Contract Glossary
Non-Compete Agreement
Definition
A standalone contract — separate from an employment or services agreement — in which one party agrees not to compete with the other for a defined period and within a defined geographic area. While a non-compete clause is embedded within a larger contract, a non-compete agreement is its own document, often signed alongside (but separate from) an employment offer, business sale, or partnership dissolution.
In Practice
You're buying a small marketing agency for $400,000. The seller signs a separate non-compete agreement promising not to start or join a competing agency within 50 miles for 3 years. Without this agreement, the seller could take the client list, open shop across the street, and compete with the business you just bought. Standalone non-compete agreements are most common in business acquisitions, partnership buyouts, and executive employment packages. Courts scrutinize them the same way as non-compete clauses — they must be reasonable in duration, geographic scope, and activity restriction. But because they're separate agreements, they need their own consideration (something of value exchanged), which is usually the purchase price, a signing bonus, or access to confidential information.
Example Clause
For a period of two (2) years following the Effective Date, the Restricted Party shall not, directly or indirectly, own, manage, operate, consult for, or be employed by any business that competes with the Company's business within a fifty (50) mile radius of the Company's principal place of business. 'Competing business' means any entity that offers [specific services/products] substantially similar to those offered by the Company as of the Effective Date.
Common in these contract types
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Frequently asked questions about non-compete agreement
A standalone contract where one party agrees not to compete with the other for a set period and within a specific geographic area. It's used in business sales (preventing sellers from competing with the buyer), executive hiring (preventing key employees from joining competitors), and partnership dissolutions. Unlike a non-compete clause embedded in an employment contract, this is its own separate agreement with its own terms and consideration.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.