Restraint of Trade
The purpose of restraint of trade is merely to limitate any future activities of commercial trade, social activity and etc in particular region of a state, or any activities that has substantial impact on local commercial trade or activities. A restraint of trade can be assumed as legal or illegal depends on its effect and attention.
In Malaysia context, under Section 28 of the Malaysian Contracts Act states that “every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to the extent void”. It was based on English common law and personal law which is based on Syariah law to be applied on Muslims. In English Law, this kind of agreement in contract would be in group of illegal and void under public policy, while in Malaysia this restraint of trade is more restrictive. (Shearn Delamore and Cecil Abraham, April 2007). Cecil Abraham resigned from Shearn Delamore and come up with a proposal to merge with Zul Rafique and Partners, this was violating the covenant with Shearn Delamore which restricts him to practice within Kualan Lumpur for 2 years. ( Under Contract Law Series ,361 Ministry of Domestic Trade, Cooperatives & Comsumerism) There are three exceptions to the general rule are provided in Section 28, namely:
Exception i: One who sells the goodwill of a business may agree with the buyer to refrain carrying on a similar industry or business, within a specified locationl limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein: Provided that such limits appear to the court reasonable, regard being had to the nature of the business.
Exception ii : Partners may, upon or in anticipation of a dissolution of the partnership ,agree that some or all of them will not carry on a business similar to that of the partnership within such local limits as are referred to in exception 1.
Exception iii : Partners may agree that some one or all of them will not carry on any business, other than that of the partnership, during the continuance of the partnership.
In U.S.A, Section 1 declares that “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations,therefore is declared to be illegal”. In U.S, there are two separate federal agencies, the Federal Trade Commission (FTC) and the Department of Justice (DoJ), (as well as injured private parties) can pursue Section 1 claims against parties that coordinate to restrain trade. (Palmer v BRG of Georgia, Inc. – 498 U.S. 46 (1990). The criminal of restraint for violations of Section 1 of the Sherman Act are severe. U.S citizens may be sentenced to up to as many as 3 years’ imprisonment and may be fined the greatest of either:
1. Fined US$ 350,000;
2. Twice the financially gained from the violation; or
3. Twice the financially injured suffered by victims.
A corporation may be...