Restraint of Trade in Commercial Contracts

Ellesmere Community Arts

Restraint of Trade in Commercial Contracts

Restraint of Trade in Commercial Contracts: What it Means for Your Business

When it comes to commercial contracts, restraint of trade clauses are often included to protect businesses from competitors. However, it’s important to understand what these clauses entail and how they can affect your ability to do business.

Restraint of trade clauses are typically found in contracts that involve employment, partnerships, or the sale of a business. These clauses restrict one party from engaging in certain activities that could harm the other party’s business interests. For example, a non-compete clause could prevent an employee from working for a competitor for a certain period of time after leaving their current employer.

While restraint of trade clauses can provide important protections for businesses, they can also be used in ways that unfairly limit competition. This is especially true if the clause is overly broad or restrictive. For example, a non-compete clause that prevents an employee from working in their industry for several years could severely limit their ability to earn a living.

In order to ensure that restraint of trade clauses are fair and reasonable, they must be carefully drafted and enforced. Courts will typically scrutinize these clauses to ensure that they are not overly broad and that they do not unreasonably restrict competition. This means that businesses need to be diligent in drafting contracts and seeking legal advice when including restraint of trade clauses.

In addition, businesses need to be mindful of laws and regulations related to restraint of trade. In some cases, these clauses may be deemed unenforceable if they violate antitrust laws or unfair competition laws. This can have serious legal and financial consequences for businesses that include these clauses in their contracts without understanding the legal ramifications.

Overall, restraint of trade clauses can be a valuable tool for protecting businesses from competition. However, they must be carefully drafted and enforced in order to avoid legal issues and ensure that they do not unfairly limit competition. By seeking legal advice and being mindful of relevant laws and regulations, businesses can ensure that their commercial contracts provide the necessary protections without hindering their ability to conduct business.