Key Takeaways
- A restraint of trade clause is presumed void. It only becomes enforceable if the party relying on it can justify it.
- To stand up, the clause has to protect a legitimate business interest and go no wider than reasonably necessary in scope, geography and duration.
- Reasonableness is judged at the date the contract was made, not by what happens later.
- A court can strike out offending words under the blue pencil test, but it won’t rewrite a clause to save it. Draft it too wide and the whole thing can fall.
- A proposed cap on non-compete clauses has been floated but isn’t law. The reasonableness test still governs.
Restraint of trade clauses turn up in employment contracts as well as business sales and shareholders’ agreements. They stop you competing, approaching certain clients or poaching staff for a set period.
The worry cuts both ways. If you’re bound by the clause, you want to know whether it can really stop you. If you’re relying on it, you need to know whether it will actually hold when it matters.
The honest answer is that a restraint of trade clause isn’t automatically enforceable just because it was signed. English law starts from the opposite position. These clauses are presumed void, and the burden is on whoever wants to rely on one to prove it’s reasonable.
This guide explains when a restraint of trade clause can be enforced along with the test the courts apply and the drafting choices that decide whether it survives. If you’re dealing with one, Osbourne Pinner offers a free 30-minute consultation with a solicitor. You can also read more about our dispute resolution services.
What is a restraint of trade clause?
A restraint of trade is any contractual term that restricts a person’s freedom to carry on their trade, business or profession. They turn up in more places than people expect:
- Employment contracts
- Consultancy agreements
- Franchise deals
- Shareholders’ agreements
- The sale of a business
The most common types are:
- Non-compete: Stopping someone working for or setting up a competing business for a period.
- Non-solicitation: Stopping them approaching the clients or customers of the business.
- Non-dealing: Going further, stopping them dealing with those clients even if the client makes the first move.
- Non-poaching: Stopping them enticing away former colleagues.
- Confidentiality: Restricting the use or disclosure of confidential information.
The starting point: presumed void
This is the part that surprises people. Under the common law doctrine of restraint of trade, these clauses are treated as void and contrary to public policy. That’s because the law doesn’t like restricting a person’s ability to earn a living or run a business.
As the government restated in a 2026 working paper on non-compete clauses, such a clause is unenforceable unless the party relying on it can show that it’s reasonable.
So, the signature is only the beginning. The real question is whether the clause can clear the reasonableness test.
The two-part reasonableness test
To be enforceable, a restraint of trade clause has to satisfy two things.
First, it needs to protect a legitimate business interest. The law recognises a limited set of these:
- Confidential information and trade secrets.
- Client, customer and supplier connections, sometimes called trade connections.
- The stability of the workforce.
- Goodwill, particularly where a business has been bought and paid for.
A clause that’s really just trying to stop ordinary competition won’t be enforced. Competition on its own isn’t something the law lets you shut down.
Second, the clause should go no further than reasonably necessary to protect that interest. The court looks at scope, geographic reach and duration. A six-month non-solicitation aimed at the specific clients someone actually dealt with is very different from a two-year worldwide ban on any competing activity. The tighter and more targeted the clause, the more likely it is to hold.
Reasonableness is judged at the start
A key and often misunderstood point is that the court assesses whether a clause is reasonable at the date the contract was entered into. It’s not done with hindsight.
What matters is whether the restriction was justified when it was agreed. That takes into account the role and the interest being protected. That’s why a clause drafted carelessly at the outset can’t usually be rescued later by pointing to how things turned out.
The blue pencil test: courts won’t rewrite
If part of a clause is unreasonable, can the rest survive? Sometimes. Under what’s known as the blue pencil test, a court can sever or strike through offending words, and enforce what’s left. However, they can only do that if what remains still makes sense on its own and doesn’t change the overall meaning.
What a court won’t do is rewrite the clause to make it reasonable. It won’t read down a two-year ban to six months, for instance, or narrow a worldwide restriction to a sensible radius. If the clause is simply too wide, the usual result is that it fails altogether. That leaves the business with no protection at all. This is why over-drafting is such a common and expensive mistake. Reaching for the widest possible clause can actually leave you with nothing.
Some practical points that catch people out
- Introducing covenants mid-employment: If you add restrictions to an existing contract, the employee usually needs to receive something in return for them to be binding. A pay rise or promotion can serve as that fresh consideration.
- Business sales are treated differently: Courts are generally more willing to uphold wider restraints against someone selling a business, because the buyer is paying for goodwill and is entitled to protect it.
- Layering works better than one broad clause: A combination of confidentiality, targeted non-solicitation and non-dealing, and garden leave often protects a business more reliably than a single sweeping non-compete.
How are they enforced, and challenged?
If a clause is breached and is enforceable, the usual remedies are an injunction to stop the breach and, potentially, damages for losses caused. Because timing matters so much in these cases, an employer will often move quickly for an injunction.
On the other side, someone bound by a clause they believe is too wide can challenge it. If the court agrees it’s an unreasonable restraint of trade, the clause simply won’t be enforced against them. Given how much turns on the precise wording, both enforcing and challenging these clauses is very fact-specific.
The doctrine reaches into some high-profile areas too. Our guide to restraint of trade clauses in sports contracts looks at how the same principles apply to players, coaches and salary caps.
What about the proposed non-compete cap?
You might have seen headlines about a limit on non-compete clauses. The government floated the idea of capping non-competes at three months, and in 2026 published a working paper exploring options. That included limiting enforceability to workers above a certain salary.
It’s important to point out that none of this is law though. Until legislation is actually passed, the position is unchanged, so the reasonableness test set out above still governs whether a clause is enforceable.
Talk to a dispute resolution solicitor at Osbourne Pinner
Whether you’re trying to enforce a restraint of trade clause or you think one is being used unfairly against you, our dispute resolution solicitors can assess where you stand. We’re a multi-office firm with solicitors in London (Piccadilly and Canary Wharf), Harrow and Manchester, advising businesses and individuals on restrictive covenants and contract disputes.
We offer a free 30-minute consultation with a dispute resolution solicitor, Monday to Friday, with no obligation. It costs nothing to find out whether a clause is likely to hold. We do not offer Legal Aid.
Call us on 0203 983 5080, message us on WhatsApp, or email [email protected] to arrange your consultation.
Please note that this article is for informational purposes only and does not constitute legal advice. We always recommend speaking to a qualified solicitor for advice tailored to your specific circumstances.
