Non-competes ancillary to a business sale receive substantially more favorable enforcement than employment non-competes, since the buyer purchased goodwill the covenant protects. Duration and scope must still be reasonable.
Several states permitting sale non-competes prohibit employment ones.
Alternative Names:
Seller Non-Compete|Acquisition Non-Compete
Why it Matters?
The sale-of-business exception survives in states that otherwise prohibit non-competes entirely, including California, which makes the distinction between a seller covenant and an employment covenant consequential for founders who continue working after closing. Structuring the restriction as ancillary to the sale rather than as an employment term is what preserves enforceability. Consideration allocated to the covenant supports that characterization.
Frequently Confused with
Related terms
Frequently asked questions
Why are sale non-competes more enforceable?
Does the exception survive in California?
