Dictionary

  • Restraint of trade

    The restriction of business competition, sometimes regulated by legislation. Under a typical ‘restraint of trade’ clause in a contract for sale of a buisness, the seller promises the buyer not to carry on a similar buisness for a specified period of time in a specified aread (eg within a 5km radius of the original business). A restraint of trade clause in a contract (including a contract of employment) is unlawful and of no effect unless the restraint is reasonable with regard to the interests of the persons concerned and the public, which may depend on such factors as the geographic area and duration of the constraint and its scope.

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