Contract - Illegality and restraint of trade

Question 0

Definition of a contract in restraint of trade

Answer 0

An agreement in which one or both parties limit their freedom to work or pursue a trade or profession in some way.

Question 1

Pearce v Brookes

Answer 1

Contracts against public policy are illegal - contract promoting sexual immorality could not be enforced.

Question 2

Mason v Provident Clothing & Supply

Answer 2

The burden of proving the restraint is reasonable lies on the covenantee (contract imposer)

Question 3

Herbert Morris v Saxelby

Answer 3

Burden of proving the restraint is contrary to public policy lies on the covenantor (party subject to restriction).

Question 4

Forster & Sons v Suggett

Answer 4

Was reasonable - 5years not working in glass industry in UK due to secret manufacturing process

Trade secrets alegitimate proprietary interest owed by employer

Question 5

Commercial Plastics v Vincent

Answer 5

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.

Question 6

Littlewoods v Harris

Answer 6

Market research held as confidential information capable of protevtion

Question 7

Mason v Provident Clothing & Supply

Answer 7

Area relevant

Islington employed but restricted to 25 miles out of London - void

Compare to Forster v Suggett - whole of UK reasonable

Question 8

Fitch v Dewes

Answer 8

Duration important
Never practice within seven miles.
Reasonable due to nature of profession and information of influence acquired.

Question 9

M & S Drapers v Reynolds

Answer 9

Duration important
Five years
Void - too long due to position held (collector salesman)

Question 10

Wyatt v Kreglinger and Fernau

Answer 10

Must be balanced with public interest
To deprive the community of a valid skill sufficient.

Criticised but followed in Bull v Pitney Bowes

Question 11

Herbert Morris v Saxelby quote

Answer 11

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”

Question 12

Nordenfelt v Maxim Nordenfelt Guns and Ammunition

Answer 12

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”.

Question 13

Vancouver Malt and Sake Brewing v Vancouver Breweries

Answer 13

Liberty to brew beer but did not
To sell goodwill of brewer’s licence.

Void - conferred no proprietary interest.
Must be a genuine sale.

Question 14

British Reinforced Concrete Engineering v Schelff

Answer 14

Only actual business sold is entitled to the protection

Question 15

Attwood v Lamont

Answer 15

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

Question 16

Goldsoll v Goldman

Answer 16

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

Question 17

Littlewoods v Harris

Answer 17

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)