Indefinite Non-Competition Clauses: Risks and the STJ’s Position

Can a non-compete clause with no time limit continue to be enforceable even if it is invalid? This article analyzes the recent position of the STJ and the risks arising from this interpretation.

Non-compete clauses play a significant role in the structuring of business transactions. Whether in business acquisitions, corporate reorganizations, partnership agreements, or various commercial contracts, such provisions are commonly used to protect investments, retain customers, and safeguard the strategic knowledge accumulated through business operations.

Although the Federal Constitution guarantees free enterprise and free competition as fundamental principles of the economic order (Art. 170, caput and subparagraph IV), the Brazilian legal system allows for these prerogatives to be mitigated in certain private relationships. The Civil Code itself, in Article 1,147, establishes that, unless otherwise provided, the transferor of a business establishment may not compete with the transferee for a period of five years following the transfer of the business.

The rationale behind this restriction is to prevent the transferor of a business from immediately using their experience, reputation, and business relationships to compete for the same clientele, thereby diminishing the economic value of the transferred asset. It is, therefore, a legitimate mechanism for protection against situations that could potentially constitute unfair competition.

The controversy arises when the restriction exceeds reasonable limits and begins to prevent, for an indefinite period, one of the parties from engaging in economic activity. To what extent does private autonomy permit the imposition of non-compete clauses without a time limit, and what are the legal consequences of the absence of such a limitation?

These issues were recently addressed by the 3rd Panel of the Superior Court of Justice (STJ) in its ruling on REsp 2.185.015/SC, with Justice Nancy Andrighi serving as the reporting judge.1

The controversy arose following the dissolution of a business partnership between two businesswomen operating in the children’s clothing sector. Upon dissolving the partnership, the parties entered into an agreement intended to regulate their respective areas of market activity, at which time they agreed to a non-competition clause without any time limit. In light of the alleged breach of this obligation, the matter reached the STJ, which was called upon to determine not only the validity of the clause but also the legal consequences arising from its potential invalidity.

In analyzing the dispute, the 3rd Panel reaffirmed the position already established in the Court’s case law that non-compete clauses are compatible with the Brazilian legal system provided they comply with proportionality criteria, particularly regarding the temporal and territorial scope of the restriction. According to the ruling, the absence of any time limit leads to an excessive restriction on the right to engage in economic activity, transforming a legitimate restriction intended to protect business interests into a genuine permanent impediment to free enterprise.2

This conclusion is not new. In a previous ruling, the 3rd Panel itself had already recognized that “contractual non-competition clauses are valid, provided they are limited in scope and duration, as they are appropriate for protecting competition and guarding against the harmful effects arising from potential customer poaching.” 3

From this perspective, the absence of a time limit compromises the proportionality of the obligation assumed and renders the restriction incompatible with the validity criteria required by the legal system. The ruling’s main contribution, however, lies not so much in reaffirming this understanding as in defining the legal nature of the invalidity resulting from the absence of a time limit.

In addressing this issue, the 3rd Panel concluded that the legal consequence is not the absolute nullity of the clause, but rather its voidability.

This distinction has significance that goes beyond mere doctrinal classification. While absolute nullity is associated with the protection of public policy and may be recognized ex officio by the judge, voidability is intended to protect predominantly private interests and depends on the initiative of the interested party to be adjudicated in court.

According to the reasoning adopted by Justice Nancy Andrighi, although there is a social interest in preserving free competition and free enterprise, a restriction on competition without a time limit does not constitute a sufficiently serious affront to public order to justify the application of the legal regime governing absolute nullity.

Based on this premise, the Court concluded that the absence of a time limit does not automatically remove the clause from the legal realm nor does it authorize its dismissal regardless of whether the interested party raises the issue.

The solution adopted has significant consequences from both a substantive and procedural perspective. The first of these is that the invalidity of the clause cannot be recognized ex officio. If the party subject to the restriction does not expressly allege that the contractual provision is voidable, the judge may not set it aside on his or her own initiative.

Furthermore, classifying the situation under the regime of voidability triggers the application of the mechanisms for confirmation and stabilization of legal transactions provided for by the Civil Code, in line with the contemporary trend toward valuing private autonomy and preserving business relationships.

It is precisely in this context that one of the most significant issues arising from the ruling emerges. By recognizing the voidability of the clause, the decision also triggers the application of the statutes of limitations set forth in Articles 178 and 179 of the Civil Code. Consequently, the possibility of challenging the validity of the restriction in court now depends on the timely exercise of the right to bring an action by the interested party.

From the perspective of legal certainty, this solution is justified by the need for stability in contractual relationships and the protection of the legitimate expectations that the contracting parties have placed in the transaction entered into. However, the choice to allow for annulment has consequences that warrant careful consideration.

This is because the conclusion reached by the Court allows a clause deemed incompatible with the proportionality requirements of the legal system itself to continue to produce effects if the potentially aggrieved party remains inactive during the statutory period for seeking its annulment.

The practical consequence is significant. The restriction may become established not because of its substantive compatibility with the values protected by the legal system, but because the right to challenge it has lapsed. In other words, the burden of identifying the defect, seeking appropriate legal guidance, and taking the necessary measures within the statutory period is entirely transferred to the aggrieved party.

The approach adopted by the STJ also merits attention from the perspective of the party benefiting from the clause. Although it upholds private autonomy and the preservation of legal transactions, the decision highlights the risks inherent in drafting overly broad restrictions. The greater the degree of disproportionality of the imposed limitation, the greater the likelihood of future judicial challenge and, consequently, of compromising the intended contractual protection.

Drafting non-compete clauses therefore requires a delicate balance. Seeking broader protection does not always translate into greater legal certainty. In many cases, attempting to excessively expand the scope of the restriction may actually undermine its effectiveness.

The ruling in REsp 2.185.015/SC reinforces the understanding that the validity of non-compete clauses depends on compliance with minimum criteria of proportionality, especially regarding the temporal and territorial scope of the obligation. More relevant, however, is the reflection prompted by the Third Panel’s decision to classify the absence of these requirements as grounds for annulment rather than absolute nullity—a solution that highlights the growing emphasis on private autonomy and the preservation of legal transactions in contemporary Brazilian law.

The protection of clientele, know-how, and business investments continues to legitimize restrictions on competition. However, the effectiveness of these limitations depends on their compatibility with the standards of reasonableness required by the legal system. Drafting balanced clauses is not only a requirement for contractual validity but also an essential element for ensuring that the intended protection is effectively preserved in the event of a legal dispute.

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1. (STJ, Special Appeal No. 2.185.015/SC, Reporting Justice Nancy Andrighi, Third Panel, decided on August 5, 2025, published in the DJEN on August 15, 2025.)

2. As noted by the reporting judge, “the absence of a time frame or the setting of an unreasonable deadline would ultimately unduly restrict the other party’s right to freely engage in economic activity.” (STJ, REsp No. 2.185.015/SC, Reporting Justice Nancy Andrighi, Third Panel, decided on August 5, 2025, DJEN of August 15, 2025.)

3. (STJ, REsp No. 1.203.109/MG, Reporting Justice Marco Aurélio Bellizze, Third Panel, decided on May 5, 2015, DJe of May 11, 2015.)

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The article was published on Migalhas and can be accessed via the link: Cláusulas de não concorrência sem prazo: Riscos e posição do STJ | Migalhas