Cascading restraint of trade clause example

What is a cascading restraint clause? Is the restraint of trade clause reasonable? Do you need a restraint clause?

To decide when the clause becomes enforceable, a court will try to balance the employer’s legitimate and reasonable business interests with your rights to seek employment. For a restraint of trade clause to be enforce it must be reasonable in the circumstances. If the court finds that the restraint goes beyond providing your business with adequate protection, it will not enforce the clause. You might have seen a restraint of trade clause in a contract which sets out alternatives.

For example , it might say that a party cannot compete within a radius of or kilometres, for months, year or years. The reason clauses are drafted this way is because a court cannot “read down” a restraint clause. That means, if the.

RESTRAINT OF TRADE. The Company, the Owners and DCSI (expressly excluding, with respect to this section only, KPMG, and with respect to sections .1(1), (2) and (3) only, Robert Langford and DCSI) agree with the Purchaser that in order to protect the goodwill of the Company that is being transferred to Purchaser hereunder and the business of the Company in the form that it is conducted. In certain instances, if a restraint clause is drafted too broadly, thereby making the restraint unreasonable, the offending parts of the restraint clause may be severed to leave the remaining reasonable part of the restraint intact and enforceable. The reasonableness and validity of a restraint clause should be assessed at the time of entry into the employment contract. The restraint clause was not unreasonable.

Broadly speaking, restraint of trade ladder clauses operate in two different ways. The first kind of ladder clause operates by creating a cascading series of reducing obligations. Each particular obligation is only triggered when the more onerous restraint preceding it is held by the court to be unreasonable.

In other words, the obligations in. It is understandable for a buyer of a business to insist on a restraint of trade clause to prohibit the seller from opening a similar business just around the corner. Even more so if the seller (e.g. hairdresser) has a loyal customer base who will follow him to the new venture.

In situations where there is a risk that a court may find a restraint of trade clause unreasonable and therefore voi cascading restraint of trade clauses are a useful drafting tool to avoid that risk. For further information on how a cascading restraint of trade clause can assist your specific situation, please contact Joe Brown. If these criteria are not met, then a restraint of trade clause will be void and unenforceable. The key is to properly consider the context of the restriction, and the supporting case law, to identify the parameters.

A cascading clause is a clause that outlines several variations applicable to the same term within a contract. These most commonly appear as cascading restraint clauses within non-compete and employment agreements. Restraint of Trade Contents 14.

For example if there is a non-competition covenant lasting for years after the end of employment and the court holds that to have been unreasonably long, the entire covenant will be void – i. Nonetheless, time and time again Courts have upheld restraint clauses and found in favour of employers. The ability to restrain former employees is contingent upon the efficacy of the restraint of trade clauses. As a general rule, restraint of trade provisions are void.

Employers often seek to include cascading restraint of trade clauses in contracts. However, the law allows the use of restraint clauses where it can be proven. By doing this, any restraints that are held by a court to be unreasonable and unenforceable can be severed. Cascading clauses contain a series of restraints that overlap.

To be enforceable, a restraint of trade clause must be reasonable. This means that an employer must be able to prove that they have a legitimate interest in imposing a restraint , and that the restraint is no wider than reasonably necessary. Usually, time periods. A restraint of trade clause may, therefore, be imposed to prevent an employee, director, partner, etc. The best way to ensure that a restraint is enforceable is to use cascading or “stepped” restraint clauses.

While cascading clauses have been controversial in the past, courts have shown. This case is an example of a cascading restraint of contract clause where the employment contract contained a number of separate restraints which served to extend the restraint period. However, it is generally not until the employee sources work with a rival company, or starts his or her own venture, in competition with the former Employer, that enforceability of the.