Agreement in Restraint of Trade Unenforceable
The defendant ran two garages under solus agreements with the plaintiffs who complained when the defendants began to purchase petrol from cheaper alternative sources. The House was asked whether the solus agreements were be regarded in law as an agreement in restraint of trade.
Held: An agreement in restraint of trade is not generally unlawful if the parties choose to abide by it: it is only unenforceable if a party chooses not to abide by it. It was necessary to ascertain the legitimate interests of the landlords which they were entitled to protect and to discover whether those restraints exceeded what was adequate for that purpose. The doctrine of restraint of trade had no application to restraints imposed on persons who, before the transaction by which the restraints were imposed, had no right whatsoever to trade at all on the land in question.
Lord Hodson said: ‘When one remembers that the basis of the doctrine of restraint of trade is the protection of the public interest, it is not difficult to see how the law developed in its conception of reasonableness as the test which must be passed in order to save a contract in restraint of trade from unenforceability.’
Lord Reid said: ‘It has often been said that a person is not entitled to be protected against mere competition. I do not find that very helpful in a case like the present. I think it better to ascertain what were the legitimate interests of the appellants which they were entitled to protect and then to see whether these restraints were more than adequate for that purpose.’
Judges:
Lord Reid, Lord Morris of Borth-y-Gest, Lord Hodson, Lord Pearce, Lord Wilberforce
Citations:
[1968] AC 269, [1967] UKHL 1, [1967] 1 All ER 699
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Young v Timmins 1831
The servant had agreed not to work for anyone else bu the employer, but he might have been given no work and he received no remuneration for considerable periods.
Held: He had been deprived of a livelihood, and the agreement was in restraint . .
Cited – Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company HL 1894
Exceptions to Freedom to Trade
The purchaser of the goodwill of a business sought to enforce a covenant in restraint of trade given by the seller.
Held: At common law a restraint of trade is prima facie contrary to public policy and void, unless it can be shown that the . .
Cited – Attorney General of the Commonwealth of Australia v Adelaide Steamship Company PC 1913
ag_adeleaidePC1913
There was an agreement between a group of colliery owners and a group of shipowners which was ancillary to an agreement between the colliery owners themselves. Each agreement was in restraint of trade.
Held: Lord Parker explained the doctrine . .
Cited – Mogul Steamship Co Ltd v McGregor, Gow and Co HL 18-Dec-1891
An association of shipowners agreed to use various lawful means to dissuade customers from shipping their goods by the Mogul line.
Held: The agreement was lawful in the sense that it gave the Mogul Company no right to sue them. But (majority) . .
Cited – Foley v Classique Coaches Ltd CA 1934
The sellers had sold to the buyers a piece of land to use in the latter’s business as coach proprietors, and also contracted with them to supply all the petrol required for that business ‘at a price to be agreed by the parties in writing and from . .
Cited – English Hop Growers v Dering CA 1928
The defendant farmer had agreed to sell his crop of hops to the Society for five years. He failed to do so and was sued. He replied that the contract was in restraint of trade.
Held: The restraint was reasonable. Scrutton LJ allowed that it . .
Cited – McEllistrim v Ballymacelligott Co-operative Society HL 1919
The Co-operative had changed its rules to prevent any member from selling (except under heavy penalty) any milk produced by him in a large area of County Kerry to anyone except the Society, and a member could not terminate his membership without the . .
Cited – Servais Bouchard v Princes Hall Restaurant CA 1904
A restaurant in Piccadilly had contracted with a supplier of burgundy not to sell burgundy to its customers other than such as it had purchased from the supplier. The restaurant broke the contract
Held: A contract by which defendant Restaurant . .
Cited – Herbert Morris Ltd v Saxelby HL 1916
For a covenant in restraint of trade to be treated as reasonable in the interests of the parties ‘it must afford no more than adequate protection to the benefit of the party in whose favour it is imposed.’ There is a need for the court to consider . .
Cited – United Shoe Machinery Company of Canada v Brunet PC 23-Mar-1909
(Quebec) The defendant Company leased machinery under a condition that it should not be used in conjunction with machinery made by any other manufacturer.
Held: The condition was not in restraint of trade. . .
Cited – Biggs v Hoddinott 1898
The owner of a freehouse had agreed to a tie in favour of a brewer who had lent him money. . .
Cited – Warner Brothers Pictures v Nelson 1936
Bette Davis contracted with the plaintiff film company to render her services as an actress exclusively to that company. With nearly six years of the contractual term yet to run, Ms Davis contracted with a third person to appear as a film artist. . .
Cited by:
Cited – WWF -World Wide Fund for Nature (Formerly World Wildlife Fund), World Wildlife Fund Inc v World Wrestling Federation Entertainment Inc ChD 1-Oct-2001
The Fund sought summary relief against the use of the sign ‘WWF’ by the defendants, in breach of a contract. The defendants urged that the contract operated in restraint of trade. There had been long running and widespread trade mark disputes, . .
Cited – Alec Lobb (Garages) Ltd v Total Oil Ltd CA 1985
The court was asked whether the terms of a lease and lease back amounted to an unconscionable bargain and was unenforceable.
Held: The court affirmed the decision at first instance, but emphasised the need for unconscientious behaviour rather . .
Cited – Tillman v Egon Zehnder Ltd SC 3-Jul-2019
The company appealed from rejection of its contention that its former employee should be restrained from employment by a competitor under a clause in her former employment contract. . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant, Commercial
Leading Case
Updated: 10 April 2022; Ref: scu.180312