Overview
- On February 3, 2026, the en banc court reversed the Court of Chancery’s dismissal and held that enforcing an automatic forfeiture provision does not render an agreement unenforceable for lack of consideration.
- The justices directed that consideration must be assessed at contract formation rather than at enforcement and cited Newell Rubbermaid v. Storm to confirm that contingent equity can have value at issuance.
- The case was remanded to the Court of Chancery to determine whether the specific forfeitable incentive units constituted valid consideration at formation and to resolve remaining issues.
- The dispute arose after an executive was terminated for cause for forming a competing business, which triggered forfeiture of both vested and unvested units under the grant agreement.
- Employers can continue to use equity awards to support noncompete and non-solicit provisions, though Delaware courts will still examine restrictive covenants for reasonableness in scope, duration, and activity.