What is a restraint of trade?
Is a restraint of trade enforceable in South Africa?
“Magna Alloys … held that agreements in restraint of trade were valid and enforceable unless they are unreasonable and thus contrary to public policy … a party who challenges the enforceability of the agreement bears the burden of alleging and proving that it is unreasonable.”
“Nienaber JA identified four questions that should be asked when considering the reasonableness of a restraint: (a) Does the one party have an interest that deserves protection after termination of the agreement? (b) If so, is that interest threatened by the other party? (c) In that case, does such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive? (d) Is there an aspect of public policy having nothing to do with the relationship between the parties that requires that the restraint be maintained or rejected?”
“Every citizen has the right to choose their trade, occupation or profession freely. The practice of a trade, occupation or profession may be regulated by law.”
When you need a Restraint of Trade
- When hiring a key employee, director, or sales person who will gain access to confidential pricing, client lists, trade secrets, or close customer relationships you need protected after they leave.
- When selling or buying a business, where the buyer pays for goodwill and needs the seller restrained from re-opening a competing operation and luring the customer base back.
- When admitting a shareholder, member, or partner whose exit could otherwise see them compete directly using the firm’s know-how and contacts.
- When engaging a senior independent contractor, franchisee, or agent who will be embedded enough in your business to walk away with its competitive advantage.
What a Restraint of Trade should contain
Protectable interest
The restraint must identify a legitimate interest worth protecting — confidential information and trade secrets, or customer/supplier connections (goodwill). A restraint that merely bars competition for its own sake, with no such interest at stake, fails the Basson v Chilwan test and is unenforceable.
Restrained activities (scope of activity)
Define precisely which activities are off-limits — e.g. soliciting or accepting work from named or defined clients, being employed by a competitor, or carrying on a competing business. The narrower and more closely tied to the protectable interest, the more readily a court will enforce it.
Geographic area
Limit the restraint to the area where the business actually competes and where the protectable interest exists. A nationwide or worldwide area is harder to justify than one matching the firm’s real market, and over-reach is a leading reason restraints are cut down or refused.
Duration
Specify a defined period running from termination. Reasonableness is judged at the time enforcement is sought, against how long the confidential information or customer connections stay valuable — commonly 6 to 24 months for employees, and often longer for a sale of business backed by goodwill.
Definitions of confidential information and customer connections
Carefully define “confidential information”, “trade secrets”, and “customers/prospective customers”. Tight definitions anchor the restraint to a real protectable interest and make it far easier to prove the threat the restraint is designed to meet.
Consideration and acknowledgements
Record what the restrained party receives (employment, the purchase price for a business, or a specific restraint payment) and include an acknowledgement that the restraint is reasonable. South African law does not require separate payment for a restraint to be valid, but a clear bargain strengthens enforceability.
Severability and blue-pencil
Include a severability/divisibility clause so a court can excise an unenforceable part — an over-wide area, activity, or period — and enforce the rest, rather than striking the whole restraint down. Drafting the restraint in separate, divisible undertakings helps a court read it down.
Jurisdiction and enforcement
Specify governing law, jurisdiction, and that the holder may seek an interdict. Restraints are typically enforced by urgent interdict in the High Court, so the clause should make clear that a breach causes harm not adequately remedied by damages.
Restraint of trade vs confidentiality vs non-solicitation
| Feature | Restraint of trade | Confidentiality (NDA) | Non-solicitation |
|---|---|---|---|
| What it stops | Competing, working for a rival, or carrying on a competing business | Disclosing or using confidential information and trade secrets | Approaching the firm’s clients, suppliers or staff |
| How broad | Broadest — can bar work in a sector and area | Narrow — limited to defined information | Targeted — limited to defined relationships |
| Time-limited | Yes — must be a reasonable period | Often runs indefinitely for true secrets | Yes — usually a defined period |
| Onus to challenge | On the restrained party to prove unreasonableness | On the party resisting to dispute the obligation | On the restrained party to prove unreasonableness |
| Typical use | Senior staff, business sale, partner exit | Almost every commercial relationship | Sales and client-facing roles |
Common South African pitfalls
- Over-broad area or duration: a restraint covering the whole country (or the world) for years, far beyond where the business competes or how long its information stays useful, invites a court to read it down or refuse it. Match the area and period to the real protectable interest.
