Restraints of trade in commercial documents must be reasonable

• Published date: 26 October 2021
• Law Firm: Rostron Carlyle Rojas
• Author: Ms Ying Tay and Michael Sing

Commercial contracts frequently contain restraints of trade designed to protect the interests of one of the parties.

The validity of those restraints depend upon a wide range of factors.

Recently-those factors were examined in Belflora Pty Ltd v Vinflora Pty Ltd [2021] NSWCA 178.

In this case, the parties had previously been in a commercial agreement involving the sale of flowers at the Flemington markets, including South American flowers.

They agreed to divide up the business between them and entered into an agreement which contained a restraint provision.

The restraint provision prohibited Vinflora from importing flowers from South America and displaying such flowers on its stands. It also provided that Vinflora could only purchase South American flowers from Belflora, and only to fulfil orders, with the profit to be shared. Belflora was subject to the same restraints in relation to Kenyan flowers.

In the first instance, the trial judge concluded that a restraint provision in an agreement between Belflora and the first respondent, Vinflora Pty Ltd (Vinflora), (the Agreement) was void as an unreasonable restraint of trade. As a consequence, the primary judge dismissed Belflora's claim for injunctive relief, seeking to restrain Vinflora and the second respondent, Mr Vamsi Nagendra Babu Uppalapti (Mr Uppalapti), from displaying and selling South American flowers in contravention of the restraint clause.

The Court unanimously dismissed the Appeal.

The main issue on appeal was whether the restraint...