The Validity of a Restraint of Trade Clause in South Africa as a Contractual Term in an Employment Contract

Abstract

What follows is a reflection on the history and the validity of restraint of trade clauses as contractual terms in South African employment contracts. The Article is divided into seven parts. Part I deals with the general meaning of restraint of trade clauses and the reasons for including these clauses in employment contracts. This is followed by a discussion of the then-uncertain status of restraint of trade clauses in South African employment contracts until 1984, when the status of restraint clauses in contracts was finally addressed. In Part III, the consequences of the Appeal Court's 1984 groundbreaking decision in Magna Alloys & Research (Pty) Ltd. v. Ellis will be examined. During 1996, the final Constitution of South Africa was enacted which afforded protection to individuals to trade freely. The influence of this constitutional guarantee on the validity of a restraint of trade clause is discussed in Part IV. This is followed by an analysis of the meaning of public policy as a criterion for the enforcement of a restraint of trade clause Part V. Diverse aspects pertaining to the practical enforcement of restraint clauses are dealt with in Part VI of the article, and finally, the conclusion follows in Part VII.