Restraint of trade

restraint of trade: a restriction on a party’s right to carry on business, commonly found in contracts of employment, consultancy agreements, share purchase agreements or sale of business agreements; the restrictions are designed to protect a party’s business interests, such as customer contacts or confidential information; the starting position is that a restraint of trade is unenforceable on grounds of public policy – the party seeking to enforce the restraint of trade clause can rebut this presumption by showing that the restraint of trade clause goes no further than reasonably necessary in order to protect that party’s legitimate business interests; proving this will often be easier where the restraint of trade clause is contained in a commercial agreement, such as a share purchase agreement, as opposed to a contract of employment.