in contexts involving complex corporate structures..
The ruling is significant in that it demonstrates how a strictly literal interpretation can influence the outcome of high-value litigation, clearly defining the scope of such agreements with regard to protected clientele and groups of companies.
The case: dispute over protected clientele
The dispute arises from a contract for the sale of company shares entered into in 2006, relating to several companies engaged in the manufacture of uniforms. As is customary, the contract included a non-competition clause designed to preserve the stability of the acquired business.
The clause prohibited the seller from carrying out competing activities in relation to certain customers, defined as those who “have been and are […] customers over the last three years (2004, 2005 and 2006)”. These could include companies affiliated with a business group.
The price included a deferred instalment, but in 2013 the buyer stopped paying more than 1.8 million euros, claiming that the seller had breached the agreement by entering into contracts with other companies within the group. The dispute centred on whether those entities were covered by the agreement and whether that conduct justified suspending payment.
The key: the meaning of ‘have been and are’
The Supreme Court rules on the matter in accordance with Article 1281 of the Civil Code, which enshrines the primacy of the literal wording when contractual terms are clear. The Chamber attaches decisive importance to the conjunction ‘and’, taking the view that it establishes a cumulative condition.
Thus, the agreement applies only to those customers who, simultaneously, maintained business relations in 2004, 2005 and 2006 and were still customers at the time the contract was signed.
This interpretation is based on a rigorous grammatical analysis and on the economic purpose of the agreement: to protect the actual and effective client base that forms part of the value of the transferred business. Consequently, relationships that are merely historical or that had already ceased at that time are excluded.
In this way, the Court defines the scope of the agreement, excluding any extension to potential or former customers and limiting it to those whom the purchaser could legitimately expect to retain.
Groups of companies: what is not agreed is not presumed
One of the most interesting aspects of the judgement is the treatment of corporate groups. The purchaser argued that the agreement should extend to all companies within the group, invoking an alleged economic unity.
The Supreme Court rejects this argument, relying on the principle of each company’s independent legal personality. Each entity constitutes an autonomous entity, with its own commercial relationships and distinct client base.
Consequently, the group cannot be treated as a single client, nor can the agreement be automatically extended to all its companies. For such an extension to be valid, an express, clear and unambiguous contractual provision is essential.
This reasoning highlights the distinction between the economic reality (where groups may operate in a coordinated manner) and the legal reality, which maintains the individual legal status of each company. Contractual gaps cannot be filled by broad interpretations.
The significance of the time factor
The judgement includes a relevant consideration regarding the timing of the breach. The Court notes that the conduct alleged to constitute a breach took place in 2015, after the buyer had ceased making payments in 2013.
This point is decisive, as a subsequent breach cannot retroactively justify a prior breach. Furthermore, the transactions involved a company not covered by the scope of the agreement.
Consequently, the Court rules out the existence of any breach attributable to the seller and rejects the defence of breach of contract, as the conditions for such a defence are not met.
Conclusion: precision is key
Supreme Court Ruling 17/2026 offers a clear lesson: the scope of contractual clauses is determined not by the parties’ intention, but by their actual wording.
This principle is particularly relevant in non-competition agreements, which, due to their restrictive nature, are subject to strict interpretation. Their content cannot, therefore, be extended beyond what has been expressly agreed.
In short, the judgement emphasises that legal certainty depends on precision in the drafting of contracts and demonstrates that even a single conjunction can prove decisive in a dispute of major financial significance.
Litigation and Arbitration
