noncompetition clause

noncompetition clause

(1) A contract provision usually required by a buyer when purchasing a business. It prohibits the seller from engaging in a similar business in competition with the buyer. Courts will usually enforce such agreements if they are reasonable in a geographical area and time period. For example, Jack sells his property management business to Irene and agrees he will not open another property management firm anywhere in the same county for the next 3 years.In this way, Irene can be sure she will not lose existing or potential clients to Jack, and she will receive the full benefit of her bargain. (2) Some noncompetition clauses are designed to prevent employees from working for competitors.Courts disfavor such clauses.Most likely,if Irene wanted her employees to agree not to work for any other property management company in town,such a clause would be unenforceable.