Restraint of Code Law and Legal Definition

Restraint of trade means any activity which tends to limit trade, sales and transportation in interstate commerce or has a substantial impact on interstate commerce. Antitrust law prohibits most of these types of practices. The main antitrust law is the Sherman Act. To prevent trusts from creating restraints on trade or commerce and reducing competition, Congress passed the Sherman Antitrust Act in 1890. The Sherman Act aims to eliminate restraints on trade and competition. States also have laws against restraints of trade that have strictly local impact.

There are also restraint of trade contracts, which are contracts that state, for example, that a person selling a business agrees not to open a similar business within 50 miles of the business being sold and for a period of ten years. These contracts are not necessarily illegal, although some states outlaw restraints on competitive business activity. It is generally against public policy to prevent someone from engaging in an occupation.