Free Essay On Noncompetition Clause And Public Policy

a) The man can protect himself by entering into contract in restraint of trade with the entrepreneur. In Esso Petroleum v Harper’s Garage (Stourport) Ltd [1968] Lord Hodson defined a contract in restraint of trade as follows;
“A contract in restraint of trade is one in which a party (the covenantor) agrees with any other party (the covenantee) to restrict his liberty in the future to carry on trade with other persons not parties to the contract in such manner as he chooses.”
In the covenant the man could require the entrepreneur not to deal in similar business within a specified location and for a reasonable period of time as was the case in Nordenfelt v Maxim Nordenfelt Guns and Ammunition co [1984].
b) The man has legal protection if he enters into such a contract since common law recognizes contracts in restraint of trade to the extent that they protect legitimate interest within a reasonable scope.
In Nordenfelt v Maxim Nordenfelt Guns and Ammunition co [1984], Thorsten Nordefelt was a manufacture in armaments. He sold his business to Hitram Stevens Maxim. In the sale they agreed that Nordenfelt would not make ammunitions anywhere in the world nor compete with Maxim in any for a period of 25 years.
The decision held by the House of Lords was that the clause prohibiting Nordenfelt from making guns or ammunition was reasonable and thus enforceable but not that banning him from competing in any way.
c) Although contracts in restraint of trade are contrary to public policy and prima facie void, they are binding if they are reasonable. If the man entered into such a contract it cannot be declared illegal if he can proof that;
i. There is an interest to protect. By virtue of the vendor/purchaser relationship there exits an interest to be protected.
ii. Such a restraint is reasonable.
iii. Such a restraint is not contrary to the interest of the public.

References:

magazine INSITE LAW. (2012, October 9th). Retrieved from DAILY ONLINE LAW NEWS AND BLOGS: http://www.insitelawmagazine.com