It is helpful to understand the basics of contract drafting even if you rarely draft your own contracts. A basic understanding can add to your confidence in all types of business writing, and will also aid when reviewing and interpreting the contracts in which you are a party. Remember these things when you draft a contract: (a) An effective contract should always be clear, specific, and focused. (b) Sentences should be short to avoid unnecessary complexity and ambiguity. (c) You may want to look at sample agreements prior to drafting your own.
(d) Make sure all party names are accurate. Include their business titles if applicable. (e) A contract should be consistent in its tone, grammar, word usage, and abbreviations. (f) Outlining the contract can aid clarity and allow for quick reference to certain clauses. (g) Make sure you define important terms. (h) Anticipate litigation by including sections regarding venue, choice of law, and attorney fees. (i) All parties should sign the contract, including business titles if applicable. (j) Pages should be numbered. Avoid the appearance that pages could have been added after the agreement was signed. (k) As with any business writing, proofread very carefully.
At the most basic level, “restraint of trade” is any activity that prevents another party from conducting business as they normally would without such a restraint. For instance, two businesses agreeing to fix prices in order to put another competitor out of business is an illegal restraint of trade. Other examples include creating a monopoly, coercing another party to stop competing with your business, or unlawfully interfering with a business deal (think: Tortious Interference). However, not all restraints of trade are unlawful, including non-competition agreements with employees in states where such agreements — if considered reasonable — are enforceable.
The doctrine of restraint of trade is rooted in English common law and codified under U.S. statute – the Clayton Act and the Federal Trade Commission Act – and various state antitrust laws. While federal (Sherman Antitrust Act) and some state laws treat restraint of trade and other antitrust acts as a crime, parties that suffer losses from such actions may seek monetary recovery in civil court. This law office focuses on civil lawsuits for economic losses resulting from unlawful restraint of trade.
Some restraints of trade are, in fact, legitimate and upheld by the courts if they are considered “reasonable.” In order to be considered reasonable, and thus valid, a restraint of trade must serve a legitimate interest, be limited to that particular interest, and not contrary to the public interest. For example, manufacturers often work out agreements with distributors to serve specifically defined territories. While it technically is a restraint of trade, it serves a legitimate interest and is not contrary to the public interest.
In addition, non-competition agreements, in which an employee signs a contract agreeing not to compete directly against the employer for a certain amount of time after termination, are legal in some states as long as they protect a legitimate interest and are reasonably limited in scope. For instance, the employer may have a legitimate interest in protecting business connections, while the non-competition agreement will need to be limited in duration, location (such as proximity to the company), and type of work. While a non-competition agreement certainly restricts trade, courts in many states consider it reasonable in the protection of proprietary information.
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