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Thread: Restraint of trade clause - question

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    Restraint of trade clause - question

    I had a 34% share in a franchised optometry practice. My partner and I had a fall out and due to differences we couldn't resolve, we descided to split. I resigned from the company and sold my shares to my partner. I was basically only payed out for what the fittings and fixures of the business are worth - approximately equivalent to six month salary. In the sales agreement which I had to sign, there is a restraint of trade clause effective for three years which prohibits me from practicing in the same town. Initially it didn't bother me because my plan was to move to another town and work there. My situation has now changed, my wife is pregnant and it is difficult for both of us to find work elsewhere. My wife has a good job in town and we also own a home here. My best option would be to open my own practice in town. How enforceable is the restraint of trade clause? And what's the worst that can happen?

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    Diamond Member AndyD's Avatar
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    I think there's two questions, the worst that would happen is that your ex-partner drags you to court to have the order upheld but what's the likelyhood he/she would do this? Second, would the terms of the restraint of trade be reasonable in the eyes of a court?

    How long ago was the restraint of trade signed by you? Are you a qualified optometrist or were you working as a retailer?
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    Full Member ghostwriter's Avatar
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    You may want consult a lawyer about this. It is my general understanding that restraint can be argued on the bases that you have the right to earn a living and practise your trade. Secondly is it possible to contact your partner and have him/her sign a contract that will remove the restraint of trade?

    If not you will have no choice but to challenge the restraint of trade in court. I am sure your partner wouldn’t want this because it can become an expensive waste of time. Consult a lawyer ask him what your options are and then see what you can do.
    here fishy fishy…

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    Hi Andy,

    I signed the agreement about 3 months ago. I am a qualified dispensing optician.

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    Gold Member garthu's Avatar
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    Hi Bullet,
    Restraints are very difficult to enforce as it is against constitution. It must specify a period and an amount/value applied to it. It cant just say you cannot work for 3 years.If it says you cant work OR you pay R100 000, then could be enforceable.
    Bottom line, you gonna have to get an attorney!
    Good luck
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    Full Member ghostwriter's Avatar
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    After doing some research it appears that the "restraint of trade" clause is a common debate. In most cases the court does not grant the employer the right to restrain trade as there are some considerations to be made.

    My question now is Mister Bullet; are you planning on opening your own practise? Or are you looking for employment?

    See the courts must consider your legal need to work and right to practise your trade against what your partner may claim as "unfair competition."

    Regardless you will need to get the restraint lifted by speaking to your partner and see if this is a possibility, because going to court is unavoidable as most employees had to fallow this path.

    I would like to have given you links sadly for some reason I cannot or so it appears.

    Best of luck to you Sir.
    here fishy fishy…

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    Based on what you've presented, the restraint is probably enforceable.

    You were a partner.
    You entered a sales contract and understood this included a restraint clause, which at the time you accepted.
    The restraint is limited to a specific area - you're free to open up in another town.
    The trouble with opportunity is it normally comes dressed up as work.

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    Bullet (28-Nov-11)

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    Thanks for all the feedback and advice. I will probably consult a lawyer as well, just to have a look at the agreement I signed.

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    Gold Member daveob's Avatar
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    Would a restraint like this prevent you from being employed by someone else (like your wife) to work in a business as an employee ?
    Watching the ships passing by.

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    Platinum Member desA's Avatar
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    My experience with this kind of matter is that the court would expect your ex-partner to compensate you for loss of income during the restraint period. In other words, it has to be fair on both sides - balancing scales, as it were.

    There will be ways around the restraint - if it is geographical. Eg. you trade fractionally outside the defined area. Anyway, how well was the area defined in the first place & also what did you understand it to define.

    Practically, few of these things stick.
    In search of South African Technology Nuggets(R), for sale & trading in South East Asia.

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