Written by Roy Bregman,
admitted attorney with over 51 years’ experience in employment and commercial
law.
Last updated: 21 July 2026
|
Key Takeaways •
A restraint of trade is only
enforceable if the employer can first prove that a restraint agreement
actually came into existence. Without that, the question of reasonableness
never even arises. •
A clause in an appointment letter
saying an employee "will be required to sign a restraint of trade"
is not a restraint. It is only an agreement to conclude an agreement later,
which our courts call a pactum de contrahendo. •
In Generator and Plant Hire SA (Pty)
Ltd v Hall (Northern Cape High Court, 17 July 2026) the court refused to
enforce a restraint that was never signed, even though the employee had
worked for the company for almost ten years and had joined a direct competitor. •
Employers should have every key
employee sign a written restraint, with clear terms on duration, area and
activities, at the start of employment, and should audit their contracts
regularly. |
Restraints of
trade are among the most litigated clauses in South African employment law.
They are also among the most misunderstood. Employers often assume that because
a restraint was mentioned at the start of the relationship, it binds the
employee forever. Employees often assume that restraints are unconstitutional
and can simply be ignored. Both assumptions are wrong.
A judgment
delivered by the Northern Cape High Court on 17 July 2026, Generator and Plant
Hire SA (Pty) Ltd v Hall, deals with a scenario that arises far more often
than employers care to admit. The appointment letter promised that a restraint
would be signed. It never was. Ten years later, the employee resigned and
joined a competitor. Could the employer still enforce the restraint? The court
said no, and its reasoning is a masterclass in why paperwork matters.
This article
explains the legal principles in plain English, unpacks the Hall judgment and
two other 2026 restraint cases that went the other way, and sets out practical
steps for both employers and employees.
What is a restraint of
trade agreement?
A restraint
of trade is a contractual promise by an employee (or the seller of a business)
not to compete with the employer for a defined period and within a defined area
after the relationship ends. Typical restraints prevent the former employee
from working for a competitor, soliciting the employer’s clients, or poaching
its staff.
Since the
Appellate Division’s decision in Magna Alloys and
Research (SA) (Pty) Ltd v Ellis in 1984, the position in our law has been
that restraints are valid and enforceable unless the person resisting the
restraint proves that enforcing it would be unreasonable and contrary to public
policy. The Supreme Court of Appeal confirmed this in Reddy v Siemens
Telecommunications (Pty) Ltd, where it balanced two competing values:
people should honour their contracts, and people should be free to work and
earn a living, a freedom protected by section 22 of the Constitution.
The High
Court in Experian
South Africa (Pty) Ltd v Haynes summarised who must prove what. The
employer only needs to invoke the restraint agreement and prove a breach. The
employee then carries the burden (in legal language, the onus) of showing that
the restraint is unreasonable. But there is an obvious first step hidden in
that formula: the employer must be able to point to a restraint agreement in
the first place. That is precisely where the employer in the Hall case came
unstuck.
Can a restraint of trade
exist without a signed agreement?
Only in rare
and exceptional cases. A contract does not always need to be in writing, so in
theory a restraint can arise without a signature. In practice, however, courts
are openly reluctant to read a restraint into an employment relationship where
the parties never recorded one, because a restraint limits a person’s
constitutional right to choose and practise their trade.
An employer
trying to enforce an unsigned restraint must squeeze its case into one of three
legal doctrines. Each doctrine has a demanding test, and each is explained in
everyday language in the table below.
|
Legal route |
What it
means in plain English |
What the
employer must prove |
|
Tacit (implied)
term |
The restraint
was an unspoken term of the existing employment contract, one so obvious that
both parties clearly intended it. |
The
"bystander test": if someone had asked both parties at the time of
contracting whether the restraint applied, both would have answered "of
course". The term must be necessary to make the contract work, not
merely convenient for the employer. |
|
Tacit contract |
A separate
restraint agreement arose from the parties’ conduct, without anything being
said or written. |
Unequivocal
conduct by both parties that is capable of no other reasonable interpretation
than that they intended to contract on those exact terms. Silence and
passivity are not enough. |
|
Quasi-mutual
consent |
Also called the
"reliance theory". Even if the employee never actually agreed, the
employee behaved in a way that made the employer reasonably believe there was
agreement, so the employee cannot now deny it. |
Conduct by the
employee that would make a reasonable person believe the employee was
assenting to specific, known terms. An employee cannot "assent" to
terms that were never disclosed to them. |
The court
dismissed the application and refused to enforce the restraint, with costs
against the employer. The judgment is the clearest recent statement of the
principle that an unsigned restraint will almost never be rescued after the
fact.
The facts
Mr Hall was
appointed as a sales and marketing representative in May 2016. His appointment
letter stated that he "will be required to sign a restraint of trade due
to the nature of the position" and that a detailed employment contract
would follow. Three months later he signed a written employment agreement. That
agreement contained a confidentiality clause, but no restraint of trade, and no
restraint was ever signed in the almost ten years that followed.
Mr Hall rose
to branch manager and then regional manager of the Upington branch, gaining
intimate knowledge of the company’s pricing, customers and strategy in the
Northern Cape. He resigned on 1 September 2025. Only then did the employer
inform him that his employment was "subject to a restraint", and only
on 30 September 2025 did it spell out the terms for the first time: a 24 month restraint
covering the entire Northern Cape Province. The employer’s investigation
suggested that Mr Hall was involved with a direct competitor and had forwarded
quotations and pricing schedules to his email address at that competitor.
The court’s reasoning
The employer
argued all three doctrines described above. Stanton J rejected each one.
On the
implied term argument, the court stressed that a court does not make contracts
for people and will not read a term into a contract merely because it would
have been reasonable. Applying the bystander test, it was impossible to infer
that Mr Hall would have agreed, by necessary implication, to restraint terms
that were formulated for the first time in a letter sent after his resignation.
