Table of Contents
What is the essence of the restraints of trade doctrine?
Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law.
How does restraint trade work?
The purpose of a restraint of trade clause, most typically, is to prevent and/or oblige employees to refrain from competing with their previous employer for the business and/or commerce of such an employer.
What is an example of restraint of trade?
For instance, two businesses agreeing to fix prices in order to put another competitor out of business is an illegal restraint of trade. Other examples include creating a monopoly, coercing another party to stop competing with your business, or unlawfully interfering with a business deal (see Tortious Interference).
What is the restraint of trade means?
A restraint of trade clause, typically found in an employment contract, provides that the employee, after termination of employment, be restrained from performing similar work or accepting future employment in competition with his current employer, usually for a certain period of time after his termination of …
What is unreasonable restraint of trade?
Unreasonable restraint of trade means such business activities by which any business operator, by contract, agreement or any other means irrespective of its name, in concert with other business operators, mutually restricts or conducts its business activities in such a manner as to fix, maintain or increase prices, or …
What is a reasonable restraint of trade?
To be enforceable, a restraint of trade clause must be reasonable. This means that an employer must be able to prove that they have a legitimate interest in imposing a restraint, and that the restraint is no wider than reasonably necessary.
Does restraint of trade hold up in court?
Enforceability of a restraint of trade clause A restraint of trade clause is valid and enforceable in our law, unless, inter alia, they impose an unreasonable restriction on a person’s freedom to trade, in which case they will be held to be against public policy and therefore illegal and unenforceable.
Can I sue for restraint of trade?
However, the common law accepts that a restraint of trade clause is legally enforceable if it was prepared because of a legitimate interest that your employer (or former employer) wants to protect, and provided the clause is reasonable both in terms of the period for which it applies and its geographical scope.
Can you sue for restraint of trade?
This means that any legal dispute arising from a restraint of trade agreement between an employer and employee cannot be referred to the CCMA to be adjudicated on. The reasonableness of a restraint of trade can only be determined on a case-by-case basis.
Is restraint of trade illegal?
Overall, restraint of trade is any activity that prevents someone from doing normal business without restraints. The Sherman Antitrust Act specifically includes a section on restraint of trade and declares it illegal.
How long is a restraint of trade?
For example, a restraint which is for two years and covers the whole of the country could be unreasonable – but one which is for six months and covers the province in which the employer’s business mainly operates could be reasonable. The same principle applies to the scope of activities which the restraint covers.
How long can a restraint of trade be enforced?
Why was the restraint of trade clause not reasonable?
The clause in the employment contract sought to prevent the employee from commencing work for two years. The Court decided that the restraints were not reasonable because the: restraint sought to prevent the employee from working at other businesses who were not in competition with Just Group Ltd; and
When is a covenant in restraint of trade enforceable?
A covenant in restraint of trade is, prima facie, unenforceable at common law and is enforceable only if it is reasonable having regard to the interests of the parties concerned and the public.
Is the restraint of trade necessary and ancillary?
A related issue is whether, even if a restraint is necessary and ancillary, available means exist to accomplish the desired result which are less harmful.
Which is the starting point of competition law?
The American Sherman Act 1890 is taken as the starting point of modern competition (or in America, ‘antitrust’) law but the roots of competition law lie much deeper.