Non-Compete Agreement

This document is a stand-alone non-compete agreement (also known as a non-solicitation agreement or an agreement containing "restrictive covenants") for use in England and Wales. A non-compete agreement aims to protect an organisation or business by restricting the activities of other parties with whom they are contracting.

Employers often use non-compete agreements to prevent employees from poaching members of staff after they leave employment, or from taking customers with them to other businesses.

Businesses often use non-compete clauses within or alongside other trade agreements. For example, in relation to a sales or services agreement, there may be a non-compete agreement to prevent a competitor party from taking their customers or employees.

Non-compete agreements are also used to protect confidential trade information. In a similar manner, a business/organisation may also wish to protect confidential information, ideas and trade secrets during negations through a Non Disclosure Agreement (NDA).

Non-compete clauses are often included within the pre-existing contract between the parties. However, where these aspects are not already written within the contract between the relevant parties, this document can be used to create a stand-alone agreement to deal with non-compete issues.

Care must be taken when using non-compete clauses to ensure they can be considered enforceable by any court which may come to consider them in the event of any breach to the term. This is because the law says that non-compete agreements should only be used if they go no further than is necessary to protect the legitimate business interests. This is called the Restraint of Trade principle, which states that an individual or business should be free to use their trade and skills without excessive interference. Legitimate business interests include only:-

• Trade connections; and
• Trade secrets and confidential information.

Where non-compete clauses are too wide, they will be considered to be void and therefore cannot be enforced. It is therefore useful for the party seeking to create the non-compete clause to think carefully about the specifics of the agreement. For example thought should be given to:

• the finer details of the industry, and whether the details in the agreement will be be necessary to protect the trade of their business; and
• how long the terms will realistically be required for; and
• or whether the terms of the agreement can be confined to a particular geographical area (for example, a particular town, city or region) so as to make the terms narrow enough to be considered reasonable.

These factors can help to keep the agreement as specific as possible and can help to show that the terms are reasonable and justifiable.

It is also very important that this document has to fulfil the criteria for a legal contract, and this includes something called "consideration". Consideration is based on idea of the agreement being reciprocal, so the non-compete agreement must be given by the restricted party in exchange for something. Consideration does not always have to take the form of money. For example, an organisation may offer the following in exchange for the non-compete agreement:-

• the provision of confidential information in exchange for the non-compete terms;
• retaining the other party as a contractor for the provision of services or goods;
• the offer of employment to an employee (where the non-compete agreement is to be signed in conjunction with a new offer of employment); or
• the offer of bonuses, or development opportunities, or a severance package for a pre-existing employee.

In addition to the existence of consideration, there must be an offer which is accepted by the other party, both parties must intend to create legal relations and the terms to the agreement must be certain.

How to Use this Document

Once the agreement has been completed with the relevant details, each party should sign two copies. Each party should then send a copy of the document with their signature of approval to the other party in order to form a reciprocal binding contract. Alternatively, the parties may sign the document in the presence of each other at the same time in order to form the contract.

For companies and limited liability partnerships, a contract can be entered into by the use of the company common seal, partnership common seal, or by the signature of a representative who is authorised to enter into the contract by the company or limited liability partnership.

Relevant Law

The key piece of law which is relevant to non-compete agreements is the Competition Act 1998.

The Companies Act 2006 also governs the formalities for a company or a limited liability partnership to enter into a contract.

The Partnership Act 1980 governs the formalities for a partnership to enter into a contract.

Help from a lawyer

You can choose to consult a lawyer if you need help.

The lawyer can answer your questions or help you through the process. You will be offered this option when you complete the document.

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.