restraint of trade

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 required) that go too far 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.

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.

Usage: The employment contract purported to prevent the former employee using their acquired skill and knowledge in their future employment and was accordingly unenforceable as a restraint of trade.

Related Words: covenant; restrictive covenant; competition law; freedom of contract.