Business Law

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Recommended: Legally upholding a restraint of trade

Restraint of Trade
The purpose of restraint of trade is merely to limitate any future activities of commercial trade, social activity and etc in particular region of a state, or any activities that has substantial impact on local commercial trade or activities. A restraint of trade can be assumed as legal or illegal depends on its effect and attention.
In Malaysia context, under Section 28 of the Malaysian Contracts Act states that “every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to the extent void”. It was based on English common law and personal law which is based on Syariah law to be applied on Muslims. In English Law, this kind of agreement in contract would be in group of illegal and void under public policy, while in Malaysia this restraint of trade is more restrictive. (Shearn Delamore and Cecil Abraham, April 2007). Cecil Abraham resigned from Shearn Delamore and come up with a proposal to merge with Zul Rafique and Partners, this was violating the covenant with Shearn Delamore which restricts him to practice within Kualan Lumpur for 2 years. ( Under Contract Law Series ,361 Ministry of Domestic Trade, Cooperatives & Comsumerism) There are three exceptions to the general rule are provided in Section 28, namely:
Exception i: One who sells the goodwill of a business may agree with the buyer to refrain carrying on a similar industry or business, within a specified locationl limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein: Provided that such limits appear to the court reasonable, regard being had to the nature of the business.
Exception ii : Partners may, upon or in anticipation of a d...

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...pany to misused their power on their interests.

Restraint of Legal Proceedings
Any practices by any employee is governed by rules of procedure under Section 28 which is not void for a contract. An employee is prohibit to use his/her company confidential information by trading secrets of the company to outsider. It also forbid an unlawful consipiracy intention to injure or cause a damage the goodwill of the company. (Faccenda Chicken v Fowler 1987). The employer’s lawyer will threatens to file with the court when the employee is violated the agrrement. The employee is advised for factors which are weighing against a defence in court, and depending on nerve, cost constraints and the benefits at stake, the employee submits or some compromise is hammered out. The factor of weigh against proceeding does not broken in any cases, unless the new employer ready to involve.

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