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Agreement Creating Restrictive Covenants

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AGREEMENT CREATING RESTRICTIVE COVENANTS

Declaration of covenants, conditions, and restrictions (Covenants) made on this the day of , , by the Homeowner's Association, Inc., hereinafter referred to as the Association, concerning the residential subdivision known as Subdivision in the County of State of , according to a map or plat thereof which is on file and of record in the office of the Clerk of (County) (State), in Plat Cabinet , Slot .

These Covenants are being made for the purpose of maintaining fair and adequate property values in the Subdivision (hereinafter referred to as Subdivision) and of continuing the Subdivision as a desirable residential part of County.

For and in consideration of the mutual interest of the owners of real estate in the Subdivision, the Association hereby subjects all of the real property described in Exhibit "A" attached hereto, to the following covenants and restrictions:

(Set forth Covenants here)

Miscellaneous Provisions

Each owner, by purchasing any lot in the Subdivision becomes a member of the Association and shall be bound by the terms and conditions of this Agreement and Declaration, the Articles of Incorporation and Bylaws of the Association, and such rules and regulation as may be adopted by the Association under such Articles and Bylaws.

On transfer, conveyance, or sale by any owner of all of his or her or its interest in any subdivision lot, such owner’s membership in the Association shall thereon cease and terminate.

Except as provided in this Agreement and Declaration, the Association shall be the sole judge of the qualifications of its membership and of the right to participate in and vote at its meetings.

The official address of the Association is , and shall remain so until changed by the Association, at which time the Association shall notify each member thereof of the change in address.

Each lot owner or lot purchaser, on purchase of such lot, shall immediately notify the Association of such owner’s name and address.

By written consent of percent 75% of all of the lot owners, the Association may be given such additional powers as may be described by the Association, or otherwise modify or amend this Agreement and Declaration in any manner.

The Association shall, at all times, observe all of the laws, regulations, ordinances, and the like of the (City) (County) (State), and of the United States. If the provisions of this Agreement and Declaration shall be found to be in conflict therewith, then such parts of this Agreement and Declaration as are in conflict with such laws, regulations, ordinances, and the like shall become null and void, but no other part of this Agreement and Declaration not in conflict therewith shall be affected thereby.

Subject to the limitations set forth in this Agreement and Declaration, the Association shall have the right to make such reasonable rules and regulations and to provide such means and to employ such agents as will enable it adequately and properly to carry out the provisions of this Agreement and Declaration.

This Agreement and Declaration shall become void after years. This Agreement and Declaration may be terminated, and all of the real property now or hereafter affected may be released from all or any part of the terms and conditions of this declaration, by the owners of 75% of the properties subject hereto at any time it is proposed to terminate this Agreement and Declaration, by executing and acknowledging an appropriate written agreement for that purpose, and filing the same with the office of the Clerk of (County) (State).

All of the provisions of this Agreement and Declaration shall be deemed to be covenants running with the land, and shall be binding on and inure to the benefit of the owners of the properties described in Exhibit "A" their heirs, successors, and assigns, and all parties claiming by, through, or under them shall be taken to hold, agree, and covenant with such owners, their successors in title, and with each other, to conform to and observe all of the terms and conditions contained in this Agreement and Declaration.

Any lot owner, or the Association, may maintain any legal proceedings to compel or enforce any of the terms and conditions of this Agreement and Declaration. When any lot owner or the Association prevails in any such legal proceedings, all costs and all expenses of such proceedings shall be taxed against the offending party or parties.

The initial members of the board of directors of the association are:

(Name and Address of each)

In witness whereof, the undersigned, constituting all of the members of the Board of Directors of the Association and all of the initial owners of the property described in Exhibit "A" have caused this Agreement and Declaration to be executed as of the day of , .

Signatures of Directors

Signatures of Owners

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What the Agreement Creating Restrictive Covenants Is

An Agreement Creating Restrictive Covenants is a legally binding contract that establishes post‑contract restraints such as non‑compete, non‑solicit, confidentiality, and non‑disclosure obligations between identified parties. Commonly used in employment separations, asset or stock sales, and business purchases, it specifies restricted activities, geographic and temporal limits, consideration, and remedies for breach. Enforceability depends on clarity, reasonableness, and applicable state law; some jurisdictions restrict non‑compete enforceability. The agreement can be executed electronically when parties demonstrate intent, consent, attribution, and retention consistent with ESIGN and UETA frameworks.

Why This Agreement Matters for Risk Management

A clear restrictive covenant protects transferrable business value, preserves confidential information, and reduces competitive harm by setting enforceable boundaries. Properly drafted restrictions allocate risk, define consideration, and improve defensibility in litigation while enabling faster execution through compliant electronic signing and retained audit records.

Why This Agreement Matters for Risk Management

Who Typically Prepares and Signs These Agreements

These agreements are prepared and executed by parties in transactions where competitive harm or disclosure risks exist; stakeholders must confirm authority and review lawfulness.

  • Employers and HR teams seeking to protect trade secrets and client relationships after termination.
  • Business buyers and sellers in M&A who need post‑closing non‑competes and non‑solicit covenants.
  • Franchisors, principals, or partners negotiating ownership transfers or partner exits.

Parties should verify state law limitations, include consideration, and use reliable execution methods to preserve enforceability.

Primary Signers and Their Roles

Employer Counsel

In‑house or external counsel drafts precise restrictions, assesses state enforceability, and documents consideration. They oversee execution, retention, and any necessary notary or witness steps to support enforcement in chosen jurisdiction.

