Business And Law
Question 1
“RESTRAINT OF TRADE CLAUSES ARE GENERALLY AGAINST THE PUBLIC POLICY AND SHOULD NEVER BE ENFORCEABLE. THE PURPOSE OF HAVING THEM IS TO RESTRICT FREE MOVEMENT OF LABOUR AND/OR HAMPER COMPETITION.”
DO YOU AGREE WITH THE STATEMENT FROM LEGAL POINT OF VIEW? STATE REASONS FOR YOUR ANSWER AND ILLUSTRATE WITH CASE LAW EXAMPLES, IF ANY.
(25 MARKS)
• RESTRAINTS OF TRADE: MEANING AND DEFINITION.
-UNDER CL: CERTAIN CONTRACTS VOID BUT NOT ILLEGAL AND THESE CONTRACTS NOT ENCOURAGED
-E.G CONTRACTS OF EMPLOYMENT/ CONTRACTS SALE OF BUSINESS/ SOLUS CONTRACTS
- BECAUSE NOT IN PUBLIC INTEREST
-R/T AN EMPLOYEE MAY BE REQUIRED NOT TO COMPETE WITH THE EMPLOYER IF HE LEAVES HIS EMPLOYMENT
• WHY ARE THEY GENERALLY UNENFORCEABLE?
-R/T VOID UNLESS REASONABLE TO PROTECT LEGITIMATE INTEREST
• WILL A COURT ENFORCE A CLAUSE IF ITS PURPOSE IS TO RESTRICT FREEDOM AND COMPETITION?
-NO. ILLEGAL CONTRACT IS NOT ENFORCEABLE AS THE COURT WILL NEVER ENFORCE A CONTRACT BY ORDERING A PARTY TO SUCH CONTRACT TO DO SOMETHING UNLAWFUL OR CONTRARY TO PUBLIC POLICY.
-DOCTRINE OF SEVERANCE: STRIKE OUT THE UNREASONABLE PARTS BUT NOT RE-DRAFT THEM
• IS IT TRUE THAT THEY ARE ALWAYS UNENFORCEABLE? HOW DO WE MEASURE REASONABLENESS? – LEGITIMATE INTERESTS AND EXTENT OF THE CLAUSE (GEOGRAPHICAL AREA AND TIME DURATION)
-NO, IT WILL DEPEND ON WHETHER IT IS REASONABLE TO PROTECT LEGITIMATE INTERESTS.
-TEST FOR ENFORCEABILITY – REASONABLENESS (3 QUESTIONS)
1. IS THE PURPOSE OF THE RESTRAINT TO PROTECT A BUSINESS INTEREST THAT CAN BE LEGALLY PROTECTED?
2. HOW LONG DOES THE RESTRAINT LAST?
3. WHAT ARE THE GEOGRAPHICAL AREA COVERED BY THE RESTRAINT?
• CASE LAW EXAMPLES ILLUSTRATING ENFORCEABLE RESTRAINTS: FORSTER AND SONS V. SUGGETT (1918), FITCH V. DEWES (1921) ETC.
• CONCLUSION
QUESTION 2
QUANTUM LTD. WAS BUILDING A NEW SHOPPING PLAZA, QUANTUM PLAZA, IN KOWLOON TONG. RECENTLY RETIRED XIANG...
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