Restraint of trade CASES
In English law, a restraint of trade is a contractual term restricting an individual’s or business’s freedom to engage in trade or professional activities, enforceable only if reasonable and justifiable.
Definition and Principles
Restraints of trade clauses typically prevent individuals from competing, soliciting customers, or working within certain industries or geographic areas after leaving employment or selling a business. To be valid, they must protect legitimate interests and not excessively restrict trade.
Key Considerations
- Reasonableness: Duration, geographic scope, and nature of restriction.
- Legitimate Interests: Protection of trade secrets, confidential information, customer relationships, or goodwill.
- Public Interest: Courts consider the broader public impact of enforcement.
Practical Implications
Careful drafting ensures restraints are enforceable and proportional, balancing protection of legitimate business interests with individual freedom.
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An actress, Bette Davis, contracted to work exclusively for Warner Bros. but then engaged with a rival studio. The court granted an injunction enforcing the negative covenant, preventing her from working for others, but refused to order specific performance. Facts The plaintiffs, Warner Brothers Pictures Inc., sought an injunction to restrain the defendant, the actress Bette Davis, from breaching her contract. In 1934, the defendant entered into a contract to provide her exclusive services as a motion picture actress to the plaintiffs for 52 weeks, with options for extension. The contract contained a positive covenant to render these exclusive services
Facts The plaintiffs, a family-owned company, Alec Lobb (Garages) Ltd, and its directors, Mr. and Mrs. Lobb, were in severe financial distress. To avoid insolvency, they entered into a complex transaction in 1969 with the defendant, Total Oil (GB) Ltd. The agreement consisted of a lease and lease-back arrangement for their garage premises. The plaintiffs leased the freehold of the property to Total for a term of 51 years in return for a premium of £35,000. Simultaneously, Total leased the property back to the company for a 21-year term. A crucial component of this arrangement was a ‘solus tie’ agreement,
