Restraint Of Trade

Restraint Of Trade

Restraint of Trade, restriction of competition by contracts between sellers and buyers of businesses, between employers and employees or between two or more businesses. For example, the seller of a business may agree not to set up a competing firm within a stated period. The Elizabethan view that all contracts in restraint of trade were void as tending to create monopolies has been modified. Such contracts are now prima fade void, but not if they are 'reasonable' in the interests both of the contracting parties and the public. The attitude of the court differs towards agreements between seller and buyer who are likely to be on equal terms and agreements between employers and employees. In the latter it has been considered that 'no more perishable commodity is brought to market than a man's labour', and restraints which would narrow the choice of new employment have been regarded as void if they did not protect the employer's trade connection and/or secrets. Judges have insisted that there must be a proprietory interest to be protected: a covenant not to compete is not enforceable, including an agreement between employers not to compete for labour.

In Britain many agreements between businesses for regulating their trade, even if not contractual in the strictly legal sense, are now within the ambit of the Restrictive Trade Practices Act, 2013, or are subject to possible scrutiny by the Monopolies Commission.

Economic - Economic Activities


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