Restrictive covenants may be found within a contract of employment, in contracts for the sale of a business and in partnership agreements. A restrictive covenant is a clause stipulation in a contract, which limits one party's freedom to work where he/she pleases or for whom he/she please or in the line of business he/she pleases. One example may be an employer may insert a restrictive covenant, into a contract of employment, which will stipulate that the employee cannot work for a rival employer for a certain period of time or while being employed by them.

The general rule is contract in restraint of trade are void but restrictive covenant are enforceable if they are shown to be reasonable in the interest of the parties and in the publics interest. Slightly different consideration applies depending upon whether the restriction appears in a contract of employment as the court are concerned that the employee is not prevented from earning his living and in a contract for the sale of a business where a buyer of a business has paid a sum for the goodwill, the court may be more inclined to find that a restriction is reasonable.