- No identifiable protectable interest: a restraint that simply bars a former employee from competing, without any confidential information or customer connection genuinely at stake, fails the Basson v Chilwan enquiry and will not be enforced — the law does not protect an employer against ordinary competition.
- No severability clause: without a divisibility/blue-pencil provision, a single over-wide element can sink the entire restraint, because a court is reluctant to rewrite the parties’ bargain for them.
- Ignoring the constitutional dimension: section 22 of the Constitution guarantees the right to choose a trade or occupation freely, and a restrained party can argue the restraint is an unreasonable limitation. A clause that goes further than necessary to protect a legitimate interest is vulnerable to this argument.
- Copy-paste clauses and stale facts: reasonableness is assessed at the moment enforcement is sought. A boilerplate restraint that does not fit the role, the market, or the information actually held is far harder to enforce when it matters.
Frequently asked questions
Are restraints of trade enforceable in South Africa?
Yes. Since Magna Alloys v Ellis (1984), a restraint of trade is presumed valid and enforceable in South Africa, and will be upheld provided it is reasonable and not contrary to public policy. A restraint that protects a genuine interest — confidential information or customer connections — within a sensible area and time is routinely enforced.
Who must prove a restraint is unreasonable?
The party trying to escape the restraint — usually the former employee or the seller of a business. South African law puts the onus on them to allege and prove that the restraint is unreasonable or contrary to public policy. The person enforcing the restraint does not have to prove it is reasonable.
How long can a restraint of trade last?
There is no fixed maximum. The period must be reasonable in light of how long the confidential information or customer connections remain valuable. For employees, restraints of roughly 6 to 24 months are common; on the sale of a business, longer periods are often upheld because the buyer has paid for goodwill.
Can a restraint stop me working anywhere or in any job?
No. A restraint can only protect a legitimate interest, so it must be limited to the activities, clients, area, and period needed to protect that interest. A clause that bars you from earning a living generally, with no real interest at stake, is unreasonable and a court will refuse to enforce it or cut it down.
Is a restraint valid without extra payment or consideration?
Yes. South African law does not require a separate payment for a restraint to be valid — the employment itself or the price paid for a business is sufficient consideration. That said, clearly identifying what the restrained party receives, and an acknowledgement that the restraint is reasonable, strengthens enforceability.
Can a court reduce an over-broad restraint instead of striking it down?
Often, yes. If the agreement contains a severability or divisibility clause, a court can excise an unreasonable part — such as an over-wide area or period — and enforce the reasonable remainder. Drafting the restraint as separate, divisible undertakings makes this far easier than asking a court to rewrite a single sweeping clause.
Does section 22 of the Constitution make restraints unenforceable?
No. Section 22 guarantees the right to choose a trade, occupation or profession freely, but the Supreme Court of Appeal in Reddy v Siemens confirmed that a restraint reasonably required to protect a legitimate interest is constitutionally permitted. The Constitution sharpens the reasonableness enquiry; it does not invalidate restraints as a class.
How are restraints of trade enforced in practice?
Usually by urgent interdict in the High Court. The holder applies to court to restrain the former employee or seller from breaching the undertaking, because damages after the fact rarely undo the loss of confidential information or clients. Well-drafted restraints make the threatened harm and the protectable interest clear so an interdict can be granted quickly.
Sources & authority
- Reddy v Siemens Telecommunications (Pty) Ltd [2006] ZASCA 135; 2007 (2) SA 486 (SCA)
- Basson v Chilwan and Others [1993] ZASCA 61; 1993 (3) SA 742 (A)
- Constitution of the Republic of South Africa, 1996, s 22
This guide is general information, not legal advice. It reflects the law as at June 2026.