Restraint of Trade
A contract in restraint of trade is one whereby the rights or liberty of one or both of the parties to carry on a business, trade, or profession as that party or parties may wish is restricted. For example, the owner of a hair salon may wish to limit competition from a hairdressing employee by requiring that employee to enter into a restraint of trade. Such a restraint of trade might (for example) prohibit the employee from starting a business on their own account within 5km of the former employer, for a period of 12 months. The general principle is that all contractual provisions in restraint of trade are prima facie void, and therefore unenforceable. However, where the party seeking to enforce the restrictive provision establishes that the restriction is reasonable it may be enforced. The restraint must be shown to be reasonable both as between the parties to the contract and also in the light of the public interests concerned, a matter which is independent of the parties' own agreement.
The Courts have powers under the Illegal Contracts Act 1970 to grant relief in cases where a contract imposes an unreasonable restraint of trade.
Whether you are an employer or an employee, a franchise operator of franchisee, have your proposed restraint of trade clause examined by experienced Rennie Cox lawyers.