OCR A2 Contract Law - Special Studies Paper - Jan/June 2013 - Restraint of Trade 34 Marker (1)

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Preview of OCR A2 Contract Law - Special Studies Paper - Jan/June 2013 - Restraint of Trade 34 Marker (1)

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Restraint of Trade ­ Intro/Basic Rule - 34 Restraint of Trade - 34 Marker (2)
Marker (1) Unreasonable Employer/Employee:
The courts have recognised the doctrine of ROT in employer/employee cases, where employee's promise not
to set up a business on their account on leaving the employer's service or to enter employment into a rival
Intro/Define: firm (Source 1, L19-21).
The leading case in this area is "Mason V Provident Clothing Industry". (Facts of case are in source 4, L6-8
and 12-15). It was held to be unreasonable due to unequal bargaining strengths being used and the courts
The essay involves the law on Restraint of Trade (ROT) clauses which are a also refused to sever. The lords have adopted a similar line of reasoning in the case of "Herbet Morris v
vitiating factor. A Vitiating factor is one which invalidates an otherwise perfectly Saxelby". Here an engineer and a draftsman who worked in London was restrained from working with or
formed contract. A definition of ROT can be found in Source 1 at lines 9-12. alone in the sale of pulley block etc for 7 years in the UK or Ireland. It was held to be unreasonable as the
clause was too wide as he never had customer contact. The Court of Appeal (CofA) also confirmed this in the
case of "Attwood v Lamont", where a tailor was restrained from working as a dressmaker and a haberdasher
Basic rule: within a 10 mile radius of Kidderminster. In this case it was also held to be unreasonable as the clause was
too wide and against public policy. Here the courts also refused to sever.
AO2: In all these cases they show judicial unity in their approach in dealing with ROT clauses. In "M v PCI",
Such clauses are prima-facie void, but can be valid if they are justified. Judges are Lord Moulton stated in source 4 at lines 16-17 "that even if the covenant, as a whole, was too wide, the
usually reluctant to interfere due to the doctrine of freedom of contract. However, courts might enforce restrictions which it might consider reasonable". Lord Moulton also went onto say that
in this area they have done so. The leading case in this area where an ROT clause the real sanction was the "expense and terror of litigation" (S4, L26) and that the covenant was "penal rather
was justified was seen in "Nordenfelt v Maxim Nordenfelt". (Facts of case & wwh, than protective" (S4, L29-30) and that they shouldn't rely on the courts to correct their mistakes and that they
"should take the consequences" (S4, L31).
S2 L1-11). It was held that only the latter part of the clause was unreasonable as
Nordenfelt hadn't sold "any other business". The remaining was reasonable as it This approach shows how the judges haven't always 'relaxed' their approach and can still apply the rigid
rule to stop people from interfering with transactions. This approach can be further seen in the case of
was a specialist business, select customer base and a worldwide industry. Lord "Lyne-Pirkis v Jones", (facts S5, L2-5) it was held to be unreasonable due to the fact imprecise language
Macnaughten laid down 2 conditions which if satisfied would make an ROT clause wasn't used and the phrase "engage in medical practice", was far too wide and vague and therefore the
valid. As stated in source 2 at lines 30-33 it must be reasonable in the interests of clause failed, as it wasn't meriting protection as it stopped the GP from working in a hospital or as a
the parties and the public. consultant.

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Restraint of Trade - 34 Marker (3) Restraint of Trade - 34 Marker (4)
Reasonable Employer/Employee Vendors of a Business:
As source 5, lines 1-2 states a ROT clause can be reasonable so long as "precise language" As source 1, lines 21-23 states, the courts have recognised the doctrine of ROT
has been used and it isn't too "wide". fall in the area of vendors of a business.…read more


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