Drafting non-competes that actually hold up

A non-compete that is too broad to enforce is worse than no non-compete at all, it gives the seller false comfort and may be struck down entirely (most courts will not "blue-pencil" overly broad clauses, instead voiding them).

Five drafting principles for an enforceable sale-of-business non-compete:

1. Tie it to specific consideration. "In consideration of the Purchase Price paid by Buyer to Seller…", the consideration is the deal itself. This is the easiest part because the entire price is consideration.

2. Define the restricted business narrowly. "The business of residential and small-commercial swimming pool cleaning, chemical maintenance, equipment repair, and related services in the Restricted Territory" is enforceable in most states. "All home services" is overbroad.

3. Define the restricted territory geographically and reasonably.
- Tie to actual operations. If the route serves a 15-mile radius around a city, restrict within that radius (often expanded by 5–15 miles to capture buyer's natural growth zone).
, List specific zip codes or counties when possible, clearer than radii in court.
, Avoid statewide or national bans unless the buyer truly operates across that geography.

4. Set a reasonable duration.
, 3 years: nearly always defensible.
, 5 years: defensible for full sale-of-business in most states.
, 7+ years: harder to defend; may be reduced or voided by a court.

5. Carve out reasonable activities.
, Permit the seller to be an investor (passive, non-controlling) in unrelated businesses.
, Permit personal pool care for friends and family.
, Permit employment in unrelated industries.
, Be specific so the clause survives a reasonableness review.

A sample sale-of-business non-compete sketch (illustrative only, have an attorney finalize):

> "For a period of five (5) years from the Closing Date, Seller shall not, directly or indirectly, own, manage, operate, control, be employed by, consult for, or have any financial interest in any business engaged in residential or small-commercial swimming pool cleaning, chemical maintenance, equipment repair, or related services within a twenty-five (25) mile radius of [City, State] or within the following zip codes: [list]. The foregoing shall not prohibit Seller from owning less than 2% of any publicly traded company or providing pool services to immediate family members on an unpaid basis."

Stack it with a non-solicit and a confidentiality clause. A non-compete prevents competition; a non-solicit prevents customer poaching even where competition is allowed; confidentiality protects customer lists, pricing, and operational know-how. Together they create overlapping coverage that survives even partial invalidation.

Severability and reformation clauses. Include a clause stating that if any provision is found unenforceable, the parties intend the court to reduce its scope to the maximum enforceable extent. This won't always work (some states refuse to "blue-pencil") but it preserves what can be saved.

Notarization and witnessing. Not strictly required for enforceability in most states, but adds a procedural shield against later "I didn't sign that" disputes.

Mutuality and consideration in employment context. If you're using a non-compete for an employee (in states that allow it), most jurisdictions require either (a) the agreement at the time of hire, OR (b) additional consideration (e.g., a raise, bonus, promotion) for an existing employee. Without consideration, employee non-competes typically fail.

Final reminder: non-compete enforceability is fact-, jurisdiction-, and judge-specific. Do not use any sample text without an attorney in your state reviewing and tailoring it. The Template Library has a starting-point non-compete and non-solicit, but they are not substitutes for legal counsel.