The Federal Supreme Court has held that an employee`s confidentiality obligations depend to a large extent on the terms of the agreed contractual obligations. Employees who have access to confidential information should be required to sign non-disclosure agreements (DNAs) and legal advice should be sought when drafting non-disclosure agreements. Since the applicability of non-disclosure agreements may vary from jurisdiction to jurisdiction, “model non-disclosure agreements”, if used, should always be considered from the perspective of local law. The doctrine of trade restriction has undergone several iterations since it was first expressed in 17th century English cases. The original doctrine condemned any agreement that prevented competition and was considered null and void.[1] Doctrine was taught in Michael v. Reynolds[2], where the doctrinal pendulum tipped in the opposite direction and was modified over the centuries until its modern construction entered our law in Malaysia as section 28 of the Contracts Act 1950. To arrive at this statement, the court distinguished between the English cases (and apparently ignored the Hua Khiow decision), but it is not clear whether the reasons for finding a judicial differentiation were based on the construction of Article 28 or the facts of the case, or both, as this was not considered in the court`s decision. The Tribunal`s subsequent unqualified judicial decision, as cited above, is all the more surprising in view of the fact that the wording of Article 28 itself does not make such a distinction and is impartial and that exception 3 clearly saw the need to deal with restrictions imposed under an existing contract. 1. If the clause in the contract has caused a person to restrict another person`s freedom in the future to pursue business activities with other parties who are not parties for a certain period of time, this would clearly fall under section 28 of the Contracts Act 1950. Although the wording of Article 28 does not distinguish between restrictions during the continuation of an existing contract and those that apply after termination of the contract, 2 of the 3 exceptions above relate to post-contractual scenarios and could therefore indicate that the main objective of Article 28 is to prohibit restrictions after the termination of a contractual relationship. However, the third exception, which concerns the continuation of a partnership, would suggest the opposite, since it clearly provides for restrictions on an existing contractual relationship (i.e. ongoing partnership agreements).
Non-compete obligations prevent former employees from competing with their former employers by preventing them from pursuing a particular profession or business, which may be delimited by a geographical area and/or limited for a certain period of time. Don`t be afraid for your search for your employment rights, don`t stop there. It is important to note that an “employment contract” is a form of contract in itself. That is, the provisions of the Contracts Act of 1950 would also apply to them. Would these “trade restriction” clauses also fall within the definition in section 28 of the Contracts Act 1950? It should be noted that this form of clause would be enforceable even if it was not expressly provided for in the employment contract (decision of the Federal Court in the case of Dynacast (Melaka) Sdn Bhd & Ors v Vision Cast Sdn Bhd & Anor [2016] 3 MLJ 417). As can be seen from the discussion above, the laws restricting trade in Malaysia are certainly stricter than those in Singapore. The position of restricting trade agreements in Malaysia can be concluded, since all contracts restricting trade are null and void pro tanto, unless they fall under legal exceptions. On the other hand, the position in Singapore is that all trade restriction agreements are prima facie void unless they meet the adequacy test. A contrary opinion would mean that a former employee could exploit confidential information with impunity, since a former employee would only have to wait until the end of the restriction period. Such a result could not be envisaged by any of the contracting parties, since it would deny the very purpose of a confidentiality provision in a contract of employment.
The consequence is that if a particular agreement is an agreement that restricts trade, Malaysian courts have no discretion other than to annul it under Article 28, except for the above-mentioned exceptions. [2] We believe that Malaysia should take a more flexible approach to restricting trade. The Indian Commission Act calls for the amendment of p. 27 of the Indian Treaties Act, which is called S. Section 28 of the Contracts Act 1950 is identical in order to allow for appropriate restriction of trade. A similar view was shared by the Supreme Court of India in the case of Percept D`Mark (India) Pvt Ltd v. Zaheer Khan & Anor. The judge wrote: “.
somewhere, there must be a boundary between contracts that restrict trade and whose appropriateness can therefore be considered reasonable by courts which have merely regulated normal business relations between the parties and which are therefore free from doctrines … ». Dynacast`s lawsuit failed because it did not specify what kind of confidential information or trade secrets were allegedly misappropriated by Mr. Cheok. In general, all trade restriction agreements are prima facie void and unenforceable. This principle is well established in the context of employment and would therefore cover non-compete obligations under termination clauses of employment contracts. [5] Malaysian courts have taken a more liberal interpretive approach to restricting trade by distinguishing between trade restriction and trade restriction, as seen in Hua Khiow Steamship Co Ltd v. Chop Guan Hin. . . .