On February 3, 2026, the Supreme Court of the State of Delaware ruled that restrictive covenants are enforceable if there is sufficient consideration at the time of contract formation, regardless of whether that consideration still exists at the time of enforcement of the covenants. The ruling revived an employer’s claims to enforce an agreement containing multiple restrictive covenants against a former employee even though the employee was forced to forfeit equity units received for agreeing to the covenants in the first place.

Quick Hits

• The Supreme Court of the State of Delaware revived an employer’s lawsuit to enforce restrictive covenants, including a noncompete agreement, against a former executive after the executive’s misconduct led to his forfeiture of the equity offered as consideration at the time of the agreement.
• The Delaware supreme court ruled that a lower court had erred in ruling that the restrictive covenant agreement lacked consideration because the executive no longer possessed the shares at the time the company sought to enforce the covenants.
• The decision clarifies the enforceability of restrictive covenants under Delaware law regarding the necessity of retained consideration after contract formation.

In North American Fire Ultimate Holdings LP v. Doorly, the Delaware supreme court rejected a lower court ruling that found North American Fire Ultimate Holdings (NAF), a fire and life safety systems company, could not enforce restrictive covenants...

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