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Sources of the non-competition obligation: deciphering commercial contracts

By Yasmine EDDAM15 June 2025

The non-competition obligation is a central concept in business law, often seen as a necessary evil to protect the value of a business or a customer base. However, its application is far from uniform. Depending on the nature of the contract, it may be a matter of course imposed by law, or on the contrary a delicate contractual construction, the validity of which depends on meticulous drafting. Understanding where this obligation comes from is therefore the first step in mastering its implications. The aim of this article is to decipher the various sources of the non-competition obligation in the main commercial contracts. For an overall understanding of the issues, our reference guide to the non-competition obligation provides an overview.

Non-competition obligation: explicit or implicit?

The fundamental distinction lies in the origin of the prohibition on competition. Either it is expressly formulated in a clause, the fruit of the will of the parties, or it is considered to be inherent in the very nature of the contract or in a broader legal obligation. This difference in source has direct consequences for the scope and application of the prohibition.

The legal or implied non-competition obligation: when does it apply?

In certain situations, the law or case law consider that the absence of a prohibition on competition would render the contract devoid of substance. In these cases, the non-competition obligation exists ipso jure, even if there is no mention of it in the contract. The most emblematic case is that of the transfer of a business. The seller is bound by an obligation not to seek to take over the clientele that he has just sold. This prohibition is based on the legal guarantee of eviction provided by the Civil Code: the seller cannot take back what he has sold. Another illustration can be found in the duty of loyalty imposed on company directors or employees during the performance of their employment contract. In principle, they may not develop a business in direct competition with their company or employer.

The voluntary non-competition clause: an expression of contractual freedom

Apart from cases where it is imposed, the non-competition obligation must be expressly stipulated. This is the field of non-competition clauses, which can be found in a multitude of contracts: franchising, transfer of company rights, commercial agent's contract after it has been terminated, etc. These clauses are an expression of contractual freedom, but this freedom is not absolute. Drafting such a clause is a delicate exercise, as its validity is subject to a number of conditions. strict conditions defined by case law, particularly in terms of limitation in time and space, and proportionality to the legitimate interests of the creditor of the obligation.

Non-competition in customer capitalisation agreements

Any transaction aimed at transferring the value of a customer base, whether commercial or civil, is based on the idea that the purchaser must be able to enjoy peacefully the item he has acquired. The non-competition obligation is the legal tool that guarantees this enjoyment. These transactions, which are at the heart of business life, are subject to specific rules, as we analyse in our article dedicated to the non-competition in the sale of businesses and customer lists.

Sale of a business: an essential guarantee obligation

As mentioned above, the sale of a business automatically entails a non-competition obligation for the vendor. Case law is consistent on this point: this obligation is the natural extension of the warranty against eviction. Without it, the seller could relocate nearby and divert the clientele, thereby depriving the buyer of the essential element of the business that he has paid for. Even where there is a non-competition clause limited in time and space, this legal obligation to provide a guarantee continues to exist and may be invoked by the purchaser if the seller, even after the clause has expired, engages in manoeuvres to misappropriate customers.

Non-competition in civil clienteles: a growing issue

Long considered non-transferable because they are attached to the person of the professional, civil clienteles (doctors, lawyers, chartered accountants) are now being transferred. In a seminal ruling on 7 November 2000, the French Supreme Court (Cour de cassation) accepted that the transfer of civil law clients was lawful, provided that the patient's or client's freedom of choice was preserved. This development logically led to the recognition of non-competition obligations. Although, as a matter of principle, an express clause is required, case law is tending to move closer to the commercial regime. To guarantee the effectiveness of the transfer, a non-reinstatement obligation is often considered to be an essential condition of the transfer, even if it is not always qualified as an implicit obligation by operation of law.

Commercial leases and the lessor's non-competition obligation

Tenants of commercial premises may legitimately fear that their landlord will set up a direct competitor in the same building. However, the principle is clear: in the absence of a specific clause, the lessor owes his lessee no non-competition obligation. Case law holds that the lessor guarantees peaceful enjoyment of the leased premises, but not the lessee's commercial success. Consequently, the lessor retains the freedom to lease neighbouring premises to a similar business. To protect himself against this risk, the lessee should negotiate the inclusion of an exclusivity or non-competition clause in his lease. This clause will prohibit the lessor from letting another premises in the building for a competing business. The lessor is contractually liable for any breach of this clause.

Partnership agreement and transfer of company rights: loyalty of partners and managers

The issue of non-competition within a company is complex because it depends on the status of the person concerned. In principle, an ordinary partner who does not hold a management position is not bound by a non-competition obligation towards his own company, unless the articles of association or a shareholders' agreement expressly provide otherwise. They must simply refrain from any act of unfair competition. The situation is different for company directors (managers of SARLs, chairmen of SASs, etc.). By virtue of their mandate and the resulting duty of loyalty, they are required not to engage in any competing activity that would be detrimental to the company they manage. However, this duty of loyalty lapses at the end of their term of office, unless there is a clause to the contrary. When transferring corporate rights (shares), the legal eviction guarantee may, in certain cases, impose a non-competition obligation on the transferor if his re-establishment in a similar activity prevents the company from pursuing its corporate purpose. However, the safest solution is still to include a clear and well-defined non-competition clause in the transfer deed.

Commercial distribution contracts: agency, concession, franchising

Distribution networks are based on close collaboration between the network head and its members. This collaboration justifies non-competition obligations, both during the performance of the contract and after its termination, to protect the interests of the network, the know-how passed on and the customer base developed.

Mandate of common interest and commercial agent: loyalty and post-contractual restrictions

The commercial agent contract is governed by an obligation of reciprocal loyalty, enshrined in the French Commercial Code. Article L. 134-3 stipulates that the agent may not agree to represent a competing company without the agreement of his principal. This non-competition obligation therefore applies automatically for the duration of the contract. After termination of the contract, the principle is to return to freedom. However, article L. 134-14 of the French Commercial Code authorises the stipulation of a post-contractual non-competition clause, provided that it is in writing, limited to the geographical sector and type of goods covered by the contract, and has a maximum duration of two years. This clause is a major issue when the relationship is terminated.

Concession and franchising agreements: know-how and network protection

In concession and franchising contracts, the non-competition obligation is essential to protect the brand, the franchisor's know-how and the coherence of the network. During the contract, the concessionaire or franchisee generally undertakes not to distribute competing products. After the end of the contract, post-contractual non-competition clauses are common. These are designed to prevent the former franchisee from using the know-how acquired for the benefit of a competing network or for its own account. The validity of such clauses is strictly regulated, in particular by European antitrust law. They must be essential to the protection of the know-how, limited in time (generally one year) and space (often the premises where the business was conducted). The so-called "Macron" law of 6 August 2015 also strengthened the framework for these clauses to encourage the mobility of distributors.

The source of the non-competition obligation largely determines its scope and conditions of validity. Whether legal or contractual, a breach can result in significant penalties. To secure your commercial contracts and protect yourself against the risks of competition, expert support in commercial law is an essential preventive measure.