Final answer:
A noncompete clause or restrictive covenant is the part of a contract that prohibits one or more parties from engaging in certain actions that would typically be legal.
Step-by-step explanation:
The part of a contract stating one or more of the contracting parties must refrain from actions that would usually be legal is called a noncompete clause or a restrictive covenant. This clause restricts the parties from engaging in certain activities, such as competing with each other or sharing confidential information, during and after the contract's term.
For example, in an employment contract, the employer may include a noncompete clause to prevent the employee from working for a competitor for a specific period of time after leaving the company. This is done to protect the employer's business interests and trade secrets.
Noncompete clauses must be carefully drafted and are subject to legal scrutiny in many jurisdictions to ensure they are reasonable in scope and duration.