A restraint of trade is a contractual provision that limits a person’s ability to engage in commercial activity, typically after the termination of an employment relationship or the sale of a business. Restraints are prima facie void at common law as contrary to public policy, but enforceable to the extent they go no further than necessary to protect a legitimate interest of the party benefitting from the restraint.
In M&A, restraints of trade given by the seller protect the goodwill the buyer is paying for, and are subject to a more permissive enforcement standard than restraints in employment contracts. Federal reforms targeting employment-related restraints (proposed to take effect from 2027) explicitly exclude business sale restraints, but the ACCC’s new merger control powers (effective 1 January 2026) include the ability to declare a sale of business non-compete unlawful.