Thelma Chagaresango & Mureriwa Isiah on Restraint of Trade Clauses.

Topics: Contract, Employment, Sentence Pages: 4 (1229 words) Published: August 17, 2011

Chagaresango Thelma and Mureriwa Isiah
The Concept of Restraint of Trade.
A clause in restraint of trade is one which prevents an employee from exercising his or her trade, profession or calling, or engaging in the same business venture as the employer, for a specific period of time and within a specific area after leaving employment. Restraint of trade clauses are often contained in either the contract of employment itself or stand as a separate and distinct contract between the employer and employee. It is an unquestionable fact that employers often use the mechanism of restraint of trade clauses in order to protect their businesses from competition by the ex-employees and often employees enter into such contracts without questioning them. For this reason restraint of trade clause need be approached with great caution. Basson et al writes that in most cases the employee will be in the weaker bargaining position and will not really be able to negotiate the terms of the contract:- the employee will just have to accept the restraint of trade clause, whose terms may be grossly unreasonable, harsh and unfair. In Super Safes (Pty) Ltd & Others v Voulgarides & Others Nicholas J said;

“A bare covenant not to compete cannot be upheld. A restraint against competition must, if it is to be valid, serve some interest of the person in whose favour it is inserted”. In Magna Alloys & Research (SA) Pty Ltd v Ellis the Appellate Division (as it then was) identified two interests or considerations whose balancing is crucial in the determination of the validity or otherwise of restraint of trade clauses. It was stated as follows;

“The first is that the public interest requires, in general, that parties should comply with their contractual obligations even if these are unreasonable or unfair. The second consideration is that all persons should, in the interest of society be permitted...
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