{"id":"nsw:act-1976-067","name":"Restraints of Trade Act 1976","slug":"restraints-of-trade-act-1976","collection":"act","jurisdiction":"nsw","status":"in_force","isInForce":true,"actNumber":"67 of 1976","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":109939,"registerId":"nsw-act-1976-067-current","compilationNumber":null,"startDate":"2026-04-03","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Name of Act","content":"#### 1 Name of Act\n\n1 Name of Act\n\n> This Act may be cited as the [Restraints of Trade Act 1976](/view/html/inforce/current/act-1976-067).","sortOrder":0},{"sectionNumber":"2","sectionType":"section","heading":"Definitions","content":"#### 2 Definitions\n\n2 Definitions\n\n> > (1) In this Act:\n> > \n> > association includes a corporation.\n> > \n> > public policy means public policy in respect of restraint of trade.\n> > \n> > rules includes memorandum and articles of association of a corporation and provisions of the constitution of an unincorporated association.\n> \n> > (2) In this Act, except in subsection (1), restraint of trade means a restraint of trade created by contract, created by the rules of an association, or otherwise created.\n> \n> > (3) Notes included in this Act do not form part of this Act.\n> \n> **s 2:** Am 2000 No 93, Sch 1.22 \\[1\\].","sortOrder":1},{"sectionNumber":"3","sectionType":"section","heading":"Application of Act","content":"#### 3 Application of Act\n\n3 Application of Act\n\n> > (1) This Act does not apply to or in respect of a restraint of trade created before the date of assent to this Act.\n> \n> > (2) This Act applies notwithstanding any stipulation to the contrary.\n> \n> > (3) This Act does not affect the operation of:\n> > \n> > > (a) section 304 of the [Industrial Relations Act 1996](/view/html/inforce/current/act-1996-017),\n> > \n> > > (b) (Repealed)\n> > \n> > > (c) section 125 of the Co-operatives National Law (NSW), or\n> > \n> > > (d) any other enactment relating to the validity of a restraint of trade.\n> \n> Note—\n> \n> The Competition Code of New South Wales and the [Trade Practices Act 1974](http://www.legislation.gov.au/) of the Commonwealth make provision in relation to restraints of trade.\n> \n> **s 3:** Am 1996 No 121, Sch 4.44; 1998 No 11, Sch 6.20; 2000 No 93, Sch 1.22 \\[2\\] \\[3\\]; 2014 No 88, Sch 2.57.","sortOrder":2},{"sectionNumber":"4","sectionType":"section","heading":"Extent to which restraint of trade valid","content":"#### 4 Extent to which restraint of trade valid\n\n4 Extent to which restraint of trade valid\n\n> > (1) A restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not.\n> \n> > (2) Subsection (1) does not affect the invalidity of a restraint of trade by reason of any matter other than public policy.\n> \n> > (3) Where, on application by a person subject to the restraint, it appears to the Supreme Court that a restraint of trade is, as regards its application to the applicant, against public policy to any extent by reason of, or partly by reason of, a manifest failure by a person who created or joined in creating the restraint to attempt to make the restraint a reasonable restraint, the Court, having regard to the circumstances in which the restraint was created, may, on such terms as the Court thinks fit, order that the restraint be, as regards its application to the applicant, altogether invalid or valid to such extent only (not exceeding the extent to which the restraint is not against public policy) as the Court thinks fit and any such order shall, notwithstanding sub-section (1), have effect on and from such date (not being a date earlier than the date on which the order was made) as is specified in the order.\n> \n> > (4) Where, under the rules of an association, a person who is a member of the association is subject to a restraint of trade, the association shall, for the purposes of subsection (3), be deemed to have created or joined in creating the restraint.\n> \n> > (5) An order under subsection (3) does not affect any right (including any right to damages) accrued before the date the order takes effect.","sortOrder":3}],"analysis":{"issue_detection":{"absurdities":[],"contradictions":[]},"kimi_summary":{"_metrics":{"source":"grok-batch-everything"},"content_quality":"ok","complexity_score":5,"scope_assessment":{"changed":false,"description":"The legislation has not grown beyond its original 1976 purpose of reforming the all-or-nothing common-law approach to restraint validity; amendments have been limited to updating cross-references and definitions without expanding the core mechanism in s 4."},"complexity_factors":["Interplay between statutory test in s 4(1) and retained common-law public policy concept","Discretionary Supreme Court power under s 4(3) triggered only on 'manifest failure' with multiple conditional elements","Deeming rule in s 4(4) that treats an association as having created the restraint","Savings provisions in s 3(3) that preserve the operation of listed statutes including the Industrial Relations Act 1996 and Co-operatives National Law","Temporal limitation in s 3(1) excluding pre-1976 restraints"],"plain_english_summary":"**The Restraints of Trade Act 1976 (NSW)** updates the rules around restraints of trade, such as non-compete clauses, non-solicitation agreements, or restrictions in business sales that limit what someone can do after leaving a job or selling a business.