Restraint Of Trade

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Restraint of trade - Wikipedia, the free encyclopedia
The restraint of trade doctrine's current use is small, given modern and ... Practical law: Restraint of trade and business secrets ...
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restraint of trade: Definition from Answers.com
restraint of trade n. , pl. restraints of trade . An action or condition that tends to prevent free competition in business, as the creation of a
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Restraint of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business.

Contractual obligations not to trade are illegal agreements on public policy grounds unless they are reasonable in the interests of both contracting parties and of the public at large.Nordenfelt v. Maxim, Nordenfelt Guns and Ammunition Co AC 535

Restraint of trade mainly affects post-termination restrictive covenants in employment contracts, and restrictions on competition in contracts for the sale of businesses.

Restraining workers Restraining clauses in employment contracts are enforceable if:

Generally, if a restraining clause is found to be unreasonable, then it will be void. In certain circumstances though the court may uphold it either by construing ambiguities or by severance. Severance consists of the application of what is known as the "blue pencil test"; if individual words which make the clause excessively wide are able to be crossed out and the clause still makes grammatical sense, without altering the nature of the obligations, then the courts may be willing to sever the illegal aspects of the clause and enforce the remainder.

History , 17th century English jurist

To be a valid restraint of trade in the first place, both parties must have provided valuable consideration for their agreement to be enforceable. In Dyer's Case(1414) 2 Hen. 5, 5 Pl. 26 a dyer had given a bond not to exercise his trade in the same town as the plaintiff for six months but the plaintiff had promised nothing in return. On hearing the plaintiff's attempt to enforce this restraint, Hull J exclaimed,

"per Dieu, if the plaintiff were here, he should go to prison till he had paid a fine to the King."

The common law has evolved to reflect changing business conditions. So in the early seventeenth century case of Rogers v. ParryRogers v. Parry (1613) 2 Bulstr. 136 it was held that a joiner who promised not to trade from his house for 21 years could have this bond enforced against him since the time and place was certain. It was also held (by Edward Coke) that a man cannot bind himself to not use his trade generally.

This was followed in Broad v. JolyffeBroad v. Jolyffe (1620) Cro.Jac. 596 and Mitchel v. ReynoldsMitchel v. Reynolds (1711) 1 P.Wms. 181 where Thomas Parker, 1st Earl of Macclesfield asked, "What does it signify to a tradesman in London what another does in Newcastle?" In times of such slow communications and commerce around the country it seemed axiomatic that a general restraint served no legitimate purpose for one's business and ought to be void. But already in 1880 in Roussillon v. RoussillonRoussillon v. Roussillon (1880) 14 Ch.D. 351 Edward Fry stated that a restraint unlimited in space need not be void, since the real question was whether it went further than necessary for the promisee's protection. So in the NordenfeltNordenfelt v. Maxim, Nordenfelt Gun Co. AC 535 case Lord Macnaghten ruled that while one could validly promise to "not make guns or ammunition anywhere in the world" it was an unreasonable restraint to "not compete with Maxim in any way." This approach in England was confirmed by the House of Lords in Mason v. The Provident Supply and Clothing Co.Mason v. The Provident Supply and Clothing Co. AC 724

Notes External links



Restraint of trade - Wikipedia, the free encyclopedia
Restraint of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. In an old leading case of Mitchell v.

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