Restraint of trade
Contract Law

In the UK, restraints of trade are restrictions on free trade or limitations on the individual liberty of traders to buy or sell freely. They are usually contractual clauses (strictly speaking, a contract is not requried) that are go too far in attempting to limit competition: restraints of trade are a fetter on freedom of contract - it is the policy of the law that traders are free to select with whom they contract and anything that impedes that free selection is void on public policy grounds unless it is reasonable and in the pubic interest.

No trader has an abstract right to be free of competition in their business.

In practice, restraints of trade are contractual provisions usually in the form of restrictive covenants that go too far in protecting the interests of one of the parties.  For instance where a business is purchased, the purchaser will sensibly wish to prevent the vendor entering the same type business for a period of time within a certain geographical area. The restraint in all the circumstances is required to be reasonable. To take a simplistic example, for a business with a single geographical presence, a restrictive covenant preventing the vendor operating a similar business within 3 miles for 6 months commencing on the date of the purchase is probably reasonable. A restrictive covenant purporting to prevent that same vendor from trading within 5 miles for 10 years in any business is more than likely void on the basis that it is a restraint of trade.

Restraints of trade seek to protect the goodwill, trade secrets of a business and/or competitors poaching staff by former employees. Where restrictive covenants are unnecessary or merely capable of enforcement in an oppressive manner (actual oppression need not be proved), they must be proved to be reasonable before a court will enforce them.

The restraint must go no further than protecting the legitimate interests of the business seeking to rely on the covenant.