Are restraint of trade clauses enforceable

What is a restraint of trade clause? Is a restraint in a sale of business contract enforceable? Can an employer add a restraint of trade clause? If these criteria are not met, then a restraint of trade clause will be void and unenforceable.

Strictly speaking, restraint of trade clauses are not fully enforceable. Under the common law doctrine of restraint of trade clauses , such clauses are presumed to be void and unenforceable as contrary to public policy. The clauses should not be too restrictive but are enforceable if reasonable. The employer has to show that a restraint clause is reasonable.

In particular, the clause must protect a proprietary interest of the employer, such as the company’s customer database. Non-compete clauses (otherwise known as restraint of trade clauses) are unlawful in the UK save in circumstances where they are the minimum protection necessary to the interest of the business and are in themselves not struck down as being. The majority of that sort of clause in contracts are unenforceable.

However, you would need to get a solictor to look it over properly. Further info for those of you who think they are automatically enforceable. The common law presumption is that a restraint of trade is void and unenforceable if its sole purpose was to protect against competition because competition is generally encouraged at common law.

There are instances in which restraint of trade agreements are unenforceable. This is usually where it is proven that the contract was not understood by the employee or the application of the restraint of trade agreement is too broad. 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. Law When considering if a restraint on trade clause will be enforceable , it is for the employer to establish that the restriction is reasonably necessary in the protection of their business.

The longstanding Court of Appeal case law provided that an unreasonable clause would be held to be unenforceable in its entirety. The starting point is that restraints of trade are unenforceable. In this way, the law errs on the side of ensuring every person is free to make a living in their chosen field of work. This is a key reason for the perception that restraints of trade are unlikely to be enforced. 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. For instance, the buyer may wish to prevent the seller entering the same type of business in the same geographical location for a certain period of time. Restraint of trade. Where a restraint of trade clause is found to be unreasonable, it will be void and unenforceable. A court is unlikely to enforce a restraint of trade clause if the restrictions are inappropriate for the role, excessively long or entirely ambiguous.

If the entire restraint of trade clause goes further than what is reasonably necessary to protect the employer’s legitimate business interests, the clause will be unenforceable. If you believe an employee is in breach of their restraint of trade clause , or you have been accused of breaching a restraint of trade clause by a former employer, please contact a member of our employment law team. 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.

The enforceability of restraint of trade clauses in employment contracts has always been a hot topic of debate in law. However, what once was a stringent clause to be abided by the Employee 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. 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”. 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.

However, a restraint of trade clause that does no more than protect the employer’s legitimate interests and which is reasonable will be enforced.