Legal Definitions - promise not to compete

A promise not to compete is a type of covenant, which is a formal agreement or promise usually found in a contract. A noncompetition covenant is a promise, usually 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.

For example, if a person sells their business to another person, they may include a noncompetition covenant in the contract to prevent the buyer from starting a similar business in the same area for a certain period of time. This protects the seller's business interests and ensures that the buyer does not use the knowledge gained from the sale to compete with the seller.