Prohibited Activities Template

In plain language: Precisely defines every key term used in the prohibited activities provisions, including 'Prohibited Activity,' 'Restricted Party,' 'Competing Business,' and 'Confidential Information.'

Common mistake: Using undefined or vague terms like 'inappropriate conduct' without precise definitions — courts will interpret ambiguity against the drafter, making the restriction unenforceable.

In plain language: States which parties are bound by the prohibitions, the geographic territory covered, the time period during which restrictions apply, and whether restrictions survive termination of the agreement.

Common mistake: Failing to specify whether restrictions survive termination — if the contract is silent, a court may rule the prohibitions expire with the agreement.

In plain language: An exhaustive, specifically itemized list of the exact activities that are forbidden, written with enough specificity that a reasonable person knows precisely what is and is not permitted.

Common mistake: Using a catch-all 'including but not limited to' list without anchoring specific examples — overbroad lists are routinely struck down for failing the reasonableness test.

In plain language: Identifies specific circumstances in which otherwise prohibited conduct is permitted, such as activities conducted with prior written consent, pre-existing relationships, or conduct required by law.

Common mistake: Omitting a carve-out for legally mandated conduct — a party who is required by a regulator to take an action should not be in breach of contract for doing so.

In plain language: Grants the non-restricted party the right to monitor compliance, request records, and conduct audits to verify that prohibited activities are not occurring.

Common mistake: Granting unlimited, warrantless monitoring rights without reasonable notice requirements — in employee contexts, overly broad monitoring rights can violate privacy laws in multiple jurisdictions.

In plain language: Requires the restricted party to promptly disclose any actual or potential violation, conflict of interest, or circumstance that may give rise to a prohibited activity.

Common mistake: Setting the notification window too long — a 30-day notice period for a data misuse violation, for example, leaves the non-breaching party exposed to significant ongoing harm.

In plain language: Specifies the contractual consequences of a breach — including termination rights, liquidated damages, injunctive relief, and the non-restricted party's right to seek additional remedies at law or equity.

Common mistake: Setting liquidated damages at a level that a court would consider punitive rather than compensatory — if the amount is disproportionate to anticipated harm, the clause may be struck down in its entirety.

In plain language: Provides the breaching party with a defined period to remedy a non-material or inadvertent violation before the non-breaching party may exercise termination or damages remedies.

Common mistake: Granting cure rights for every type of violation, including intentional or fraudulent breaches — cure rights should be expressly excluded for willful misconduct or repeat violations.

In plain language: States that if any individual prohibited activities provision is held unenforceable, it will be modified to the minimum extent necessary to make it enforceable, and the remaining provisions remain in full effect.

Common mistake: Relying on a generic severability clause in the boilerplate rather than a specific blue-penciling provision within the prohibited activities section itself — courts treat the two differently.

In plain language: Identifies which jurisdiction's law governs the interpretation and enforcement of the prohibited activities provisions and the forum for resolving disputes.

Common mistake: Selecting a governing law that bars the specific restrictions included — for example, choosing California law for a broad non-compete or non-solicit clause that California courts will refuse to enforce.

A prohibited activities clause is a provision in a contract or standalone legal document that explicitly lists conduct the signing party is forbidden from engaging in — during the agreement, post-termination, or both. It defines the restricted conduct with precision, sets the geographic and temporal scope of the restriction, and specifies the consequences of a breach. Prohibited activities clauses appear in employment contracts, platform terms of service, franchise agreements, partnership agreements, and compliance policies.

A standalone prohibited activities document is appropriate when the restrictions are extensive enough to warrant their own agreement — for example, in platform or marketplace contexts where user conduct rules are lengthy and separate from the main service terms, or in compliance-heavy industries where regulators expect documented conduct standards. For most employment and partnership contexts, prohibited activities provisions are embedded within the main contract rather than issued as a separate document.

Yes, generally enforceable when properly drafted — but courts apply a reasonableness standard, particularly for post-employment restrictions and competitive activity prohibitions. A clause that is overly broad in scope, duration, or geography is more likely to be struck down than enforced. Precise definitions, proportionate scope, and a severability provision significantly improve the enforceability of prohibited activities clauses in most jurisdictions.

A non-compete is a specific type of prohibited activities restriction that prevents a party from working for or starting a competing business. A prohibited activities clause is broader — it can cover any type of restricted conduct, including data misuse, solicitation of customers or employees, unauthorized system access, regulatory violations, and competitive activity. Non-competes are one category of prohibited activities; prohibited activities documents typically contain several additional categories beyond competition.

Handbooks can document prohibited conduct policies, but they are generally not binding contracts unless explicitly stated and acknowledged in writing. For restrictions you need to enforce legally — particularly non-compete, non-solicit, IP assignment, and data use prohibitions — embed them in the signed employment contract. A handbook reference alone typically cannot support injunctive relief or liquidated damages claims.

The most common remedies are injunctive relief (a court order to stop the activity immediately), liquidated damages (a pre-agreed sum per violation), actual damages (documented financial losses caused by the breach), and contract termination. Injunctive relief is particularly valuable because it acts quickly without requiring proof of the full dollar value of harm — courts typically grant it where the breach is ongoing and monetary damages alone would be inadequate.

Only if the contract explicitly states they do. A scope clause should clearly specify which restrictions apply during the agreement only, which survive for a defined post-termination period, and which survive indefinitely (such as confidentiality obligations for trade secrets). Without explicit survival language, courts in many jurisdictions presume restrictions expire when the contract ends.

Specific enough that a reasonable person in the restricted party's position would know, without ambiguity, whether a particular act is prohibited or not. Generic categories like 'competitive activities' or 'misuse of systems' are insufficient. Each restriction should name the specific conduct, the specific systems or relationships covered, and the specific adverse outcome the restriction is designed to prevent. Courts enforce restrictions they can read clearly; they strike down restrictions they have to guess at.

For straightforward internal policies and platform terms, a high-quality template reviewed by counsel is usually sufficient. Engage a lawyer when the restrictions involve post-employment non-competes or non-solicits in multiple jurisdictions, when the restricted party is a senior executive or key technical contributor, when the document is intended to support injunctive relief proceedings, or when the relationship is in a heavily regulated industry. A 1–2 hour template review typically costs $300–$800 and is worthwhile when enforcement is a real possibility.