When a Restraint of Trade is Not Enough

Restraints of trade are widely relied on to protect business interests.

They are effective in limiting unfair competition and safeguarding established relationships.

However, they do not always address the risk of being bypassed in the creation of those relationships.

In collaborative or referral-based environments, that distinction can become critical.

The Distinction

A restraint of trade is typically designed to protect:

• existing client relationships
• confidential information
• established business interests

Its purpose is not to eliminate competition, but to protect interests that are legitimate and capable of being defined.

However, not all commercial risk arises at that stage.

In many arrangements, the vulnerability arises earlier — during the development of an opportunity.

An introduction is made.
A relationship begins to form.
A potential deal takes shape.

At this point, the risk is not competition, but exclusion.

The Role of Non-Circumvention

Non-circumvention clauses are aimed at protecting that earlier stage.

They are not concerned with restricting competition.

They are concerned with ensuring that a party is not bypassed in relation to:

• introductions
• commercial opportunities
• developing relationships

They protect the pathway to the deal, rather than the deal itself.

Why This Matters

A restraint of trade may offer protection once a client relationship is established.
It does not always protect the process that led to that relationship.

The financial implications of this gap are often underestimated.

Where a party is bypassed at the opportunity development stage, the loss may include:

• the full commercial value of the opportunity
• the cost of time, effort and resources invested in developing the relationship
• lost future revenue streams linked to that client or transaction
• diminished market position where a collaborator, having potentially been privy to your pricing, approach, strategy and intellectual capital, becomes a direct competitor in relation to the same opportunity

This creates an inherent imbalance, where one party is competing with the benefit of insight derived from the very process they helped develop.

In many instances, the value of a lost opportunity can exceed the value of an existing client relationship — particularly where the opportunity relates to:

• long-term service agreements
• panel appointments
• high-value commercial transactions
• repeat or institutional work

Without appropriate protections in place, a party may have no effective recourse, despite having been instrumental in creating the opportunity.

Understanding this distinction allows for more effective structuring of agreements — particularly in collaborative, referral-driven or project-based environments.

Closing Insight

Commercial risk does not arise only from competition.

It also arises from how opportunities are developed, shared and ultimately secured.

Ensuring that collaboration and competition are appropriately balanced, with clear protections in place, is essential

About the Author
Samantha Govender is an admitted attorney and founder of Clause & Counsel, advising organisations on employment risk, workplace governance and commercial structuring.

This content is provided for general informational purposes only and does not constitute legal advice. No attorney-client relationship is created. Specific legal advice should be sought based on individual circumstances