Restraint of trade in commercial contracts – towards a systemic understanding

Part 1

The restraint of trade doctrine has a long history with the judiciary resting somewhat uneasily between protecting the public’s right to free trade, verses an employer’s right to protect Legitimate Business Interests[1] (LBI).  Restraint of trade cases present an unusual mix of employment law and intellectual property issues for the courts to adjudicate.

The general rule unfortunately is that a restraint of trade clause in an employment contract is contrary to public policy and prima facie void unless it can be justified by the special circumstances of the particular case.[2]

Because of the evolution of the case law on this issue and the different commercial contracts in which a restraint of trade clause can be used, the circumstances where a restraint of trade clause is enforceable vary widely.  Compounding the issue is the apparent widespread misunderstanding about the enforceability and subsequent lack of a consistent nomenclature for describing the elements of such clauses.

The aim of this article it is address these issues in our first “multipart article”. [Read more…]

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