Non-Compete Agreement
What it means
A non-compete restricts someone from competing with the other party for a period after the relationship ends. It usually specifies three limits: how long the restriction lasts, what geographic area it covers, and what activities it forbids.
In a small business context, non-competes show up in three places. In employment agreements, restricting where a departing employee can work. In contractor agreements, restricting who a freelancer can work for next. And in the sale of a business, stopping the seller from opening a competing shop across the street — the one context where courts have historically been most willing to enforce them.
Enforceability varies enormously and is genuinely jurisdiction-dependent. Some places will not enforce employment non-competes at all; others will enforce them only if the scope is reasonable; some will narrow an overbroad clause rather than strike it. This is a term where "is this enforceable where I am?" is a real question with a real answer that depends on where you are, and it is worth asking a lawyer rather than guessing.
What you can assess without a lawyer is scope. A clause covering "any business similar to the Company's" with no geographic limit and a three-year term is broad by any standard. One covering a named list of competitors within your metro area for twelve months is not.
Watch for non-solicitation clauses sitting alongside — they restrict approaching customers or staff, and they are often enforced where a straight non-compete would not be.
Why it matters for your business
A non-compete signed casually can determine what work you are allowed to take for years after a relationship ends. For a freelancer or a small firm, an overbroad clause can rule out an entire industry you have spent years building expertise in.
See it in action
ContractClerk highlights the duration, geographic scope and activity scope so you can see how far the restriction actually reaches, and flags where the scope is unusually broad. It does not tell you whether a clause is enforceable in your state — that is a question for a lawyer.
Related terms
- Confidentiality Clause — Because it sits inside a longer document, this clause is signed with less attention than a standalone NDA while carrying the same weight — and it is frequently one-sided in a way a dedicated NDA would not be..
- NDA (Non-Disclosure Agreement) — The asymmetry is the risk.
- Governing Law — This clause sets the cost floor for enforcing anything else in the contract.
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Review your contract free →This is general information about how non-compete agreement clauses usually work. It is not legal advice, and how a clause applies depends on the rest of the document and on where you are. For a high-stakes agreement, talk to an attorney.