Restraint of Trade Agreement

South African legal context (2026 checklist)

A Restraint of Trade Agreement is used to protect legitimate business interests after an employment, contractor, shareholder, partnership, sale-of-business, franchise, or commercial relationship ends. It may restrict a person from competing, soliciting clients, poaching staff, using confidential information, misusing trade secrets, approaching suppliers, or diverting business opportunities. In South Africa, restraint of trade agreements are generally valid and enforceable unless the person resisting enforcement proves that the restraint is unreasonable and contrary to public policy. The agreement should therefore be carefully limited to what is reasonably necessary to protect a genuine business interest, such as confidential information, trade secrets, customer connections, supplier relationships, goodwill, or intellectual property. The restraint should specify the restricted activities, duration, geographic area, protected clients or markets, confidential information, and remedies for breach. It should not merely prevent ordinary competition or stop a person from using general skills, experience, and knowledge. A restraint that is too wide in time, area, industry, clients, or activities may be vulnerable to challenge. Where the restraint is linked to employment, it should be consistent with the employee’s role, seniority, access to confidential information, client relationships, and actual risk to the employer. Where it is linked to the sale of a business, stronger protection may be justified to protect goodwill purchased by the buyer. Where the agreement includes personal information, customer data, employee data, or digital records, POPIA and confidentiality safeguards should also be included.

• South African common law of contract and restraint of trade
• Constitution of the Republic of South Africa, 1996 — sections 22, 23 and 34
• Labour Relations Act 66 of 1995, where the restraint arises from employment
• Basic Conditions of Employment Act 75 of 1997, where the restraint forms part of employment terms
• Protection of Personal Information Act 4 of 2013
• Electronic Communications and Transactions Act 25 of 2002, where electronic signatures or digital records are used
• Companies Act 71 of 2008, where directors, shareholders, company records or business opportunities are involved
• Competition Act 89 of 1998, where restraint, exclusivity or market restrictions may affect competition
• Consumer Protection Act 68 of 2008, where consumer-facing services or franchise arrangements are involved
• Copyright Act 98 of 1978, where documents, software, designs, templates or creative work are protected
• Trade Marks Act 194 of 1993
• Patents Act 57 of 1978
• Designs Act 195 of 1993
• Magna Alloys and Research SA (Pty) Ltd v Ellis 1984 (4) SA 874 (A)
• Basson v Chilwan and Others 1993 (3) SA 742 (A)
• Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA)
• Barkhuizen v Napier 2007 (5) SA 323 (CC)
• Automotive Tooling Systems (Pty) Ltd v Wilkens and Others 2007 (2) SA 271 (SCA)
• Experian South Africa (Pty) Ltd v Haynes and Another 2013 (1) SA 135 (GSJ)
• Aranda Textile Mills (Pty) Ltd v Hurn and Another 2000 (4) SA 455 (E)
• Aon South Africa (Pty) Ltd v Smith and Others (J298/24) [2024] ZALCJHB 200

Use this as a starting point only. Verify current gazetted amendments, tribunal rules, and SARS / DOL circulars that may apply to your matter.