An agreement in restraint of trade is a term that refers to any agreement or contract that seeks to restrict a person`s ability to engage in a particular business or trade. In other words, it is an agreement that attempts to prevent someone from engaging in a competitive trade or business. This type of contract is generally deemed void, as it is seen as being against public policy and detrimental to free competition. However, there are some exceptions to this rule, which we shall discuss in this article.
The concept of `restraint of trade` is a legal principle that has been developed over many years. The underlying idea is that individuals should be able to compete freely in the market without being restricted by others. This is seen as being in the public interest, as it promotes healthy competition and helps to drive innovation and growth in the economy.
Despite this, there are some situations in which restraint of trade agreements may be legitimate. For example, if a company has confidential information that they are concerned could be used by a competitor, they may put in place a non-compete agreement to prevent former employees from using this information to compete against them.
Another example is where a company has invested significant amounts of money in training and developing an employee`s skills, they may require a non-compete agreement to prevent the employee from leaving and taking all their newly acquired skills to a competitor.
In both cases, the agreement would need to be reasonable, in terms of its duration and geographical scope, and there must be a legitimate business interest that is being protected. Where this is the case, the agreement may be deemed to be valid and enforceable.
It is important to note that courts are generally sceptical of restraint of trade agreements. It is up to the party seeking to enforce the agreement to prove that it is reasonable and necessary for their legitimate business interests. If the court finds that the agreement is too restrictive, or that it is not necessary for the protection of the party seeking to enforce it, then it may be deemed to be void.
In conclusion, an agreement in restraint of trade is generally considered void. However, there are exceptions to this rule, where the agreement is reasonable and necessary for the protection of a legitimate business interest. If you are considering putting in place a restraint of trade agreement, it is important to seek legal advice to ensure that it is both valid and enforceable.