The list that decided whether a hauling contract counted as competition

The situation

'Can we just stop paying the rest of the earn-out?' Manuel asked that question a few months after closing, once word reached him that Ishara, the founder he had bought the business from, was hauling loads again for the same regional mine the company had always serviced. It seemed, from where he sat, like a simple question with an obvious answer.

Manuel had spent years working farm labour crews before he saved enough to buy his first truck. Cristina had operated a forklift at a distribution yard before the two of them started hauling loads together on contract. By the time they were ready to acquire a small competing hauling business, three trucks and a set of long-standing contracts with a regional mine, the deal sat in the three to eight million dollar range, funded mostly through a combination of savings, a modest loan, and an earn-out structure that let them pay part of the price over the following three years out of the acquired business's own performance.

Ishara had built that business over close to fifteen years and stayed on briefly to help with the transition. The purchase agreement included a standard non-compete, restricting her from operating a competing hauling business in the region for a period tied to the length of the earn-out, on the logic that she should not be able to draw down payments for the business's ongoing value while quietly rebuilding a rival operation next door. The agreement also allowed Manuel and Cristina to reduce or withhold earn-out payments if she breached the covenant.

The trouble started when Ishara registered a new trucking company under a different name within a year of closing. She insisted she was hauling general freight, not competing with the mine contracts specifically. Manuel and Cristina were fairly sure otherwise, but proving it meant establishing what counted as competing business under the agreement, and that definition led somewhere unexpected.

Cristina had been the one to notice it first, catching sight of one of Ishara's newly painted trucks parked outside the mine's site office on a routine delivery of their own. She recognized the driver from the transition period the year before. It was a small, almost accidental discovery, the kind that starts a dispute long before either side has any paperwork ready to support a position, and it left Manuel and Cristina reacting to a suspicion rather than a confirmed fact.

The risk we had to size

The non-compete clause defined a competing business, sensibly enough at the time it was drafted, as any hauling operation serving the mine's approved carrier program, the list the mine's own procurement office maintained of trucking companies cleared to bid on its haul contracts. This made sense as a definition because it tied the covenant to the client's actual customer relationship rather than to a vague description of the industry. The problem was that the approved carrier list itself was not a document either Ishara or Manuel and Cristina controlled. It belonged to the mine, a company with no involvement in the sale and no obligation to share its procurement records with either party.

To know whether Ishara had actually breached the covenant, we needed to know whether her new company appeared on that list, and if so, when it was added and under what circumstances. The mine's procurement office was not a party to any dispute between Manuel, Cristina and Ishara, and had no reason to prioritize a records request from either side. Early inquiries, made informally through a contact Manuel still had at the mine, produced only a partial picture: Ishara's new company had applied for approved carrier status, but it was unclear whether the application had been granted, was still pending, or had been approved on terms that excluded the specific routes the original company had serviced.

This mattered enormously for sizing the risk. If Ishara's company was formally approved and actively hauling loads that the original business would otherwise have carried, the breach was likely real and enforceable, and withholding earn-out payments was defensible. If her company was only pending approval, or approved for different routes, the picture was murkier, and moving aggressively to cut off earn-out payments risked a wrongful withholding claim from Ishara that could cost more than the competition itself.

There was also a harder question sitting underneath the factual one. Even with clear proof, enforcing a non-compete against someone earning a living in the only trade she knew, in a smaller regional market with limited other work available, carries real uncertainty. Courts scrutinize restrictive covenants closely, and a covenant whose scope depends on a third party's discretionary list, one that could change without notice to either side, is a harder covenant to enforce cleanly than one with a fixed, self-contained definition.

There was a timing pressure layered on top of all this. The earn-out payment schedule called for a quarterly instalment due within a matter of weeks, and Manuel wanted an answer before that payment went out, not months later once the mine's records had finally been sorted through. Every day spent chasing confirmation was a day closer to a payment that, once made, would be far harder to claw back than to simply withhold in the first place.

