Restraint of Trade agreements

A restraint of trade agreement is an agreement which restricts an individual in his freedom to carry on his/her trade or profession. The purpose of such a contract is to protect the business interests of an employer

Restraint of trade agreements are valid and enforceable in South Africa, unless the contract places an unreasonable restriction on an individual’s freedom to trade. The courts deem certain contracts unenforceable because the contract is contrary to good moral (contra bonos mores), or against public policy.
Public policy or public interests comprises of the interest of the various parties. The courts approach to assessing public interest is to assess the reasonableness of the restraint. Here the court weighs individual interest and employer interest.

The leading case, an old one, but one which nonetheless reflect the current position, is MAGNA ALLOYS AND RESEARCH (SA) (PTY) LTD V ELLIS [1984] 2 All SA 583 (A).(hereinafter the Magna case)[1]
Various tasks and duties can be restricted and these include: the nature of the restricted activity, the geographic area where the restriction is in force, the period of the restraint, the patrimonial interests that are to be protected by the restraint.
When dealing with the requirements of reasonableness, the courts consider.
They are many different types of restraint of trade agreements.

The following are the most common restraint of trade agreements:

Sales agent; Salesman; Senior salesman or marketing director; Ordinary salesman; Technical sales manager: Machinery and components; Sales representative; Sales or marketing employee or manager; Sales representatives and sales managers; Business sold by major shareholder(s) or sole proprietor in a company; Sale of shares by shareholders in a business; Sellers of a business who continue to work for it as employees after the sale; Sellers of a business in a close corporation; Executive or key employee; Key employee or director; An executive; Senior technical or marketing or manufacturing manager or employee Insurance broker; Estate agent: Penalty clause and restraint; Estate agent: Protection of employer’s interests; Estate agent: restraint; Broker or consultant: Financial Services (countrywide); Franchise agreement; Franchise agreement; Manufacturing manager; Partnership; Partnership: Doctor; General employee; General employee Simple clause: Seller of a business; Retail business or shop; Branch manager of service company; Product support manager: Computer software (paragraph in letter of appointment); Conference organiser; Management consultant; Insurance broker.

[1] MAGNA ALLOYS AND RESEARCH (SA) (PTY) LTD V ELLIS [1984] 2 All SA 583 (A).(hereinafter the Magna case).