Restraint of Trade in South Africa: A brief introduction

Occasionally, an Agreement is reached between two parties whereby one party is restricted in pursuing his or her trade, ostensibly to protect the economic interests of the other party.

Generally in South Africa, individuals may freely enter into Agreements with one another, provided the parties have the legally defined capacity to do so, the Agreement is capable of being enforced and the Agreement does not fall foul of law.

The South African Constitution entrenches the principle that everyone has the right to choose a trade, occupation or profession freely. It further states that the practice of the trade, occupation or profession may be regulated by law and allows these rights to be limited provided the limitation is reasonable and justifiable.

South African Courts have considered the Restraint of Trade quite extensively, determining that there must be a legitimate protectable interest and that the public interest must be taken account of insofar as the nature and extent of the restriction as well as the circumstances prevailing when the Restraint is sought to be enforced. A Court may also declare some parts of the agreed Restraint of Trade to be enforceable while declaring others to be unenforceable.

All facts will have to be considered in order to determine whether the Restraint may be enforceable, thereby leading to greater certainty as to the parties rights.

Restraints of Trade are usually agreed to in Employment relationships, sometimes when Businesses are sold.

The above is a brief introduction and you must consult an Attorney regarding Restraints of Trade and Contracts in general.