Also known as: restrain trade · restraining trade · restrained trade · restraint of trade
Written by attorneys · grounded in primary & secondary sources — see below
A promise whose performance limits competition in any business or restricts the promisor in the exercise of a gainful occupation. Such a promise is unenforceable on public policy grounds when it is unreasonably broad in scope, duration, or geographic reach relative to any legitimate interest of the promisee.
Rowan Russell withdrew from a private equity partnership. His agreement barred him for three years from any lending, investing, or advising role across North America. The partnership sought to enforce the clause to protect deal pipelines. A court found the continent-wide ban exceeded any need to safeguard confidential information and refused enforcement.
Raven Logistics contracted with a town to supply power exclusively for twenty years. A separate clause paid town officials annual bonuses if they opposed residents forming a solar cooperative. After residents organized, officials invoked the stipend. Taxpayers sued, and a court declined to enforce the stipend because it penalized efforts to create competing energy sources.
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A court finds the restraint unreasonable if it is broader than needed to protect the promisee's legitimate interests or if any need is outweighed by hardship to the promisor and likely public injury. The inquiry focuses on duration, geography, and the activities barred.
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No. The relationship supplies the required ancillary character, but the restraint must still satisfy the reasonableness test. Overbroad clauses that bar an employee from an entire profession or geographic area remain unenforceable even when tied to employment.
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Courts may refuse enforcement when a promise restrains trade and also undermines additional protected interests such as citizen organizing or environmental oversight. The analysis draws on judicial recognition of public welfare needs beyond statutes.
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