Contract - Illegality and restraint of trade Flashcards
Definition of a contract in restraint of trade
An agreement in which one or both parties limit their freedom to work or pursue a trade or profession in some way.
Pearce v Brookes
Contracts against public policy are illegal - contract promoting sexual immorality could not be enforced.
Mason v Provident Clothing & Supply
The burden of proving the restraint is reasonable lies on the covenantee (contract imposer)
Herbert Morris v Saxelby
Burden of proving the restraint is contrary to public policy lies on the covenantor (party subject to restriction).
Forster & Sons v Suggett
Was reasonable - 5years not working in glass industry in UK due to secret manufacturing process
Trade secrets alegitimate proprietary interest owed by employer
Commercial Plastics v Vincent
Not reasonable - too wide in scope nor capable or severance although court expressed regret as genuine proprietary interest existed.
Anywhere in the world with rivals for one year.
Littlewoods v Harris
Market research held as confidential information capable of protevtion
Mason v Provident Clothing & Supply
Area relevant
Islington employed but restricted to 25 miles out of London - void
Compare to Forster v Suggett - whole of UK reasonable
Fitch v Dewes
Duration important
Never practice within seven miles.
Reasonable due to nature of profession and information of influence acquired.
M & S Drapers v Reynolds
Duration important
Five years
Void - too long due to position held (collector salesman)
Wyatt v Kreglinger and Fernau
Must be balanced with public interest
To deprive the community of a valid skill sufficient.
Criticised but followed in Bull v Pitney Bowes
Herbert Morris v Saxelby quote
Lord Parker “an employer may protect his business connection only in respect of employees who are in a position to influence and subsequently entice customers as opposed to employees who merely have knowledge of such customers”
Nordenfelt v Maxim Nordenfelt Guns and Ammunition
25 years
Gunmaking
Worldwide restriction for 25 years
Valid except for “any other business activity” part
Lord MacNaughten “it is a sufficient justification if the restriction is reasonable in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, as to afford adequate protection to the party in whose favour it is imposed while at the same time it is in no way injurious to the public”.
Vancouver Malt and Sake Brewing v Vancouver Breweries
Liberty to brew beer but did not
To sell goodwill of brewer’s licence.
Void - conferred no proprietary interest.
Must be a genuine sale.
British Reinforced Concrete Engineering v Schelff
Only actual business sold is entitled to the protection
Attwood v Lamont
Illustrates confusion over the blue pencil test.
DC held not altering substance of agreement but
CA held A single divisible agreement, the substantial object of which was to protect the employer’s entire business.
Description of entire business
Employer/employee
Whole clause failed
Also authority for scope needing to be reasonable
Goldsoll v Goldman
London, imitation jewellery
Area outside London was void and only limited to imitation jewellery - not real as well.
Divisible
Sale of business
More liberal approach
Littlewoods v Harris
By construing the clause by reference to circumstances existing when the contract was made, possible to limit it to those matters it was intended to protect.
Note
JA Mont v Mills - if a contract includes a covenant expressed to be too wide - held void and of no effect
Wincanton Ltd v Cranny -held intentionally wide in an attempt to cover all possible situations - fatal to enforceability of the restrictions (distinguished from Littlewoods)
