Agreements in Restraint of Trade: A Brief Overview for Businesses
An agreement in restraint of trade is a contract between two parties that seeks to limit the freedom of one or both parties to carry out their trade or profession in a certain manner or location. Such agreements are governed by the common law and are generally considered to be unenforceable unless they are deemed reasonable and necessary to protect legitimate business interests.
There are several types of agreements in restraint of trade, including non-competition agreements, non-solicitation agreements, and confidentiality agreements. Non-competition agreements are commonly used to prevent former employees from working for competitors or starting their own businesses in competition with their former employer. These agreements are typically limited in scope and duration and are subject to strict scrutiny by courts.
Non-solicitation agreements, on the other hand, prohibit employees from soliciting or doing business with the employer`s customers or clients after they leave the company. These agreements are often used in conjunction with non-competition agreements and are also subject to scrutiny by courts.
Confidentiality agreements are designed to protect trade secrets, confidential information, and other proprietary information from disclosure to third parties. These agreements are typically enforced through injunctive relief and damages awards.
While agreements in restraint of trade may be necessary to protect legitimate business interests, they must be carefully crafted to avoid violating antitrust laws and to ensure that they are reasonable and necessary. Courts will consider a variety of factors in determining the enforceability of such agreements, including the nature of the parties` business, the geographic scope of the restriction, and the duration of the restriction.
Businesses should consult with experienced legal counsel when drafting and enforcing agreements in restraint of trade to ensure that they comply with the applicable laws and regulations. This will help to minimize the risk of litigation and potential damages awards.
In conclusion, agreements in restraint of trade are a critical tool for businesses seeking to protect their legitimate business interests, but they must be carefully crafted and properly enforced to avoid violating applicable laws and regulations. As such, businesses should consult with experienced legal counsel to ensure that their agreements are reasonable, necessary, and legally enforceable.