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Facts: The agreement between Improve West associates and the Improve Comedy Club prohibits the Improve Club from opening any non-improve clubs till 2019. When Improve Comedy Clubs failed to open eight clubs by the end of 2002 Improve West commenced arbitration. The arbitration award of 2005 stated that CCI had forfeited its right to open improve clubs. Comedy Improve Clubs could, therefore, not be allowed to open any new improved clubs for the period remaining.
Issue: Was the arbitrator right to terminate an exclusive right for Improved Comedy club to open new improved clubs lawful because of contractually inadequate performance?
Answer: No.
Court Rationale: The court argued that while keeping in force the restrictive covenant makes sense, the agreement did not specify the consequences of the inability to keep up to the agreement. The court, therefore, argued that the agreement should only apply to those countries where the Improve Comedy Club currently operates.
Significance of the Case: it is not ethical that companies should be bound to covenants that would not enable them to compete in business. After all, business is all about competition.
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