Agreements In Restraint Of Trade

In this case, the parties were businessmen in Calcutta. The defendant, Rajcoomar suffered a loss due to competition from the complainant and reached an agreement with the complainant that if he entered into his business there, he would have made all the advances he had made to his workers. When the defendant was unable to pay, the applicant filed an appeal to recover the amount, but failed to do so because it was a trade restriction agreement that was therefore not applicable in court. Once a legitimate interest has been established, trade restriction cannot go beyond what is necessary to protect that legitimate interest. The restriction must be proportionate with respect to the duration of the restriction, the geographical area and the extent of the activities covered. The term “appropriate” generally means that it does not provide more protection than is relevant and necessary to preserve the relevant legitimate interest. With regard to geographical area, for example, a restriction for a seller who worked exclusively in the UK would be presumed to have a similar activity anywhere in the world (although this depends on the nature of the transaction). With the duration of the restriction, it is much more difficult to define a general rule. However, the courts recognize that the longer the restriction, the greater the likelihood that it will appear inappropriate. That said, it is not scandalous that the limitation of trade clauses in commercial contexts takes 2, 4 or even 5 years.

In the United States, the first major discussion in the opinion of the chief of the court (later President of the United States, then Head of Supreme Justice) William Howard Taft in the United States against Addyston Pipe and Steel Co. [9] Justice Taft explained the Sherman Antitrust Act of 1890[10] as a legal codification of the English common law doctrine of commercial restraint. , as in cases like Mitchel v Reynolds. [11] The Tribunal distinguishes between mere trade restrictions and those that result in the legitimate purpose of a legitimate contract and are reasonably necessary to achieve that objective. [12] An example is a non-competition clause related to the rental or sale of a bakery, as in the case of Mitchel. Such a treaty should be considered by a “rule of reason,” i.e. it should be considered legitimate if it is “necessary and incidental.” The price-fixing and supply-fixing agreements involved in the Addyston case are an example of the reserved nature of the reserve.