Non-Compete Clause template clause

    Updated: 23 March 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Article [X] - Non-Compete

    1. During the term of this Agreement and for a period of [e.g. 12 months] following its termination ("Restricted Period"), [Party] shall not, directly or indirectly, engage in activities that compete with [description of protected activities] ("Protected Activities") within [geographic area] ("Territory").

    2. Competing activities include, without limitation:
    (a) offering goods or services directly comparable to the Protected Activities;
    (b) becoming employed by, advising, or acquiring an interest in any business that carries on the Protected Activities;
    (c) actively soliciting customers or contacts of the other Party with a view to offering them goods or services comparable to the Protected Activities.

    3. The restriction in paragraph 1 does not apply to:
    (a) activities that [Party] demonstrably carried on before the commencement of this Agreement;
    (b) the holding of a shareholding of less than 5% in a publicly listed company;
    (c) activities for which the other Party has given prior written consent.

    4. If [Party] breaches this non-compete clause, [Party] shall pay an immediately payable liquidated sum of [currency] [amount] per breach and [currency] [amount] for each day that the breach continues, without prejudice to the other Party's right to claim specific performance and full compensation for any additional loss suffered.

    5. The Parties acknowledge that the restrictions in this Article are reasonable in light of the nature of the collaboration and the access to confidential information that [Party] obtains under this Agreement. If a court determines that any restriction is too broad, the Parties request the court to reduce the restriction to the maximum permissible scope rather than strike the clause in its entirety.

    What does this clause mean?

    A non-compete clause prevents a contracting party from engaging in competing activities during and for a defined period after the relationship. It protects trade secrets, customer relationships, and strategic knowledge that the party has gained during the collaboration.

    Courts scrutinise non-compete clauses for reasonableness. A clause that is too broad in duration, territory, or scope of restricted activities risks being struck down entirely or read down by the court. Paragraph 5 contains a severability provision: if the court finds the restriction too wide, it is asked to narrow it to the maximum enforceable scope rather than voiding the clause completely.

    Loio (2026) reports that 71% of contracts are never monitored for compliance after execution. With non-compete clauses, that is particularly dangerous because a breach that goes undetected for months will have caused damage that is difficult to reverse.

    When should you use this clause?

    Use a non-compete clause in partnership agreements, joint ventures, franchise contracts, agency agreements, and business sale agreements (where the clause is almost always present). It is also useful in outsourcing contracts where the service provider gains access to your client base or business strategy.

    Be conservative with the scope. A clause that bans all possible competition worldwide for an indefinite period will not withstand judicial scrutiny. A restricted period of 6 to 24 months, combined with a clearly defined territory and specific list of restricted activities, is more common and far more enforceable.

    According to World Commerce & Contracting, the average business loses 9.2% of annual revenue to poor contract management. The absence of a non-compete clause in sensitive commercial relationships contributes to that loss when a former partner immediately approaches your customers after departure.

    Note: this template is designed for commercial contracts between businesses. Non-compete clauses in employment contracts are subject to stricter requirements under Dutch law (Art. 7:653 BW), including mandatory written form and justification requirements for fixed-term contracts. Do not use this template for employment agreements.

    Customize these elements

    • 1Limit the duration to 6 to 12 months for standard commercial relationships, 12 to 24 months for strategic partnerships or business sales
    • 2Define the territory as specifically as possible: "England and Wales", "the Benelux countries", or "the territory set out in Schedule [X]" rather than vague terms like "the market"
    • 3Consider attaching a compensation payment to the non-compete if the restriction materially limits the other party's freedom to trade
    • 4Add a non-solicitation clause if the concern is not competing activities as such but specifically the poaching of customers or employees

    Sources

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