restraint of trade

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A contractual term that limits a person's right to exercise his trade or carry on his business. An example is a term in an employment contract or partnership agreement prohibiting a party from engaging in a similar business for a specified period after the relationship ends. Such a term is void unless the party relying on it shows that it does not offend public policy; it must also be reasonable as between the parties. Many such terms are reasonable and therefore valid (Wincanton Ltd v Cranny [2000] IRLR 716 (CA). See also garden leave clause.

Subjects: Law — Social Sciences.

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