Is restraint of trade clause valid? Is a restraint in a sale of business contract enforceable? Can a restraint of trade clause affect my ability to work? Under the common law doctrine of restraint of trade clauses, such clauses are presumed to be void and unenforceable as contrary to public policy.
This presumption may be rebutted however if the employer can demonstrate the existence of special circumstances which establish that the restraint clause is reasonable and is not unreasonable in the public interest. It is only where special circumstances justifying the restraints can be proven by the employer that restraint of trade provisions will be enforceable. In order for such special circumstances to arise, the employer must be able to show that the restraint of trade clause goes no further than is reasonably necessary to protect a legitimate.
This is assessed on a case by case basis. Accordingly the restraint of trade agreement was found to be valid and enforceable. If these criteria are not met , then a restraint of trade clause will be void and unenforceable. In general, restraint of trade clauses are void as they are against public policy.
However, a restraint clause is enforceable if an employer can demonstrate that the restraint is no more than is necessary to protect a “legitimate business interest”. I often hear employers and employees say restraint of trade clauses are not enforceable and that we don’t need to bother with them. That’s not exactly true. There is a common misconception amongst many members of the public, and indeed the legal profession, that agreements in restraint of trade are invalid and unenforceable. As a matter of fact, and law, nothing could be further from the truth.
Covenants in restraint of trade are valid. Like all other contractual stipulations however they are unenforceable when, to the extent that, the enforcement would be contrary to public policy. It is against public policy to enforce a covenant which is unreasonable, one which unreasonably restricts the covenanter’s freedom to trade or to work. Accordingly, restraint of trade clauses are generally considered to be unenforceable in a legal context.
Whether the restraint of trade is unreasonable will be determined with reference to whether, at the time the contract was entered into, the employer had a legitimate interest to protect and whether the restraint of trade clause affords no. This means that even though you may have voluntarily accepted post-employment restrictions in your contract, the starting position is that these will be void and have no effect. If the restraint extends for a long period of time it is likely that the restraint will be enforceable. RADIUS – restraint clauses often cover a specific radius specifically in relation to non-compete clauses.
You need to ensure that the radius only extends to areas that are reasonable. However, what once was a stringent clause to be abided by the employers when the employment relationship terminated for whatsoever reason has now been raised by many employers and employees during the nationwide lockdown due to the Covid-pandemic. The restraint of trade is a clause in the employment contract to protect the employer against infringement of its proprietary interest, such as trade secrets, customer contacts, trade expertise, and pricing regimes.
A restraint of trade clause in an employment contract which is an outright claim for protection from competition without anything to justify such a claim will be unenforceable. Restraint of trade – is it enforceable ? However, a restraint of trade clause that does no more than protect the employer’s legitimate interests and which is reasonable will be enforced. If the court finds that the restraint goes beyond providing your business with adequate protection, it will not enforce the clause. Enforcing your restraint of trade clause may be harder than you think.
Such restraint clauses can be enforce but only to the extent that is ‘reasonably necessary’ to protect the legitimate interests of the business. Whether a provision is enforceable will therefore depend on the wording of the clause and the context of each case. Although employee restraints can be difficult to enforce and the Courts have expressed the view that such restraints are inherently voi they can be upheld if the inclusion of the restraint is reasonable, and it is designed to protect the legitimate business interests of the employer. ACTIVITIES – Post employment restraints will seek to.
To be enforceable , a restraint must protect legitimate interests such as goodwill, trade secrets or confidential information. Assessing reasonableness and the enforceability of restraint of trade clauses is not easy and has rarely been successful in the medical sector. In the GP context, showing special circumstances is difficult for the GP clinic because the only services they provide are to the doctor, those services are not special, unique or confidential. Under South African law, a restraint of trade is valid and enforceable , except when its enforcement would be contrary to public policy, in which case such a restraint of trade will not be uphel either fully or in part. Another question relates to how a restraint of trade clause is enforced?
The success of HRX was due to a number of factors namely, the well drafted restraint of trade covenant, the monetary compensation and shares provided for and the fact that the employee had had his own legal and accounting advice on the relevant restraint clause before entering into it.