Contract Glossary
Restrictive Covenant
Definition
A restrictive covenant is a contractual clause that limits what a party can do during or after the term of an agreement. In employment contracts, restrictive covenants prevent employees from competing with a former employer, soliciting clients, or disclosing trade secrets. In real estate, they restrict how property can be used. The enforceability of restrictive covenants varies widely by jurisdiction, with courts balancing the legitimate business interests of the party imposing the restriction against the restricted party's right to earn a livelihood or use their property.
In Practice
A senior marketing director signs an employment contract with a restrictive covenant that includes a non-compete (12 months, same metropolitan area), non-solicitation of clients (18 months), and a confidentiality obligation (indefinite for trade secrets). When she leaves for a competitor, the former employer reviews the restrictive covenant to determine which provisions to enforce based on the jurisdiction's standards for reasonableness.
Example Clause
For a period of twelve (12) months following the termination of employment, Employee shall not, directly or indirectly, within a fifty (50) mile radius of Employer's principal office, engage in any business that competes with the Employer's business, solicit any of Employer's clients or customers, or recruit any of Employer's employees.
Common in these contract types
Related contract clauses
Related articles
Georgia Contract Requirements (2026 Guide)
Georgia contract requirements: NDAs, freelance agreements, leases — Restrictive Covenants Act, worker classification, and more.
Best Free Contract Templates for Small Businesses in 2026
Find the best free contract templates for small businesses. Covers NDAs, freelance agreements, leases, service contracts, and more — with what to look for in each template and where to get them.
How to Write an NDA for Freelance Work
Freelancers and clients both need confidentiality protection. Learn how to write an NDA that covers trade secrets, project details, and client data without killing the working relationship.
Frequently asked questions about restrictive covenant
It depends on the jurisdiction, the type of restriction, and whether the scope is reasonable. Most states enforce restrictive covenants if they protect a legitimate business interest (trade secrets, client relationships), are reasonable in duration (typically 6-24 months), are limited in geographic scope, and don't impose undue hardship. California notably refuses to enforce most non-compete restrictive covenants, while other states apply a reasonableness test.
Create a contract with proper restrictive covenant clauses
Generate a professional contract in minutes with all the essential clauses — no legal expertise needed.
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.