What is a non-compete clause in commercial law and why is it important
Business-to-business competition clauses can appear in various contractual relationships and have their own specific rules and limitations, which are established by law.
Key takeaways
How do non-compete clauses between businesses work?
Under Czech legislation, there are two types of non-compete clauses:
Non-compete clause in a commercial agency agreement: This type is specific to commercial agency agreements, where a commercial agent works as an independent entrepreneur for the principal (for example, a company) and undertakes to broker business deals. Stricter rules apply to this type of non-compete clause.
General non-compete clause: This applies to all other types of contractual relationships and has slightly different rules compared to the non-compete clause in a commercial agency agreement.
Rules for non-compete clauses
The territory or persons to whom the clause applies must be clearly defined.
The competitive activities that are prohibited must be specified.
The duration must not exceed 2 years for commercial agency agreements and 5 years for general non-compete clauses.
The clause must be balanced, meaning it must not disproportionately restrict one of the parties.
What happens if the rules are not followed?
If a non-compete clause does not meet all the legal conditions, it can be declared invalid. This means it will be disregarded and cannot be enforced in court. It is therefore important that a non-compete clause is carefully drafted and respects all legal requirements.
Conclusion
A non-compete clause is an important tool for protecting business interests, but it is necessary to ensure it is correctly formulated and complies with legal conditions. A properly drafted non-compete clause can prevent many problems and disputes that could arise after the termination of a contractual relationship.
If you are dealing with any matter concerning a non-compete clause, do not hesitate to contact us - our Prague-based legal team will be happy to help you.
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Disclaimer:
The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 350,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (consultation@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.