Restraint of trade – from a business perspective

Despite the common belief that restraint of trade agreements are not legally enforceable, the position in South African Law is that the sanctity of a valid contract overrides the right and freedom to trade [1984 – the Appellate Division in the Magna Alloys case].  And on that basis, restraints of trade are deemed valid and enforceable, unless they are contrary to public policy, in which case they will not be enforced.

Restraints of trade are therefore deemed enforceable unless the former employee, franchisee or business partner who alleges that the contract is against public policy, is able to prove so. The courts will therefore interfere with restraints of trade only where the restraint is unreasonable in relation to the employee’s freedom to trade.

For that reason, the best form of protection of a business’s interests from exploitation by a former employee, franchisee or business owner is a restraint of trade agreement.  It is therefore necessary for businesses to periodically assess which employees are privy to customer connections and or confidential information and most importantly, to seek legal advice and engage a specialised attorney to draw up a well-considered, well-constructed and precise restraint of trade agreement.

In the April 2017 issue of the BAN Bulletin, Monique Sharland discusses restraints of trade and non-solicitation agreements from a business perspective and when businesses should consider protecting their interests through restraint agreements.

Next time, Business Accounting Network’s alliance partners, Robyn Hey Attorneys Inc. will discuss restraint of trade agreements from a legal perspective.

Visit our April newsletter here Restraint of Trade – from a Business Perspective to read the full article.