Sale of business restraints

Are you restrained under Sale of Business contract?  Is this fair?

 

Vendors in the context of sales of businesses are often subject to restraints of trade.  Without a restraint of trade clause on the vendor, a purchaser may be less inclined to purchase a business because the value of the business can easily be undermined if the vendor immediately sets up in direct competition after the sale.

 

But is the restraint fair?  In order to determine this, various factors need to be considered including the following:

 

(a)   the duration of the restraint;

(b)   the geographical area of restraint;

(c)   the scope of the restraint (ie. the type of trade that is precluded under the restraint); and

(d)   the price of the purchase.

 

Many sale of business contracts attempt to impose restraints that are too onerous on the vendor.  If this is the case, the restraint clause may not be enforceable, and it is therefore crucial to obtain legal advice.  Speak to mdp McDonald Partners on +61 3 9620 9660 for more information.

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