What we did

1. Sent a formal records request to the mine's procurement office. Rather than relying on informal contacts, we sent a written request asking whether Ishara's new company held approved carrier status and, if so, since when, framed around the mine's own interest in confirming which carriers were authorized to move its freight, which gave the request a legitimate business reason beyond the private dispute.
2. Reviewed the original purchase agreement for any alternative evidence route. Before relying entirely on the mine's cooperation, we checked whether the agreement gave Manuel and Cristina any independent right to demand records or conduct an audit of Ishara's new operation directly. That right turned out to be limited to financial statements, not customer or carrier status, confirming early that the mine's own procurement records really were the only reliable source of proof.
3. Documented what we could confirm and what remained genuinely uncertain. The mine's response confirmed the new company had been approved roughly four months earlier, but only for a subset of routes that overlapped partially with what the original business had hauled, and the response was silent on two other routes entirely. We built the file around that partial, honest picture rather than the worst-case scenario Manuel had gone in expecting.
4. Advised against a full earn-out stoppage. Even though Manuel wanted to act immediately on his suspicion, we recommended against cutting off all remaining earn-out payments outright, because a wrongful withholding claim, if the breach later turned out to be narrower than the confirmed records showed, could have exposed Manuel and Cristina to more liability and cost than the competition itself was actually costing them.
5. Proposed a proportionate withholding tied to the confirmed overlap. We calculated the amount to withhold against the specific routes we could confirm, through the mine's own response, that Ishara's company was both approved for and actively hauling on, leaving the routes with unclear approval status untouched. This kept the client's position defensible even with an incomplete record, because every dollar withheld could be traced to a route the mine itself had confirmed as competing business.
6. Opened direct negotiation with Ishara rather than litigating the definition. Because enforceability depended on a document neither side controlled and that could shift again without warning, we recommended settling the scope directly with Ishara rather than asking a court to interpret a covenant tied to someone else's discretionary list, which would likely have taken longer and cost more than the disputed amount justified.
7. Negotiated a narrowed, self-contained non-compete to replace the original one going forward. As part of the settlement, we replaced the mine-list definition with a fixed list of named routes and a defined geographic radius that did not depend on any third party's records or discretion. This closed the exact gap that had caused the dispute in the first place and gave both sides a covenant either could evaluate without needing anyone else's cooperation.
8. Set a short internal deadline ahead of the next earn-out payment. Because the quarterly instalment was approaching regardless of how complete our information was, we built the investigation timeline backward from that date, prioritizing the mine's response and the settlement conversation with Ishara so any decision on withholding could be made on solid information rather than because the clock simply ran out.

The outcome

Manuel and Cristina withheld a portion of the remaining earn-out corresponding to the confirmed route overlap, an amount in the low hundreds of thousands rather than the full remaining balance Manuel had first wanted to stop paying. Ishara accepted the reduction rather than dispute it, in exchange for the client dropping any claim over the routes where her approval status remained genuinely unclear.

This was not a clean win. Manuel and Cristina lost some of the exclusivity they believed they had paid for, and a portion of the mine's business that the original covenant was meant to protect is now, at least in part, going to Ishara's new company on the routes where her approval held up. Pursuing the full covenant through litigation might have produced a better result, or it might have produced a worse one given how much depended on a document controlled by a company with no stake in the outcome. Settling converted an uncertain, expensive fight into a bounded, known cost.

The lasting change was to how the next covenant got written. The replacement non-compete no longer references any outside party's list or discretionary approval process. It names specific routes and a fixed radius, terms that exist entirely within the four corners of the agreement and do not depend on records Manuel and Cristina would need someone else's cooperation to obtain if a dispute ever arose again.

Manuel, looking back on it, said the hardest part was not the money they gave up but accepting that being right about Ishara's intentions was not the same thing as being able to prove it on the terms the original agreement had set. Cristina put it more simply: next time, she said, the contract needs to describe the thing they are actually trying to protect, not point at somebody else's filing cabinet and hope it stays put.

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