Restraint of trade is essentially the unlawful act of preventing someone from doing business. Although alone it is not a tort, it is a legal doctrine that relates to a wide range of torts that unlawfully restrict a business’s operation. While the idea of a restraint of trade may be easily understood as an unlawful practice, it is not always illegal. In fact, some forms of restraints of trade are legitimate and can be upheld by the court.
Reasonable restraints of trade can be seen as valid in the eyes of the court so long as they meet certain requirements. In order for a court to consider any type of a restraint of trade reasonable, it must serve to protect a legitimate business interest. It must also be limited to that specific business interest. This may be the case where defined territories of sales are agreed upon between manufacturers. Although these territorial restrictions may be seen as a restraint of trade, they are seen as legitimate because they serve a business interest and are not in opposition to the public interest.
Another type of restraint of trade that the courts commonly consider reasonable is non-competition agreements. These contracts are generally legal and enforceable when they serve to protect a specific business interest. However, in order for these agreements to be considered reasonable, they must be limited in scope, duration and location.
Understanding the difference between unlawful restraint of trade and what may be seen as reasonable can help protect your business. If you are struggling with restraint of trade issues within your business or have someone imposing an unlawful restraint of trade on your business, you may get the answers you need by working with an experienced business law attorney.