Legal Definitions - promise not to compete

A promise not to compete, also known as a non-compete clause or covenant, is a contractual agreement where one party agrees to refrain from engaging in a business or professional activity that would directly compete with another party. These promises are typically included in contracts to protect a business's legitimate interests, such as trade secrets, client relationships, or goodwill. To be legally enforceable, such promises must generally be reasonable in terms of their geographical scope, duration, and the specific activities they prohibit.

• Example 1: Employment Agreement

  A senior marketing executive signs an employment contract with a national advertising agency. The contract includes a clause stating that if the executive leaves the agency, they promise not to work for a direct competitor within a 100-mile radius for a period of 18 months. This is a promise not to compete designed to protect the agency's client list and proprietary campaign strategies from being immediately used by a rival firm.

• Example 2: Sale of a Business

  When Dr. Evelyn Reed sells her successful dental practice to Dr. Marcus Thorne, their sales agreement includes a promise not to compete. Dr. Reed agrees that she will not open another dental practice within a 20-mile radius of her former office for five years. This ensures that Dr. Thorne acquires the full value of the existing patient base and goodwill without immediate competition from the previous owner.

• Example 3: Partnership Dissolution

  Two partners decide to dissolve their architectural design firm. As part of the dissolution agreement, one partner, who plans to start a new firm, makes a promise not to compete by agreeing not to solicit any of their former firm's clients for a period of two years. This allows the other partner, who is continuing the existing firm under a new name, to retain the client relationships and maintain business stability during the transition.