Buyer / Acquirer

Buyers or acquirers negotiate covenant scope as part of sale terms, confirm successor liability treatment, and ensure post‑closing enforcement language aligns with transaction documents and closing conditions.

Core Elements to Include in a Professional Agreement Creating Restrictive Covenants

A complete agreement balances protection with reasonableness: identify parties, describe restricted conduct, set scope and term limits, specify consideration, list carve‑outs, and define remedies and dispute resolution.

Parties & Recitals

Identify contracting parties, describe transaction or relationship context, and state the business interests being protected to support enforceability in court.

Restricted Activities

Define prohibited conduct precisely (competitors, solicitation, hiring, solicitation of clients) with examples to avoid overbreadth and ambiguity.

Geographic & Temporal Scope

Specify a clear geographic area and time period; reasonableness is jurisdiction dependent and affects courts' willingness to enforce.

Consideration

State the consideration provided (employment continuation, severance, purchase price allocation) since valid consideration strengthens enforceability.

Carve‑Outs & Exceptions

List permitted activities (preexisting clients, passive investments, certain roles) to reduce risk of a court finding the covenant overly broad.

Remedies & Enforcement

Include injunctive relief, liquidated damages if enforceable, attorneys' fees, and a choice of law and forum clause to guide dispute resolution.

Essential Data Fields for the Agreement

Party Names: Exact legal names
Effective Date: MM/DD/YYYY
Scope Terms: Activities defined
Geographic Limits: Region specified
Consideration: Monetary or non‑monetary
Signature Blocks: Signed and dated

Stepwise Process to Complete the Agreement

Follow these four steps to prepare, execute, and preserve the covenant with legal and recordkeeping controls.

  • 01
    Select Template: Choose a jurisdiction‑appropriate template.
  • 02
    Complete Fields: Enter names, dates, scope, and consideration.
  • 03
    Review & Approve: Have counsel verify reasonableness and compliance.
  • 04
    Execute & Store: Sign electronically or in person; retain audit trail.

Configuring an Electronic Workflow for This Agreement

Set up a secure signing workflow that enforces signer order, required fields, and retention of the audit trail.

Field Configuration
Template selection Use jurisdiction‑specific template
Authentication Email + SMS or advanced auth
Signer order Specify sequence for parties
Retention settings Enable audit trail and export

Technical Requirements for eSigning and Distribution

Ensure the signing platform supports secure authentication, PDF and DOCX formats, audit trails, and optional integrations before routing documents.

  • File formats: PDF and DOCX supported
  • Integrations: CRM, cloud storage connectivity
  • Authentication: Email, SMS, or multi‑factor

Reliable platforms should preserve a tamper‑evident signed document and an exportable certificate of completion to support enforceability and record retention requirements.

Where to Send or File the Final Agreement

After execution, deliver copies to each party and store authoritative records with the responsible holder or filing agent.

  • To Counterparties: Email executed copy to all signers
  • Transaction File: Add to M&A closing binder
  • HR Records: Place employee‑related covenants in personnel file
  • Secure Archive: Store signed PDF with audit trail

Key Timing Considerations and Deadlines

Observe timing for effectiveness, review windows, and recordkeeping obligations to maintain rights and comply with transaction milestones.

Effective Date:

Date in agreement begins obligations

Review Period:

Allow reasonable negotiation window

Enforceability Check:

Counsel review before signing

Closing Delivery:

Provide signed covenants at closing

Retention Start:

Begin retention on execution date

Milestones from Draft to Post‑Execution

Track milestones sequentially so responsibilities and timelines are clear through negotiation, execution, and post‑closing obligations.

01

Drafting Complete

Terms agreed and initial draft produced

02

Negotiation Period

Counterparty revisions and legal review

03

Execution

All parties sign and date

04

Post‑Execution Compliance

Monitor obligations and enforce as needed

Common Mistakes to Avoid When Preparing Restrictive Covenants

  • Drafting overly broad geographic or temporal limits that courts may strike as unreasonable and render the covenant unenforceable.
  • Failing to specify clear, adequate consideration such as severance, promissory payments, or transaction consideration for enforceability.
  • Omitting carve‑outs for preexisting client relationships or passive investments, producing ambiguity and disputes.
  • Neglecting to confirm state law restrictions; some jurisdictions substantially limit or void noncompetes for employees.

Risks and Consequences of an Incorrect or Unenforceable Agreement

Unenforceability: Court may void covenant
Litigation Costs: Significant legal fees
Injunction Risk: Temporary court orders possible
Damages Exposure: Monetary awards may follow
Employee Turnover: Loss of talent if poorly drafted
Tax Treatment: Consideration allocation affects taxes

Example Scenarios Using Restrictive Covenants

Two representative scenarios illustrate typical drafting choices and operational handling of restrictive covenants during transactions and separations.

Employee Separation

A departing sales director signs a one‑year non‑solicit to protect customer lists

  • key clients excluded if preexisting relationship
  • the employer documents consideration and stores the signed PDF with audit trail for enforcement readiness.

Asset Sale

Buyer requires seller non‑compete in an asset purchase to preserve goodwill

  • geographic radius tied to former customer base
  • executed covenants are delivered at closing and retained in the transaction folder.

eSignature Vendor Pricing and Capability Snapshot

Comparison of typical starting prices and feature availability for platforms commonly used to execute and store restrictive covenants. signNow is listed first per standard comparison format.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial Yes, 7‑day free trial No No Yes, limited Yes, limited
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Frequently Asked Questions About Agreement Creating Restrictive Covenants

Answers to common questions about drafting, enforceability, signatures, and recordkeeping for restrictive covenants in U.S. jurisdictions.


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