A covenant not to compete is a special type of contract that prohibits commerce directly in the business world. There are, essentially, two primary types of contracts not to compete: First, the contract between potential employer and employee as a conditi

Business Law GBA 231:

A covenant not to compete is a special type of contract that prohibits commerce directly in the business world. There are, essentially, two primary types of contracts not to compete: First, the contract between potential employer and employee as a condition of the offering and acceptance of an employment contract (preventing the employee from working with other employers for a specified period of time, usually 3-5 years and usually within a defined geographic area such as “within a 100 mile radius” of the prior business. Secondly, very often the sale of business contains provision that demand that the seller of the business not compete in any like-kind business as a condition of the sale.  Do these non-compete clauses fundamentally and necessarily interfere with commerce, or are such contracts necessary and appropriate?