June 2015

“It is quite common these days for various restraint clauses to be inserted in agreements such as for the sale of businesses and employment contracts. The intention is that the purchaser of the business does not wish to lose the clients of the business to the former owner and therefore lose some of the income from the business. Similarly, employers attempt to prevent departing employees from taking clients of the business or fellow employees with them. This is done by the use of what is commonly referred to as non-competition and non-solicitation clauses in the employment contract. These clauses generally deal with the scope of work or activity which the person is prevented from undertaking. They also set out the period and area in which the activity is prohibited. As a general rule, restrictive trade covenants are unenforceable because they impede freedom of trade and the individual liberty of action in trading. There are exceptions to the rule. Care needs to be taken with the drafting of such clauses. In a recent case, the employer sought to enforce the restraint of employment and non-solicitation covenants. At the end of a nine-day trial, the employer was fortunate the Court limited the application of...

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