On the tacit
contract argument, the court held that the employer had to prove unequivocal
conduct capable of no other reasonable interpretation than that both parties
had agreed to the alleged terms. Working loyally for ten years without ever
raising the topic simply did not meet that standard.
On
quasi-mutual consent, the court found the argument self-defeating. The employer
only made the terms of the restraint known after the resignation and took no
steps over a decade to negotiate and conclude a restraint. Mr Hall could not
have created a reasonable impression of agreeing to terms he had never seen.
The appointment letter’s promise of a future restraint was, at best, a pactum
de contrahendo, that is, an agreement to conclude an agreement in the future,
which is not itself a restraint.
How does this compare with
recent cases where restraints were enforced?
The contrast
with two other 2026 judgments shows that the deciding factor was not judicial
hostility to restraints, but the absence of a signed document.
In Citadel Holdings
(RF) (Pty) Limited v Stratfold (Western Cape High Court, 30 June 2026), the
respondent had signed restraint, confidentiality and non-solicitation
undertakings when she sold her shareholding and continued working in the group.
The court enforced the restraint across South Africa until May 2028, holding
that she had failed to discharge the onus of proving the restraint
unreasonable.
In Allens Meshco (Pty)
Ltd v Krige (Western Cape High Court, 12 March 2026), a restraint that was
freely and voluntarily signed to bolster the employee’s employment conditions
was enforced after the employee resigned shortly before a disciplinary hearing.
And in Reddy v Siemens, the Supreme Court of Appeal enforced a signed 12 month
restraint even without proof that the employee had actually misused
confidential information; the risk of disclosure was enough.
The pattern
is unmistakable. Where a proper written restraint exists, employees carry a
heavy burden to escape it. Where no restraint was ever concluded, even
compelling evidence of competition, as in the Hall case, will not save the
employer.
What should employers do
now?
Fix the
paperwork before you need it. In our experience, the following steps close the
gap that sank the employer in the Hall case:
1.
Audit every employment contract
for senior, sales and client-facing staff. Confirm that a signed restraint
actually exists in each file, not merely a letter promising one.
2.
Sign the restraint at or before
commencement of employment, as part of the offer, with the duration,
geographical area and restricted activities spelled out in full.
3.
Never rely on a clause that says a
restraint "will be signed in due course". As the Hall case shows,
that is an agreement to agree, not a restraint.
4.
For existing employees without a
restraint, conclude one at the next promotion or salary increase, so that the
employee receives something of value in exchange for signing.
5.
Do not treat a confidentiality
clause as a substitute. It protects information, but it does not stop the
employee from joining a competitor.
6.
Keep the restraint reasonable. A
restraint covering an entire province for 24 months, when the business operates
within a 300 kilometre radius, invites a public policy challenge.
7.
Act quickly on breach. Restraint
applications are urgent by nature, and delay undermines both the case and the
relief.
What should employees
know?
If you never
signed a restraint, do not assume you are bound by one raised for the first
time when you resign. Equally, do not assume you are free of all obligations. A
confidentiality clause survives termination, and forwarding your employer’s
quotations, pricing schedules or client lists to a competitor can expose you to
an interdict (a court order stopping specified conduct) and a damages claim
under the law of unlawful competition, even where no restraint exists. Take
advice before you move.
Conclusion
Generator and
Plant Hire SA v Hall is not a case about whether restraints of trade are
enforceable in South Africa. They plainly are, as the Citadel and Allens Meshco
judgments confirm. It is a case about the first hurdle that every employer must
clear: proving that a restraint agreement actually came into existence. A
promise to sign a restraint, followed by ten years of silence, clears nothing.
The lesson for employers is simple and inexpensive: reduce the restraint to
writing, on clear terms, and have it signed on day one.
Frequently Asked Questions
Is a verbal restraint of
trade valid in South Africa?
In theory,
yes, because South African law does not require a restraint to be in writing.
In practice, an unwritten restraint is extremely difficult to enforce. The
employer must prove clear agreement on specific terms, and courts will not
readily read a restraint into an employment relationship, so a signed written
restraint remains essential.
Who must prove that a
restraint of trade exists?
The employer.
The employer must first prove that a restraint agreement came into existence
and that the employee breached it. Only then does the burden shift to the
employee to prove, on a balance of probabilities, that enforcing the restraint
would be unreasonable and contrary to public policy.
Can my employer add a
restraint of trade after I resign?
No, not
without your agreement. A restraint is a contract, and contracts need consent
from both sides. In Generator and Plant Hire SA v Hall the Northern Cape High
Court refused to enforce restraint terms that were communicated to the employee
for the first time only after he had already resigned.
Does a confidentiality
clause stop me from working for a competitor?
No. A
confidentiality clause protects the employer’s confidential information and
usually survives termination, but it does not prevent you from taking up
employment with a competitor. Only a valid restraint of trade can do that.
Misusing confidential information at a competitor can, however, still be
interdicted separately.
How long can a restraint
of trade last in South Africa?
There is no
fixed statutory limit. Courts assess reasonableness case by case, weighing the
employer’s protectable interests against the employee’s right to work.
Restraints of six to twenty-four months are common, and courts can enforce a
restraint partially, for example by reducing an unreasonably wide area or
period.
Speak to us before the
restraint becomes a dispute
Whether you
are an employer who needs watertight restraint and confidentiality agreements,
or an employee who has been threatened with a restraint you never signed, we
can help. Bregman Moodley Attorneys has been taking the sting out of legal
problems since 1974.
Call us on +27
(0)11 646 0335, email roy@bmalaw.co.za
or visit www.bregmans.co.za to book a
consultation. We respond to every email with a phone call within 24 working
hours.
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