Restraint of trade victoria

What is a restraint of trade? Is restraint of trade clause enforceable? Can a vendor challenge a restraint period?

Restraints of trade in Victoria are any clause in a contract – typically an employment or business sale contract – which restricts one of the contracting parties from engaging in certain kinds of competition. A restraint clause in an employment agreement typically applies when an employee leaves the business. You can enforce a restraint clause to the extent that it is ‘reasonably necessary’ to protect your legitimate business interests.

It offers tips for drafting restraint of trade clauses in Victoria to avoid legal traps. When it comes to restraint clauses , a Victorian practitioner could be forgiven for believing that the modern and sensible interpretation of commercial contracts has been overridden by the burden of proof on the employer. Where all parties intended to create a valid lawful restraint agreement , it is lamentable that due to poor draftsmanship the ex-employer loses all protection, possibly to the point of ruin. Cascading provisions will cover a variety of restraint periods (for example, months, months or months) and geographic regions (Australia, Victoria or Melbourne). Standard contracts in New South Wales (NSW), Queensland (QLD) and Victoria (VIC) include a general restraint of trade clause that will apply to a range of circumstances.

The restraint clause prevents the vendor, for a specified period or geographic area, working for another business similar to the one they are selling. This is particularly true in jurisdictions, such as the ACT and Victoria , where the common law restraint of trade doctrine has remained largely unaltered by statute. Generally speaking, restraint of trade clauses will be enforceable to the extent that the restraint is ‘reasonably necessary’ to protect the legitimate business interests of the employer. Whether a clause is reasonably necessary will turn on the specific clause and the facts of the case.

In particular, a court will consider the time period and geographic area of the restraint of trade. Restraint of trade clauses that go beyond what is reasonably necessary to protect the interests of the employer will be unenforceable. The restraint should be no longer and cover no more area than necessary to protect the employer’s interest. These clauses are intended to protect the employer’s legitimate business interests.

A recent interlocutory injunction in the Supreme Court of Victoria restraining a general practitioner from engaging in a rival medical practice within the area of restraint , provides a useful summary of this often difficult area of the law and is a reminder of the significant implications to employees and independent contractors who sign contracts which include a restraint clause. The Supreme Court of Victoria again recently considered the issue of whether a post-employment contractual restraint of trade is enforceable. It was held that such restraint of trade provisions will only be justified if they are reasonably necessary to protect an employer’s legitimate business interests. The recent decision of the Supreme Court of Victoria in Freedom Finance Accounting Pty Ltd v Goldstein VSC 1demonstrates the importance of drafting clear and concise restraint of trade clauses in commercial agreements. It might also refer to a restriction on the Franchisee having another business during the term of the franchise agreement.

If a restraint of trade clause in your employment contract is uphel the court may: Impose an injunction to stop a breach or continuing breach of the clause by the former employee. A restraint of trade clause refers to a clause that restricts the liberty of the Franchisee to conduct a similar business once the franchise agreement comes to an end. Make an order for compensation to the former employer. Restraint of trade establishes a general rule that restraint - of - trade -clauses are void except when they protect a legitimate interest and are reasonable in scope. How Restraint of Trade Works Any activity that tends to limit trade , sales, or transportation in interstate commerce is considered restraint of trade.

Australian employers often use restraint of trade clauses to protect their business interests after an employee leaves their company. The restraint of trade was enforced years later as the expert ended up working at a company in the same industry. This blog explores the enforceability of employment restraint of trade clauses post-employment in Victoria. A condition of the sale of business was that Deady agreed not to leave the plaintiff’s practice and setup a competing practice (a restraint of trade clause). In the recent decision of Hunter v Koulouris1the New South Wales Supreme Court was required to consider whether a restraint of trade clause in a business dissolution deed was reasonable, when determining a breach of contract claim.

This is an issue that has given rise to a series of cases and insurance notifications in recent years. In a recent case, Crowe Horwath (Aust) Pty Ltd v Loone, the Victorian Court of Appeal upheld the decision that a restraint of trade clause is unenforceable when the employer repudiates the contract and the employee accepts this repudiation.