What is a contract in restraint of trade?

A restraint of trade clause is a contractual restriction imposed upon a business or an individual for a finite period of time. A restraint of trade clause in a Share Purchase Agreement may, for example, limit the activities of the seller to act in competition with the business sold after completion.

What is agreement in restraint of trade are there any exceptions to this?

Exception 1 : Saving of agreement not to carry on business of which good will is sold – One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on …

Is an agreement in restraint of trade and marriage valid?

Section 26 of the Indian Contract Act of 1872 states that every agreement in restraint of marriage, except those in restraint of marriage of minors, is void.

How long does a restraint of trade last?

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.

Is restraint of trade illegal?

At the most basic level, “restraint of trade” is any activity that prevents another party from conducting business as they normally would without such a restraint. For instance, two businesses agreeing to fix prices in order to put another competitor out of business is an illegal restraint of trade.

Is an agreement in restraint of trade void?

Agreements in restraint of trade are void under section 27 of the Indian Contract Act, 1872, which is given as under: “Agreement in restraint of trade, void- Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind to that extent void.”

What are the types of void agreement?

Expressly Void Agreements

1] Agreement in Restraint of Marriage. Any agreement that restrains the marriage of a major (adult) is a void agreement.
2] Agreement in Restraint of Trade.
3] Agreement in Restraint of Legal Proceedings.
4] An Agreement Whose Meaning is Uncertain.
5] Wagering Agreement.

Is a restraint of trade legal?

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.

Which is an example of a restraint of trade agreement?

A restraint of trade is an agreement between an employer and an employee, or a provision in an employment contract that restricts an employee from being employed by a competitor of the employer, or establishing a business in competition with the employer following termination of employment.

Is the agreement in restraint of trade void?

Agreement in restraint of trade is void under Section 27 of the Indian Contract Act. It is an understanding that suspends one individual from the beginning or proceeding with his exchange or calling, as an end-result of some thought is void.

Is the restraint of trade agreement enforceable in South Africa?

The second point to consider is that case law in South Africa shows that restraint of trade agreements are legally enforceable, despite the common belief that they are not. Employees should not assume that a restraint agreement is a bluff by an employer.

Can a employer enforce a restraint of trade clause?

An employer can only enforce a restraint of trade clause to the extent that it is reasonably necessary to protect their business interests. However, whether a clause is reasonably necessary will depend on the particular facts of the case.