THE APPLICATION OF RESTRAINT OF TRADE OR NO COMPETITION

CLAUSES IN INDEPENDENT CONTRACTOR AGREEMENTS.

Restraint of trade is defined in the case of Greendale Hardware & Electrical (Pvt) Ltd v
Bangaba (03/06) as, is an obligation voluntarily undertaken by the employee to refrain from
the exercise of freedom of trade in favour of the employer in the exercise of freedom of
contract. It is therefore prima facie valid and the onus is on the employee who seeks to resile
from its burden to show that it is nonetheless against public interest and unenforceable.
In the case of Magua and Research (SA) Pty Ltd v Ellis 1984(4) SA 874(A) which is the
locus classicus on covenants in restraint of trade, laid down the following principles;
(i) a covenant in restraint of trade will be presumed to be reasonable unless the party
wishing to escape from it can show it to be unreasonable.
(ii) The onus to prove the unreasonableness of the Covenant lies with employee
covenantee.
(iii) The unreasonableness or otherwise of the Covenant is a matter to be decided on
the facts of the case (i.e. circumstances of the case)
(iv) The facts circumstances to be considered are the facts and circumstances
prevailing at the time of enforcement of the Covenant.
Because of the lack of Zimbabwean case law relating to the application of restraint of trade in
Independent Contractor agreements. Reliance can be made on South African case law. In the
case of Automotive Tooling Systems v Wilkens [2006] SCA 128 (RSA), were the
employees at the appellants instance, entered into Independent Contractor agreements with
the appellant. The apparent change in their status from employees to independent
contractors with the appellant had no material bearing on the nature of the work they
performed. The service agreements contained two clauses relevant to this dispute; a restraint
of trade covenant and a confidentiality clause. The clauses prohibited the first and second
respondents from:
[Having] a direct interest as . . . employee or otherwise . . . in any business, firm or company
in competition with the company or deal[ing] directly with a client or prospective client of
the company . . . for a period of three years from the date of termination of the agreement;
and from
[disclosing] any information of any activities or processes of the company . . . such as
methods, processes, computer software or any other information damaging for the company
or beneficial to another person to the detriment of the company.
In this case the court applied the same principles applied in the Magna Alloys case supra, it
was held that, An agreement in restraint of trade is enforceable unless it is unreasonable It
is generally accepted that a restraint will be considered to be unreasonable, and thus
contrary to public policy, and therefore unenforceable, if it does not protect some legally
recognisable interest of the employer but merely seeks to exclude or eliminate competition.
This case like the Greendale Hardware case supra, states that the restraint of trade clause
will only apply if there is protection of a proprietary interest. Therefore this shows that the
courts have applied the same principles in both contracts of employments and independent
contractors contracts. It is my contention that the same principles in employee contracts on
restraint of trade, should apply to independent contractor agreements in Zimbabwe.
Arccording to Mangwana v mparadzi 1989 (1) ZLR 80 McNALLY JA it was held, that
there is nothing inherently wrong or immoral in a restraint of trade clause between a legal
practitioner and his professional assistant. That the principle that contracts are to be obeyed
takes precedence over the principle of freedom of trade. The onus is on the employee to show
that the enforcement of the provision will be contrary to the public interest. In deciding this
point, the court must have regard to the circumstances prevailing at the time it is asked to
enforce the provision. It is not limited to a finding that a restrictive provision is enforceable
or unenforceable as a whole, nor does it have to have regard to the artificiality of the test of
severability; it has the power to decide that part of such a provision is enforceable or
unenforceable.
In the case of National Foods Ltd V J A Mitchell (Pvt) Ltd T/A Mitchell's Bakery 1997
(2) ZLR 14 (HC) held, that agreements in restraint of trade are prima facie legal and
enforceable the onus is on the party seeking to avoid the restraint to establish that the
restraint is unreasonable and contrary to public policy or to the public interest and should
therefore not be enforced.
From the plethora of case law available on restraint of trade clauses, it is clear that they are
valid, the unreasonableness of a restraint of trade is a question of law. Its determination
involves the application by a court of a legal standard to the facts of a particular case. The
relevant circumstances are those existing at the time the restraint of trade is sought to be
enforced in so far as they impinge upon public interest. The correct test for the validity of a
restraint of trade in a contract of employment is whether there are proprietary rights for the
protection of which the restraint was imposed by the employer and undertaken by the
employee. If there are proprietary interests to be protected the next question is what are they
being protected against and is the restraint more than is reasonably necessary for the
protection of the proprietary interests. Therefor is this is met nothing prevents the application
of restraint of trade clauses in a Independent contractors agreement.