Restraint of Trade Contract Act Malaysia

In Malaysia, the Restraint of Trade Contract Act governs the legality of contracts that limit an individual`s ability to work in a specific industry or with certain competitors for a set period. These types of agreements are common in industries where trade secrets and confidential information are integral to success.

The act states that any contract or agreement that restricts a person from carrying on any trade, business, or profession, or limit their freedom to work with a particular person, is void unless it is reasonable and necessary to protect a legitimate interest. Legitimate interests may include the protection of trade secrets, confidential information, goodwill, and customer relationships.

The Restraint of Trade Contract Act also establishes that any agreement attempting to restrain trade must be in writing, signed by both parties, and contain a reasonable restraint period and geographical location. The restraint period is typically between six months to a year, and the geographical location must be reasonable, considering the nature and scope of the trade or business.

Any violation of this Act may result in the contract being deemed void or unenforceable in court. The Malaysian courts will consider the reasonableness of the restraint period, the geographical location, and the legitimate interests being protected by the agreement.

Overall, the Restraint of Trade Contract Act serves to balance the interests of both parties involved in such agreements. Employers can protect their trade secrets and confidential information, while employees can maintain their freedom to work and avoid unfair restrictions on their future employment opportunities. It is important for individuals to understand their rights and obligations under the Act and seek legal advice before entering into any restraint of trade agreements.