Non-Compete Agreements

This article refers to written non-compete agreements between a buyer and seller of a business. This is important, because California courts have determined that most non-compete agreements between an employer and employee are illegal and therefore unenforceable.

A non-compete agreement is a contract that prohibits the seller of a business from engaging in direct competition with the business they have sold within a limited period of time and within a defined geographical area.

Most non-compete agreements cover a period from 3 to 5 years and specify a radius from the sold business of 3 to 5 miles. Given that the law dealing with the enforceability of non-compete agreements is constantly changing, it is wise for both buyers and sellers of businesses to obtain the opinion of legal counsel on this subject. The goal is to protect the buyer, but not to unreasonably prohibit the seller from earning a living or engaging in business.


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