Week Eight Flashcards
What are some considerations regarding reasonableness and adequacy?
Nature of restriction – e.g., activity,
geographical extent, duration
Nature of employment – junior or senior
Bargaining position (Sundolitt v Addison)
What is a Liquidates Damages Clause and is it enforceable or not?
A clause in a contract that provides in money terms what is payable where a party breaches a contract
* Enforceable clauses
What is a Penalty Clause and is it enforceable or not?
A clause in a contract that provides in money terms what is payable where a party breaches a contract, but one which involves an element of penalty for the breach
* Unenforceable clauses
* (In Scots Law, a penalty clause might be
modified by the court to remove the penalty
element and render it enforceable)
What is meant by measures of damages?
The measure of damages is the amount of compensation a plaintiff receives for a loss or harm caused by another party.
What case is key in defining the scope of Restrictive Covenants and the precedent it sets?
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] - The restraints on trade are enforceable if they are reasonable in scope and duration and in the interest of both parties
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] intorduces three requirements for a valid restrictive covenant what are they?
Is the covenant necessary to protect legitimate interests
Reasonable between parties?
And in the Public Interest
What key case is used when defining reasonable adequacy in restrictive covenants?
Sundolitt v Addison [2017] - Restrictive covenents must be reasonable in scope and duration to be enforced
Sundolitt v Addison [2017] introduces ground rules for reasonable adequacy, what are they?
Has the term been validly
incorporated?
Does the term impose a restriction on
one party over another party who
seeks to enforce the restriction?
Should the restriction be enforced?
What cases are concerned with Reasonableness and Public Policy and the precedents they set?
Bridge v Deacons [1984] - Sale of business supports upholding restrictive covenants for protecting property rights.
Herbert Morris v Saxelby [1916] - Covenants can’t be too broad and require different considerations when concerning someones ability to earn a livelihood in this case it was too excessive in that regard
What case is concerned with legitimate interests and what are those interests?
Bluebell Apparel Ltd v Dickinson 1978 SC 16 (2-year worldwide restriction)
Protecting confidential information, trade secrets, business methods.
What case is concerned with Business connections and what they are?
Scottish Farmers Dairy Co v McGhee (2-year 1-mile radius restriction)
Competition vs client poaching.
What case is key in defining the Blue Pencil Test and what that is?
Tillman v Egon Zehnder Ltd [2019] - shows the use of the blue pencil test, when removing “interested in” from a non-compete clause, making the rest of it enforceable
What are some key example cases pertaining to restrictive covenants and what they are?
Stewart v Stewart 1899 1 F 1158: Photography business. Restriction: within 20 miles of Elgin.
- The covenant was enforceable because it was reasonable and necessary to protect the business
Dallas McMillan & Sinclair v Simpson 1989 SLT 454: Partnership agreement, 20-mile restriction for 5 years.
- Wasn’t enforceable as it wasn’t reasonable due to the broad range and the large customer base of Glasgow
Prosoft Resources v Griffiths 1999 SLT 1255: Employment restriction involving confidential information.
- Wasn’t enforceable as it wasn’t sufficently justified to protect Prosoft’s business interests, covenants needs to be tailored and specific
What case is mentioned in regard to measures and damages?
A/B Karlshamns Oljefabriker v Monarch Steamship Co Ltd 1949 SC - Because the costs were a direct and natural consequence of the breach the court awarded damages to cover the costs
What case is key in establishing the difference between penalty and liquidated damages clauses and what precedent it sets?
Clydebank Engineering & Shipbuilding Co Ltd v Castaneda (1906) - Although described as a penalty clause it was deemed to be a liquidated damages clause. The case established that the terminology in a contract is not decisive but the ket factor is whether the sum stipulated is genuine pre-estimate of loss (liquidated damages) or an extravagant and unconscionable amount (penalty). If the former it is enforceable if the latter it is not.
