Carl Wilton has just sold his Mexican restaurant to Jerry Felt. The restaurant is located in Costa Brava, a city of about 300,000 people. In their sales agreement, a clause provides that Carl will not open another restaurant in Costa Brava for a period of five years. The clause is: a. a covenant not to compete. b. void as against public policy. c. prohibited under the Sherman Act. d. none of the above

A covenant not to compete (can also be referred to as a non-compete clause), in the sale of business, is an agreement where the buyer will have the seller sign an agreement that states that the seller will not open a business within a regional area, within a specific duration of time.

Since the sales agreement of Carl who is the seller and Jerry who is the buyer contains a clause which states that Carl is not allowed to open another restaurant in the area for a duration of five years, then THE CLAUSE IS A COVENANT NOT TO COMPETE.