Restrictive Covenants

Question 1

General topics of discussion for answer (RCs)

Answer 1

1.State what an RC is + why it is used
2. What one needs to prove to rely on an RC
3. Discuss consideration of geography + time in deciding whether an RC ‘reasonable and fair’
4. Discuss what are consdiered ‘legitimate business interests’
5. Extent of protection RC’s provide for each
6. Necessity to consider information/skills disclosed/learnt were regarded by … as a trade secret and whether … was expressly informed
7. Acknowledgement of UCTA 1997, repealed by CRA 2015
8. Analyse the circumstances in which … is/isn’t entitled to act for a competing company.
9. Dissect the relevant authority (Faccenda Chicken Ltd v Fowler1987), by inferring that the information … is going to avail is/is not confidential.

Question 2

What is a restrictive covenant? (1)

Answer 2

• A clause in a contract of employment that prohibits an individual from competing with their ex-employer for a certain period after they have left the business.

Question 3

Why are restrictive covenants used? (1)

Answer 3

• To protect a businesses legitimate proprietary interests

Question 4

What does one need to prove in order to rely on a restrictive covenant? (1)

Answer 4

• that it is both (a) designed to protect legitimate business interests
• (b) that it extends no further than is ‘reasonably necessary’ to protect those interests.

Question 5

What are the two main factors courts will consider in determining whether a clause is ‘reasonable and fair’? (2)

Answer 5

Geography
Time
(Bluebell Apparel v Dickinson 1978 + Spencer v Marchington 1998)

Question 6

What happened in Bluebell Apparel v Dickinson 1978? (2)

Answer 6

A worldwide restrictive covenant lasting 2 years was upheld.

Question 7

What happened in Spencer v Marchington 1998? (2)

Answer 7

A restrictive covenant lasting 2 years and covering a radius of 25 miles and 10 miles of two respective towns was deemed unreasonable.

Question 8

What is the relevance of Bluebell Apparel v Dickinson 1978 & Spencer v Marchington 1998? (2)

Answer 8

They highlight the issue of determining what measures are considered ‘reasonably necessary’ to protect the interests of a business.

Question 9

What are considered legitimate business interests? (3)

Answer 9

• Information with a confidential element
• Trade secrets
  Faccenda v Chicken v Fowler 1987 highlights that courts will look to distinguish the two.

Question 10

To what extent are legitimate business interests protected by restrictive convenants? (4)

Answer 10

• Trade secrets is protected by implied duty of confidentiality
• Information with a confidentialo element only amounts to breach of contract if it is disclosed over duration of employment -> will not be protected after employment is terminated (Brooks v Olyslager OMS (UK) 1998)

Question 11

What did the UTCA 1977 do? (5)

Answer 11

• Regulates contracts by limiting the extent to which one party can claim breach of contract through use of clauses such as restrictive covenants

Question 12

Why did the CRA 2015 repeal the UCTA 1977? (5)

Answer 12

• It provided new, more specific requirements for unfair terms in consumer contracts.