Drafting and Enforcing Restraints Of Trade

05 Mar 2018

1. INTRODUCTION

 1.1 The purpose of this paper is to provide a practical guide to drafting and enforcing restraints. However, we appreciate that a number of the people reading this paper are looking for something that they can copy and paste into submissions. For those of you who fall into this category, please see sections 2 and 3 below.  

1.2 For the remainder of you, rather than delving into case law and analysing the various inconsistent Court decisions that exist in this area of law, we have attempted to set out a basic guide as to what you should consider when drafting restraint of trade clauses and what you should prepare if you are seeking to enforce a restraint of trade clause. 

2. RELEVANT LEGAL PRINCIPLES – RESTRAINTS OF TRADE GENERALLY 2.1 The principles relevant to the validity of restraint of trade clauses are now well settled. At common law, a restraint of trade is contrary to public policy and void, unless it can be shown that the restraint is, in the circumstances of the particular case, reasonable.[1] 

2.2 The onus at common law of showing that the restraint goes no further than is reasonably necessary to protect the interests of the person in whose favour the restraint operates lies on the party seeking to support the restraint as reasonable.[2] 

2.3 The validity and reasonableness of the restraint is to be determined as at the time it is entered.[3] 

 

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1 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 565; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 315. 

2 Adamson v New South Wales Rugby League Limited (1981) 27 FCR 535 at 554 per Hill J 
3 Portal Software v Bodsworth [2005] NSWSC 1179 per Brereton J at [83], citing, inter alia, Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 574, Lindner v Murdock's Garage (1950) 83 CLR 628, Adamson v New South Wales Rugby League Limited (1991) 31 FCR 242 at 285 per Gummow J, Woolworths Limited v Olson [2004] NSWCA 372 at [40], and Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 344.


Dilan Mahendra

Solicitor 2006
Barrister 2010

02 9151 2941

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Lucy Saunders

Solicitor 2013
Barrister 2017

02 9151 2955

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