Non-compete vs non-solicit

Sellers frequently see both clauses in the same purchase agreement and assume they are the same protection worded twice. They restrain different conduct, and Canadian courts generally treat them differently for enforceability, which matters directly to what a seller is actually agreeing to give up when they sign.

What a non-compete restrains

A non-compete stops the seller from operating, working in, owning or investing in a business that competes with the one just sold, within a scope defined by activity, geography and time. It is the broader of the two tools, because it does not matter whether the seller ever contacts a single former customer — simply being in the competing business at all is enough to breach it.

What a non-solicit restrains

A non-solicit is narrower: it stops the seller from actively approaching, and depending on the wording sometimes even accepting, business from the specific customers, staff or suppliers named or described in the clause, for a defined period. A seller bound only by a non-solicit could open a competing business next door and not breach it, as long as they never reach out to the people the clause protects.

Where the real difference sits — and why courts treat them differently

Canadian courts assess a restrictive covenant against what is reasonably necessary to protect the interest the buyer actually paid for, and a clause that stops all competition restrains far more of the seller’s future livelihood than one that only stops specific contact — which is why a non-solicit is generally viewed as the more proportionate, and often the more readily defensible, of the two. Context matters just as much as scope: enforceability differs by province, and a covenant given by a seller as part of a business sale is generally assessed more permissively than a similar-sounding covenant imposed on an employee, because the seller was paid specifically for the goodwill the covenant protects and the bargaining between commercial parties is closer to equal.

• Scope: a non-compete restrains an entire category of activity; a non-solicit restrains contact with a defined group of people or accounts
• Breach without contact: a non-compete can be breached simply by operating a competing business; a non-solicit generally requires actually approaching a protected customer, employee or supplier
• Judicial treatment: courts generally scrutinize the broader non-compete more closely than the narrower non-solicit, though neither is automatically enforceable
• Legal context: the same clause given on a business sale is treated differently — generally more permissively — than one given in employment, and some provinces have legislated restrictions specific to employee non-competes that carve out sale-of-business situations

Why buyer and seller pull in different directions

A buyer paying for goodwill generally wants the broadest protection available, asking for a non-compete alongside a non-solicit to cover both the risk of direct competition and the narrower risk of the seller poaching relationships. A seller, especially one who may want to work again in the same trade after a transition period, resists a non-compete far more than a non-solicit, since it can effectively bar them from earning a living in their own field for as long as the covenant runs. Where the seller is a regulated professional bound by their own governing body’s rules, a full non-compete can be especially contentious, and a non-solicit is often the more realistic tool the parties actually land on.

What commonly goes wrong

The most common failure is overreach: a covenant drafted broader in geography, activity or duration than the goodwill actually purchased justifies risks being struck down entirely on challenge, leaving the buyer with no protection rather than the narrower protection a more carefully scoped clause could have provided. A second failure is assuming either clause automatically survives every change in circumstances — a buyer who later sells the business again, or restructures it substantially, can find the original covenant does not clearly transfer or apply the way expected, because it was drafted for the original transaction, not for whatever came after it.

How to decide

This is rarely a binary choice between the two tools, since most purchase agreements layer some version of both to cover different risks. The real negotiation is over how each is scoped — what counts as competing, which customers and staff are covered, and for how long — and getting that scope right for the specific business and the specific seller matters far more than which label the clause carries.