Free Sale of a Business Non-Compete Agreement

Sale of a Business Non-Compete Agreement

A sale of a business non-compete agreement is a legal contract between a buyer and a seller that prevents the seller from starting or joining a competing business for a set period and within a defined geographical area. In most cases, the sales price serves as consideration (legal value) for the agreement.

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Last updated June 17th, 2025

A sale of a business non-compete agreement is a legal contract between a buyer and a seller that prevents the seller from starting or joining a competing business for a set period and within a defined geographical area. In most cases, the sales price serves as consideration (legal value) for the agreement.

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Is It Legal?

Yes. Non-compete agreements tied to the sale of a business are enforceable in every U.S. state and territory, as long as they are reasonable in scope, timeframe, and location.

Courts are generally more lenient with sale-related non-competes than employment-based ones because the seller receives compensation and the buyer is vested in protecting the business they just purchased.

Key Legal Requirements

To be enforceable, a sale-of-business non-compete must meet the following criteria:

  1. Consideration
    • The agreement must state that the purchase price includes compensation for the seller’s agreement not to compete.
  2. Geographic Area
    • The restriction should apply to locations where the business currently operates or holds a market presence.
    • Can be defined by counties, cities, or a set radius (e.g., 50 miles).
  3. Period
    • Most states allow a restriction of 2 to 5 years.
  4. Scope of Work
    • The restricted activities must be specific to the business being sold.
    • Example: A doctor selling a pain management clinic can be restricted from opening another pain management practice, but not barred from all medical practice.

Sample Non-Compete Clause

If you’re including a non-compete in a business purchase agreement, you might use language like this:

Non-Compete Clause
 The purchase price of the business shall serve as consideration for this covenant not to compete. The Seller acknowledges their access to proprietary information and trade secrets that are integral to the business’s ongoing success. Therefore, to protect the Buyer’s legitimate interests, the Seller agrees to the following:

  • Scope of work: The Seller will not engage in the business of [DESCRIBE SERVICES]
  • Term: This restriction shall remain in effect for [DURATION] following the date of sale
  • Geographical area: The restriction applies within [CITIES / COUNTIES / RADIUS]
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