What this document is for

A Non-Compete Agreement is a legal document used to restrict one party from competing with another party for a defined period of time, within a defined geographic area, and in relation to a defined type of business activity. It is most commonly used to protect a business from unfair competition by someone who has had access to confidential information, client relationships, pricing, strategy, trade secrets, or other commercially sensitive knowledge.

This type of agreement is often used in employment, contractor, business sale, partnership exit, shareholder exit, and consultancy settings. A well-drafted non-compete agreement aims to protect legitimate business interests without going further than necessary. It usually works alongside confidentiality, non-solicitation, and intellectual property clauses, rather than replacing them.

A written non-compete agreement can help a business reduce the risk that a former employee, contractor, founder, seller, or partner will immediately start a competing business, take key clients, exploit inside knowledge, or use confidential know-how to damage the original business. At the same time, these agreements must usually be reasonable in scope and duration to have a better chance of being enforceable.

When to use it

Use a Non-Compete Agreement when one party will gain access to sensitive business knowledge or strategic advantages and there is a real commercial need to limit direct competition for a reasonable period after the relationship ends.

This document may be useful when:

• an employee in a senior, sales, technical, or strategic role will access confidential information
• a contractor or consultant will gain insight into business operations, pricing, clients, or systems
• a business is being sold and the buyer wants to stop the seller from opening a competing business immediately
• a founder, shareholder, or partner is exiting and the remaining business wants protection
• a service provider will be exposed to trade secrets, internal processes, or proprietary methods
• the business has built strong client relationships that could be unfairly exploited
• the business wants contractual protection beyond a confidentiality clause
• the parties want to define a limited post-termination competitive restriction in writing
• the role or transaction involves substantial goodwill, know-how, or sensitive market information
• the agreement is part of a broader employment, contractor, shareholder, or sale transaction

A non-compete agreement is usually most appropriate where the restricted party had meaningful access to information or influence that could cause real commercial harm if used in competition.

When not to use it

A Non-Compete Agreement is not suitable for every role, transaction, or relationship. In many cases, it may be unnecessary, too broad, or difficult to enforce.

You may need a different document if:

• a confidentiality agreement alone is enough to protect the business
• the main concern is poaching clients or staff rather than direct competition
• the person had little or no access to sensitive business information
• the restriction would be far broader than the actual business risk
• local law restricts or prohibits non-compete clauses in certain settings
• the relationship is low-risk and a non-solicitation clause would be more proportionate
• the business only needs protection during the active relationship, not after it ends
• the issue is ownership of work product or intellectual property rather than competition
• the restraint would likely prevent the person from earning a living unreasonably
• the transaction requires a broader sale-of-business covenant package instead of a stand-alone non-compete

In many situations, a narrower confidentiality or non-solicitation agreement may be easier to justify and enforce than a broad non-compete.

Key clauses explained

A Non-Compete Agreement should be drafted carefully because these clauses are often closely scrutinized. The following sections are usually the most important.

Parties

This section identifies the business seeking protection and the person or entity agreeing to the restriction. Use the correct legal names of all parties.

Restricted activities

This clause explains what kinds of competitive activities are prohibited. It should be specific enough to describe the competing conduct clearly, such as starting, owning, operating, managing, advising, or working for a directly competing business.

Restricted business scope

The agreement should define the line of business or commercial activity that is protected. This helps limit the restriction to the actual market in which the protected party operates.

Geographic area

A non-compete often applies only in a stated territory, such as a city, province, country, or specific trading area. The area should relate to where the business actually operates or has a legitimate commercial interest.

Restricted period

This section states how long the non-compete lasts after the relationship ends. The period should be reasonable in light of the business interest being protected.

Legitimate business interests

Some agreements describe the interests being protected, such as goodwill, customer relationships, confidential information, strategic plans, or trade secrets. This can help show why the restriction exists.

Exceptions

The agreement may specify activities that are not restricted, such as passive shareholding below a certain percentage, work outside the restricted business line, or activities in unrelated sectors.

Relationship to confidentiality and non-solicitation

A non-compete often works alongside confidentiality and non-solicitation obligations. These clauses protect different things and may be used together in the same broader agreement.

Remedies

This clause may state that a breach could cause serious harm and that the protected party may seek remedies such as damages, injunctions, or other relief allowed by law.

Severability

Some non-compete agreements include wording saying that if part of the restriction is unenforceable, the rest may still remain effective to the extent allowed by law.

Governing law

This section states which jurisdiction’s law applies. This matters greatly because non-compete rules vary significantly between countries, states, and regions.

Jurisdiction notes

Non-compete agreements are highly jurisdiction-specific. In some places they are generally enforceable if they are reasonable and protect a legitimate business interest. In others they are restricted, narrowly interpreted, or not enforceable in many employment settings.

Before using this Non-Compete Agreement, check local law on:

• whether non-compete clauses are enforceable at all
• special rules for employees, contractors, or sale-of-business transactions
• maximum permitted duration
• geographic scope requirements
• whether compensation is required during the restricted period
• how courts assess reasonableness
• whether non-solicitation clauses are treated differently
• labour law or competition law limitations
• public policy restrictions
• available remedies for breach

A non-compete that is too broad in time, geography, or business scope may be difficult to enforce. The agreement should be tailored to the real business interest involved rather than copied from a generic template without adjustment.

