Is my restraint of trade clause enforceable?
It's common for contracts to contain a 'Restraint of Trade' Clause. There are many different kinds of Restraint of Trade clauses. For example, there are non-compete clauses for employees, business partners and non-disclosure clauses preventing the distribution of certain information. Employment contracts and consultancy agreements often contain Restraint of Trade Clauses. A question I am often asked is: "Would a Restraint of Trade clause be enforceable if it was breached?" The answer isn't a simple yes or no. This week on YOU LEGAL TV, we consider some of the factors a Court might take into account when deciding whether to up-hold the clause. You can also learn more about Restraint of Trade Clauses in our blog post on Restraint of Trade Clauses in Commercial Agreements. If there is a topic you would like to feature on an episode of You Legal TV, I would love to hear from you!
See below for complete transcript of this episode -
Hi. Welcome to You Legal TV.
My name is Sarah Bartholomeusz and at You Legal, we help leaders in growing companies make bold decisions in their businesses. Have you ever wondered whether a restraint of trade clause in a contract you've signed would be enforceable by a court?
It's a commonly asked question because restraint clauses show up in all sorts of contracts, from confidentiality agreements to joint venture agreements, employment contracts, consultancy arrangements, just to name a few. The answer, with so many things legal, is it depends. What it depends on is three things.
Firstly, who your counterparty is. The court will be interested in who's got more power and how that has been exerted in the circumstances.
The second thing that the court will look at is the length of time that the restraint is for.
In some cases, a restraint for a year might be appropriate. In some cases, three months might be appropriate. So, the court will look at that.
Finally, the court will also look at the territory in which the restraint is for. In some cases, a restraint that covers the whole of Australia might be appropriate.
In other cases, only 25 kilometers from the GPO of your city might be an appropriate restriction.
If you have any specific questions on this, feel free to get in touch. You're welcome to do that anytime. We look forward to seeing you on our next episode of You Legal TV.
What Should I Do Next?
Contact us if you would like further legal advice about Contracts. Our lawyers at You Legal will be happy to assist you in whatever way we can.
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* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.