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.

References in periodicals archive ?
And carefully consider all of the implications of signing a noncompetition clause.
Beal had died in 1883, and the basis for the noncompetition clause had expired with him.
2d at 571-72 (holding a noncompetition clause void because of a failure to meet the statutory exception to the general rule that covenants restricting trade are disfavored).
457(f) aimed at creating a substantial risk of forfeiture is to include a noncompetition clause in a terminating executive's employment agreement.
While courts in some states will modify a noncompetition clause that is too broad, others will not.
The partnership's billing practices, he said, "place me at great risk, without personal benefit, and without an avenue to change these practices, therefore jeopardizing the validity of my employment contract with CVSA," including the noncompetition clause.
483, 485 (1990) ("[I]t still is difficult for lawyers to predict confidently how a court will react to any given noncompetition clause.
In addition to the provision on termination, the contract also set forth a noncompetition clause whereby the employee agreed not to enter into any competing insurance business and not to write any policies for any persons who were clients of the former employer.
According to the drug chain's lawyers, the terminations didn't abrogate either the five-year noncompetition clause barring Perlmutter or Marden from starting a firm to compete against Odd Lot or Revco's right of first refusal to repurchase their shares should Perlmutter and Marden attempt to sell their shares to a third party.
But in denying TeamWorks' effort to block the AIDS/LifeCycle from taking place, California superior court judge David Yaffe ruled on January 14 that state law may invalidate the noncompetition clause in TeamWorks' contract.
What is meant by a true noncompetition clause, however, is more specific.