How to fill this out correctly

To complete a Non-Compete Agreement properly, make sure the restriction matches the real commercial risk and is not broader than necessary.

1. Enter the full legal names of the parties.
   Identify clearly who is being restricted and who is being protected.

2. Describe the business being protected.
   State the business activities, market, or commercial area to which the restriction relates.

3. Define the restricted activities carefully.
   Be clear about what conduct is prohibited, such as operating, advising, owning, or being employed by a competing business.

4. Set a reasonable geographic scope.
   Limit the restriction to the area where the business genuinely operates or has a real commercial interest.

5. Set a reasonable time period.
   Choose a duration that reflects the need for protection without being excessive.

6. State the legitimate business interests involved.
   Explain what the restriction is designed to protect, such as clients, confidential information, or goodwill.

7. Include carve-outs where appropriate.
   For example, passive investment in public companies or work in unrelated fields may be excluded.

8. Check consistency with other agreements.
   Make sure the non-compete wording aligns with any employment agreement, shareholder agreement, contractor agreement, or sale agreement.

9. Review local enforceability rules.
   Do not assume a standard restriction will be valid in every jurisdiction.

10. Have the parties sign and date the agreement.
    Each party should keep a signed copy with the related contract documents.

A strong non-compete agreement should be specific, proportionate, and commercially justified.

Common mistakes

Non-compete agreements often fail because they are too broad or poorly connected to a real business need. Common mistakes include:

• trying to restrict competition where there is no legitimate protectable interest
• using a very broad business description
• imposing an excessive time period
• using a geographic area far larger than the actual market
• applying the same clause to every employee regardless of role
• using a non-compete where confidentiality or non-solicitation would be enough
• failing to define the restricted activities clearly
• not checking local law before using the clause
• assuming the label “non-compete” makes it enforceable
• copying wording from another country or industry without adapting it
• not linking the restriction to goodwill, trade secrets, or client relationships
• forgetting to coordinate the clause with the main agreement
• leaving out signatures or dates
• using vague language that is hard to interpret or justify

A non-compete should be narrow enough to defend and clear enough to apply in practice.

Before you sign checklist

Before signing this Non-Compete Agreement, review the following:

• Confirm the full legal names of the parties
• Check the description of the protected business
• Review the restricted activities
• Confirm the geographic scope
• Review the restricted period
• Check whether the restriction is tied to a real legitimate business interest
• Confirm any carve-outs or exceptions
• Review related confidentiality and non-solicitation terms
• Check the remedies clause
• Review the governing law clause
• Make sure the agreement is proportionate to the role or transaction
• Check whether local law allows this type of restriction
• Ensure both parties understand the effect of the restraint before signing
• Sign and date all required pages
• Keep a signed copy with the related agreement

Completed sample

Below is an example of how a Non-Compete Agreement might look once completed. This sample is for illustration only.

Protected Party:
ClearBridge Advisory (Pty) Ltd

Restricted Party:
Daniel Maseko

Protected Business:
Business advisory and outsourced finance consulting services for small and medium-sized companies in the Western Cape

Restricted Activities:
The restricted party may not, during the restricted period, directly own, operate, manage, or provide substantially similar advisory services to a business that competes directly with the protected party in the defined territory, except with prior written consent.

Geographic Scope:
Western Cape, South Africa

Restricted Period:
12 months from the termination of the service relationship

Legitimate Interests Protected:
Customer relationships, pricing models, confidential service methods, internal financial tools, and business strategy

Exceptions:
Passive ownership of less than 5% in a publicly traded company is permitted

Governing Law:
Laws of the Republic of South Africa

Signatures:
Protected Party: ____________________
Restricted Party: ____________________
Date: ____________________

FAQ

What is a non-compete agreement?

A non-compete agreement is a contract that restricts one party from competing with another party’s business for a certain period, in a certain area, and within a defined business scope.

Are non-compete agreements enforceable?

Sometimes, but it depends heavily on local law and whether the restriction is reasonable. Some jurisdictions allow them in limited cases, while others restrict them heavily or treat them with skepticism.

What makes a non-compete more likely to be enforceable?

A non-compete is usually more defensible when it protects a legitimate business interest and is limited in time, geography, and scope of restricted activity.

Is a non-compete the same as a non-solicitation clause?

No. A non-compete restricts competing business activity, while a non-solicitation clause usually focuses on preventing the poaching of clients, customers, or staff.

Can a non-compete be used in an employment contract?

In some jurisdictions, yes, but employment-related non-competes are often closely scrutinized and may face stricter limits than sale-of-business restraints.

Does a confidentiality agreement replace a non-compete?

Not always. A confidentiality agreement protects secret or sensitive information, while a non-compete restricts certain competitive conduct. Sometimes one is enough, and sometimes both are used.

How long should a non-compete last?

That depends on the role, the transaction, and the applicable law. The shorter and more targeted the restriction is, the easier it may be to justify.

Should I get legal advice before using a non-compete agreement?

That is often a good idea, especially because enforceability varies so much by jurisdiction and because overbroad restrictions can be difficult to enforce.

Related resources

You may also find these documents and guides useful:

• Non-Disclosure Agreement (Mutual)
• One-Way NDA
• Employment Contract
• Independent Contractor Agreement
• Service Agreement
• Shareholders Agreement
• Partnership Agreement
• Termination Letter
• Confidentiality Agreement
• Business Sale Agreement