Noncompetition Agreement Definition

An agreement where one party agrees not to compete with the other party for a specific period of time and within a particular area. Salespeople, for example, often sign noncompetition agreements that prevent them from using the contacts gained by one employer to benefit another employer, from selling within a particular area, or even working in the same type of business. Noncompetes are also used in the context of a contract for the sale of a business: The selling owner may agree not to compete with the acquiring business for a certain period of time. In some states, such as California, courts view noncompetition agreements with disfavor and will not enforce them against employees or contractors unless the restrictions are very narrow. In other states, courts routinely uphold them.