What Is The Purpose Of A Restraint Of Trade Agreement

In other cases, the question was raised as to whether the deduction was necessary and incidentally necessary to obtain something unworthy of recognition, given the resulting damages. In a recently dismissed case, a court rejected an attempt to justify a restriction on competition imposed by a credit card issuer, which is reasonably necessary to promote «loyalty» and «cohesion. [17] As necessary and necessary for what remains such controversial questions about the teaching of Mitchel v. Reynolds. It is important to note that there are many types of restrictions on trade clauses. The type of clause you choose depends on the type of agreement you design. A sales and sales contract would include, for example. B, restrictions for sellers to ask existing customers or suppliers to recruit existing staff or compete with the company for a certain period of time. A typical franchise agreement would include restrictions for the franchisee, which would apply for the duration of the contract and, as a general rule, for a limited period thereafter. As a general rule, it is not a question of recruiting customers or employees, not competing with the franchise business and not representing yourself in any way with the franchisor. Non-solicitation and non-competition clauses are the most common types of trade restrictions.

Given South Africa`s difficult economic situation and the extremely high unemployment rate, potential workers are willing to sign almost anything to preserve employment, and many employment contracts contain a limitation of the trade clause that was agreed without a second thought. If a staff member has access to confidential information and has the opportunity to disclose it, the first two requirements are met. Whether there is an alternative remedy takes into account the relevance of limiting the trade agreement and balancing competing interests. With regard to the meaning of the term «trade» in the second sub-question, it should be noted that trade must be understood as a whole, so that it is not limited to a specific skilled occupation, but applies to employment in general. Individuals should be able to use their skills without inappropriate restrictions and companies should be free to compete with other companies. However, the limitation of trade clauses is not unusual in trade agreements. This blog discusses the general principles of trade restriction and examines the different types of restrictions on trade clauses that you may encounter in your business transactions. Courts find it inappropriate to restrict trade agreements in cases where their application is too vague or too broad. In Hi-Tech Recruitment (Pty) Limited, among others against Nel and Another, the Tribunal stated that «the restriction will be inappropriate if the duration and extent of the area to be imposed are outside the agreement itself and/or if the restriction is broader than necessary.» A trade restriction clause is valid and applicable in our law, unless it imposes, among other things, an inappropriate restriction of a person`s commercial freedom, in which case it is found to be contrary to public order and therefore illegal and unenforceable. This is what Rabie CJ said in the pioneering decision of Magna Alloys and Research (SA) (Pty) Ltd/Ellis.

Rabie CJ stated that the principle of our law is that agreements contrary to the public interest cannot be applied, and it could therefore be said that an agreement restricting a person`s commercial freedom is contrary to the public interest and is therefore not applicable if the circumstances of the case in question are such that the Court considers that the application of the agreement would be detrimental to the public interest. He also stated that a disproportionate restriction of a person`s commercial freedom could most likely be detrimental to the public interest if the person concerned were limited.