\n\nUnder old common law, if a restraint went even slightly too far it was usually completely void. This Act changes that: a restraint is now **valid to the extent it is not against public policy** (i.e. to the extent it is reasonable to protect legitimate business interests). Courts can treat the restraint as severable even if the wording is not explicitly divisible.\n\nThe Supreme Court can, in limited cases, declare a restraint completely invalid or only partly valid for a particular person if the party who imposed it showed a 'manifest failure' to try making it reasonable. The Act covers restraints created by contracts, by the rules of associations (including companies), or 'otherwise created', but only those made after the Act received assent in 1976.\n\nIt does not override other specific laws on restraints (such as certain industrial or co-operative rules) and works alongside Commonwealth competition legislation. The law matters because it tilts the balance toward enforcing reasonable protections while still striking down unfair ones, giving businesses more confidence in drafting restraints and employees clearer avenues to challenge overly broad ones."},"summary":{"complexity_score":5,"scope_assessment":{"changed":false,"description":"The Act appears to have remained largely consistent with its original intent since 1976 — to allow NSW courts to enforce restraints of trade to the extent they are reasonable, rather than applying an all-or-nothing approach. The two version dates (2000 and 2015) suggest only minor amendments over nearly 50 years, indicating no significant expansion or contraction of scope from the original purpose."},"complexity_factors":["Interplay between the Act and pre-existing common law principles on restraint of trade, requiring understanding of both to apply the law correctly","The concept of 'reading down' or severing clauses to the extent reasonable involves judicial discretion that is inherently unpredictable and fact-specific","Determining what is 'reasonable' in any given restraint requires analysis of industry context, geographic scope, duration, and the legitimate interests being protected","The Act interacts with federal competition law (Australian Consumer Law / Competition and Consumer Act 2010), creating potential jurisdictional complexity","Limited legislative text means the law's practical scope has been largely shaped by decades of case law, which practitioners must navigate alongside the Act itself","Different treatment may apply depending on whether the restraint arises from employment, sale of business, or other commercial contexts"],"plain_english_summary":"## Restraints of Trade Act 1976 (NSW)\n\n**What is this law about?**\n\nThis is a New South Wales law that deals with **restraint of trade clauses** — these are contractual provisions (terms written into a contract) that restrict what a person can do after leaving a job or selling a business. Common examples include:\n\n- A clause saying an ex-employee cannot work for a competitor for 12 months\n- A clause saying a person who sells their business cannot open a competing business nearby\n\n**Who does it affect?**\n\nThis law affects:\n- **Employees** who have signed employment contracts with non-compete or non-solicitation clauses (restrictions on poaching clients or staff after leaving)\n- **Business owners** who have sold a business and signed agreements not to compete\n- **Employers and businesses** relying on these restrictions to protect their interests\n\n**Why does it matter?**\n\nUnder general (common law) rules, restraint of trade clauses are presumed to be void (invalid) unless they are reasonable. NSW's Restraints of Trade Act 1976 changed this by allowing courts to **enforce a restraint to the extent it is reasonable**, rather than throwing out the whole clause if part of it goes too far. This is sometimes called the 'blue pencil' or severance approach on steroids — courts can actually *read down* (reduce or modify) an overly broad restraint to make it enforceable, rather than striking it out entirely.\n\n**In plain terms:** If your employment contract says you can't work in the same industry anywhere in Australia for 5 years, a court under this Act could decide that restriction goes too far — but instead of scrapping it completely, it might enforce a more limited version (e.g., within Sydney for 6 months) if that portion is reasonable.\n\n**Current status:** This Act has been in force since 1976 and remains current law in NSW as of 2026. It is a short but significant piece of legislation that has had a major practical impact on how non-compete and similar clauses are handled in NSW courts."},"flash_summary":{"complexity_score":4,"scope_assessment":{"changed":true,"description":"The text of the Act includes amendment notes to sections 2 and 3 (see amendment footnotes), and the current provisions explicitly exclude restraints created before assent (s 3(1)) and preserve the operation of other enactments dealing with restraints (s 3(3)). Those elements indicate the Act’s present scope differs from a simple, unamended original text: it contains non‑retrospectivity and specific savings for other statutes and association rules (s 2(2), s 3(1), s 3(3)). The source text does not set out the original version in full, so the precise nature of each historical change is not contained in the provided text."