Many Australian businesses use contractual restraints of trade to protect confidential information and customer relationships. In this update we answer frequently asked questions about the future of restraints of trade in Australia, and consider options available to companies in the event that some types of restraints are no longer available.
Are restraints of trade still allowed?
Yes – in the sense that the rules that have applied for years still apply for the moment.
Restraints of trade can form part of an employment arrangement (usually in the employment contract or a deed) and sale of business agreements and will be valid and enforceable in certain situations.
There are a fairly complicated set of both rules and principles that Courts apply in determining whether a restraint will be valid, and warranting remedy, where it has been or might be breached. The basic rule is that a restraint will be unenforceable unless there are special circumstances where a restraint protects a legitimate interest recognised by law. This interest must be recognised by the law and deemed reasonable by the Court both as between those who agreed to it, and taking into account the public interest.
