noncompetition covenant

A promise, usu. in a sale-of-business, partnership, or employment contract, not to engage in the same type of business for a stated time in the same market as the buyer, partner, or employer.

• Noncompetition covenants are valid to protect business goodwill in the sale of a company. In other contexts, they are generally disfavored as restraints of trade: courts generally enforce them for the duration of the business relationship, but provisions that extend beyond the termination of that relationship must be reasonable in scope, time, and territory.

— Also termed noncompetition agreement; noncompete covenant; covenant not to compete; restrictive covenant; promise not to compete; contract not to compete. [Cases: Contracts 115. C.J.S. Con-tracts §§ 249–254, 257–260.]

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