When you sign up for a service agreement, you might come across a clause called the non-compete clause. It sounds intimidating, but it`s actually a standard part of many service agreements. This clause establishes that the person or company providing the service agrees not to compete with the client during the period of the service agreement and for a specified period after its termination. The non-compete clause is an important tool to protect businesses from losing their competitive edge.
What is a Non-Compete Clause?
A non-compete clause restricts a service provider from competing with the client while the service agreement is in effect. The clause might also specify a period after the agreement ends during which the service provider agrees not to compete. This is usually done to protect the client`s business interests, such as trade secrets and customer information. It also prevents the service provider from using the client`s resources to develop a competing service or product.
Why is a Non-Compete Clause Necessary?
A non-compete clause is necessary for several reasons. For example, if a service provider is working for a competitor of the client, it could compromise the client`s confidential information. In addition, if a service provider were to use the client`s resources, technology, or information to create a competing product or service, it would create a conflict of interest. The non-compete clause protects the client from these scenarios.
What should be Included in a Non-Compete Clause?
A typical non-compete clause should include the following elements:
– The scope of the restriction: This should specify the type of work or services the service provider is restricted from performing while the agreement is in force and for a specified period afterward.
– The geographic area of the restriction: This should specify the geographic range within which the service provider is not allowed to compete.
– The duration of the restriction: This should specify the length of time the non-compete clause is in force.
– The scope of the agreement: This should specify which parties are subject to the non-compete clause, including the service provider and any other parties associated with the service provider.
Conclusion
A service agreement non-compete clause is an important tool to protect a business from losing its competitive advantage. It restricts the service provider from competing with the client and protects the client`s confidential information and resources. When drafting a non-compete clause, it`s essential to make sure it`s reasonable and not overly restrictive. That way, both parties can benefit from the service agreement`s terms and conditions.