},"complexity_factors":["Use of open-ended legal standard: validity determined by whether a restraint is \"against public policy\" (s 4(1))","Judicial discretion: Supreme Court may order full or partial invalidation and set terms and effective dates (s 4(3))","Ambiguous doctrinal trigger: \"manifest failure\" to attempt to make the restraint reasonable is a factual/legal standard requiring judicial assessment (s 4(3))","Interplay with other statutes and preserved enactments (s 3(3)) creates cross‑statute considerations","Application to different sources of restraints (contracts, association rules, otherwise) and deeming rule for associations (s 2(2), s 4(4))","Non-retrospectivity for pre-existing restraints (s 3(1)) combined with preservation of accrued rights (s 4(5)) requires careful timing analysis"],"plain_english_summary":"### What this law does, who it affects, and how it works\n\n- This Act sets how courts treat \"restraints of trade\" — contract terms or association rules that limit what a person can do in business or employment (s 2(2)).\n\n- It does not apply to restraints that were created before the Act received assent (s 3(1)). It applies even if a contract says otherwise (s 3(2)) and does not override other statutes dealing with restraints of trade (s 3(3)).\n\n- The basic legal rule is that a restraint of trade is valid to the extent it is not against public policy (s 4(1)). That means a restraint is enforceable to the degree it does not offend the law’s public-policy standard for restraints.\n\n- The Supreme Court can be asked by a person subject to a restraint to decide whether the restraint is against public policy for that person. If the Court finds the restraint (as it applies to that person) is against public policy because the person who made the restraint manifestly failed to try to make it a reasonable restraint, the Court may either declare the restraint wholly invalid as to that person or declare it valid only to the extent the Court thinks appropriate (but no more than the maximum validity allowed by public policy). The Court may impose terms on any order and set the date the order takes effect (s 4(3)).\n\n- If a restraint arises from an association’s rules (for example, a corporation’s rules or an unincorporated association’s constitution), the association is treated as a creator of the restraint for the purpose of Court applications (s 4(4)).\n\n- An order invalidating or limiting a restraint does not affect rights (including claims for damages) that have already accrued before the order takes effect (s 4(5)).\n\nPurpose-claims from the text and mechanical trade-offs\n\n- The instrument’s mechanical effect is to preserve judicial control over enforceability of restraints of trade (mainly through s 4), while excluding pre-existing restraints (s 3(1)) and not displacing other statutory regimes (s 3(3)). Those are the explicit rules in the text.\n\n- Who decides: the Supreme Court decides questions about public-policy invalidity and has broad remedial discretion to invalidate or limit restraints and to set terms and effective dates for its orders (s 4(3)).\n\n- Who pays / who bears consequences: a person subject to a restraint can apply to the Court (s 4(3)); the creator (including an association, deemed creator where relevant) may have the restraint limited or struck down as to that person (s 4(3)–(4)). Pre-existing accrued rights (including claims for damages) remain enforceable up to the date the Court’s order takes effect (s 4(5)).\n\n- Incentives and compliance burdens: by allowing judicial modification or invalidation where there was a \"manifest failure\" to attempt reasonableness, the Act imposes legal uncertainty for parties creating restraints: creators must take steps to make restraints reasonable or face later reduction or invalidation (s 4(3)). Parties relying on restraints must consider the risk that a court may alter enforceability and also that statutory or other legislative regimes may still apply (s 3(3)).\n\n- Discretion and implementation risk: the Court’s power to decide whether a restraint offends public policy and to order tailored relief introduces case-by-case judicial discretion into enforcement (s 4(3)). The Act does not define \"public policy\" in detail; it simply uses that standard (s 2(1) defines the phrase \"public policy\" as \"public policy in respect of restraint of trade\").\n\n- Effects on private choice and associations: the Act reaches restraints created by contract or by association rules (s 2(2), s 4(4)), so both individual contracting parties and incorporated/unincorporated associations are affected when they create restraints.\n\nPractical implications (mechanical, not evaluative)\n\n- Contracts and association rules that restrict trade or employment remain potentially enforceable, but their enforceability can be tested and adjusted by the Supreme Court on application (s 4(1), (3)).\n\n- Creators of restraints should document efforts to make restraints reasonable because a \"manifest failure\" to do so is the statutory trigger for a Court to intervene (s 4(3)).\n\n- Claims and accrued rights arising before a Court order are preserved and not retrospectively undone by the Court’s order (s 4(5))."}},"importantCases":[],"_links":{"self":"/api/acts/restraints-of-trade-act-1976","history":"/api/acts/restraints-of-trade-act-1976/history","analysis":"/api/acts/restraints-of-trade-act-1976/analysis","conflicts":"/api/acts/restraints-of-trade-act-1976/conflicts","importantCases":"/api/acts/restraints-of-trade-act-1976/important-cases","documents":"/api/acts/restraints-of-trade-act-1976/documents"}}