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

Intro/Define:

The essay involves the law on Restraint of Trade (ROT) clauses which are a vitiating factor. A Vitiating factor is one which invalidates an otherwise perfectly formed contract. A definition of ROT can be found in Source 1 at lines 9-12.

Basic rule:

Such clauses are prima-facie void, but can be valid if they are justified. Judges are usually reluctant to interfere due to the doctrine of freedom of contract. However, in this area they have done so. The leading case in this area where an ROT clause was justified was seen in "Nordenfelt v Maxim Nordenfelt". (Facts of case & wwh, 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 was a specialist business, select customer base and a worldwide industry. Lord Macnaughten laid down 2 conditions which if satisfied would make an ROT clause valid. As stated in source 2 at lines 30-33 it must be reasonable in the interests of the parties and the public.