If one of the parties to a contract are attempting to impose a “Restraint of Trade” clause on the other party, then this is unlikely to be legal or enforceable.
Restraint of Trade clauses in commercial contracts are void at common law unless three conditions are satisfied. The clause must be:
1. designed to protect a “legitimate business interest” of the party imposing the restraint, which include trade connections with suppliers or customers, trade secrets or other confidential information, and the stability of the workforce.
2. no wider than reasonably necessary to protect that interest.
3. not contrary to the public interest.
It may appear to a Court to be an attempt to tie the other party’s hands behind their back by not providing services to your competitors.
The party may have commercial motives to maintain your profits by imposing the Restraint of Trade clause. However, this clearly implies that there is unequal bargaining power between the parties and therefore your position is vulnerable to attack under the UK’s Unfair Contract Terms Act 1977.
Restraint of Trade clauses risk breaching UK and EU Competition Law as per Article 101 of the Treaty of Rome and Chapter 1 of the UK Competition Act 1998. The Restraint of Trade clause appears to be a “Hardcore Restriction” in that it is a restriction of sales to end-users by buyers operating at the retail level of trade. Therefore, it is not necessary to consider its potential or actual effects on competition and the market. If the legal enforceability at common law and unfair contract terms legislation does not concern you, an investigation by the Competition and Markets Authority certainly should.