Which term describes an agreement where the seller agrees not to compete?

Study for the California Escrow Exam. Dive into detailed content with flashcards and multiple choice questions, accompanied by explanations and hints. Ensure your success on test day!

In contract language, the specific promise that a seller will refrain from competing is called a covenant not to compete. A covenant is a binding promise within a contract, which fits the idea of a seller agreeing not to engage in competing activities after the sale. The other terms don’t capture that contractual promise: a condition not to compete would hinge on something that must happen for the contract to be performed, a restriction not to compete is vague and not the standard legal label, and a declaration not to compete would be just a statement of fact rather than a contractual pledge. In escrow or business-sale contexts, the covenant not to compete protects the buyer’s goodwill and value by limiting the seller’s ability to compete for a reasonable period and within a reasonable area. (Note: in California, employment noncompetes are generally unenforceable, but a reasonable covenant not to compete tied to the sale of a business is more likely to be enforceable.)