Page images
PDF
EPUB

in Alabama, it was held that a contract by which a partnership, engaged in the business of selling hardware, and selling out their stock of plow blades and plow stocks to a rival

States engaged in a somewhat similar business.' The defendant testified that he looked up the number of patents pertaining to this branch of the art in 1881, and that there were then about 500. The defendant contends that he ought to be able to use his own patents for subsequent improvements, applicable to such apparatus, if the plaintiff does not elect to purchase them; that he was previously a manufacturer of fire alarm and police telegraph apparatus, and not a seller thereof; that the good will which attached to his business was that of a manufacturer who did not sell his manufactures in the market, and that it is against public policy that he should be restrained from exercising his peculiar skill anywhere in the United States, or in the world, for the period of ten years. The apparatus, as the defendant contends, which he has a right to manufacture and sell, is not secret machinery, and is not protected by any patents which the plaintiff owns or has a right to control, but is apparatus either not protected by patents at all, or by patents of his own, or of some other persons who may choose to employ the defendant. The only ground upon which this restriction can be maintained, is that it is reasonably necessary for the beneficial enjoyment by the plaintiff of the property it bought of the defendant, or if this is not so, that the law in modern times does not regard such an agreement as against public policy. So far as we are aware in every modern case in this common

wealth, except one, where a contract in restraint of trade has been held valid, the restriction has been limited as to space. In Taylor v. Blanchard, 13 Allen, 370, the parties entered into a partnership for carrying on the trade or business of manufacturing shoe cutters,' and it was provided that 'at whatever time the said co-partnership shall be determined and ended,' the defendant shall not, nor will, at any time or times thereafter, either alone or jointly with, or as agent for any person or persons whomsoever, set up, exercise, or carry on the said trade or business of manufacturing and selling shoe cutters within the aforesaid commonwealth of Massachusetts, and shall not, nor will, set up, make or encourage any opposition to the said trade or business hereafter to be carried on by the plaintiff. The manufacture of shoe cutters was an art which could be carried on only by persons instructed in it, and the business was confined to the plaintiff and three other persons, but the court held the agreement void. In Bishop v. Palmer, 146 Mass. 469; s. c., 16 N. E. Rep. 299, the plaintiff, being engaged in the manufacture and selling of bed quilts and comfortables, conveyed to the defendant his 'entire business plant and enterprise as a manufacturer of and dealer in bed quilts and comfortables,' together with the good will of the business and all the machinery, implements and utensils used by him in said business, and agreed that for and during the period of five years from the date hereof, he will

company, agreed "not to handle any more plow blades or plow stocks," construed, in connection with the attendant circumstances, showing the extent of country over which

not, either directly or indirectly, in his own name or in the name of any other person or persons, continue in, carry on, or engage in the business of manufacturing or dealing in bed quilts or comfortables, or of any business of which that may form a part.' It was held that this was clearly illegal and void as being in restraint of trade, because not limited as to space. See also Alger v. Thacher, 19 Pick. 51; Pierce v. Fuller, 8 Mass. 223; 226; Perkins v. Lyman, 9 Mass. 522; Stearns v. Barrett, 1 Pick. 443; Palmer v. Stebbins, 3 Pick. 188; Gilman v. Dwight, 13 Gray. 356; Angier v. Webber, 14 Allen, 211; Dean v. Emerson, 102 Mass. 480; Dwight v. Hamilton, 113 Mass. 175; Boutelle v. Smith, 116 Mass. 111; Ropes v. Upton, 125 Mass. 258; Handforth v. Jackson, 150 Mass. 149; s. C., 22 N. E. Rep. 634. The case of Morse, etc. Machine Co. v. Morse, 103 Mass. 73, is the case referred to as an exception. The question arose upon demurrer. The agreement of the defendant was only to transfer his patents, machinery, etc., and all improvements and inventions, but that he will use his best efforts for the perfecting of improvements in the business and manufacture, and for such alterations and combinations as may tend to insure the success of the same and of the company,' and that he will do no act that may injure the company or its business, and that he will at no time aid, assist or encourage, in any manner, any competition against the same.' He also agreed

'to serve as the superintendent of the company for three years,' etc. The plaintiff company was formed by the defendant and others, and the defendant's business was transferred to it. He was a stockholder and was made superintendent. The plaintiff agreed to employ the defendant for three years, and he was actually employed as superintendent up to the time he entered upon a competing business. The case seems to have been decided on the ground that the defendant had agreed to give to the plaintiff his exclusive services with reference to his mechanical skill and ingenuity in all improvements, alterations and combinations which would tend to insure the success of the plaintiff in manufacturing twist drills and collets. The court say that 'the same principle that enables a partner to bind himself to do nothing in competition with the business of the firm ought to apply to him.' The opinion proceeds to consider the English cases where the restriction was held not to extend beyond the good will of the business which was the subject of the sale, or was not greater than the interests of the vendee required, and was not unreasonable in view of all the circumstances. doctrine, in England, has been carried very far. See Davies v. Davies, L. R. 36 Ch. D. 359. In this country the courts generally have not gone so far, but the old law has been a good deal modified in some jurisdictions in view of modern methods of doing business. See Oregon Steam Navigation Co.

This

the rivalry in business extended, is not an unreasonable restriction or restraint of trade. In a case in Ohio, M, a married woman, engaged in the business of millinery and dressmaking with her separate funds, and on her own account, in the town of F, sold her stock of goods, together

v. Winsor, 20 Wall. 64; Fowle v. Park, 131 U. S. 88; s. c., 9 Sup. Ct. Rep. 658; Ellerman v. Stockyards Co., 49 N. J. Eq. 217; s. C., 23 Atl. Rep. 287; Western, etc. Association v. Starkey, 84 Mich. 76; s. C., 47 N. W. Rep. 604; Matthews v. Associated Press. 136 N. Y. 333; s. c., 32 N. E. Rep. 981; Oliver v. Gilmore, 52 Fed. Rep. 562; Diamond Match Co. v. Roeber, 106 N. Y. 473; s. c., 13 N. E. Rep. 419; Whitney v. Slayton, 40 Me. 224." Field, C. J., in Gamewell, etc. Tel. Co. v. Crane, 160 Mass. 50; s. c.. 35 N. E. Rep. 98.

1 Moore Hardware Co. v. Towers Hardware Co., 87 Ala. 206. See also Hubbard v. Miller, 27 Mich. 15; Curtis v. Gokey, 68 N. Y. 300; Warfield v. Booth, 33 Md. 63; Dethlefs v. Tomsen, 7 Daly, 354; Beal v. Chise, 31 Mich. 490; Horner v. Graves, 7 Bing. 735; White taker v. Howe, 3 Beav. 383; Tallis v. Tallis, 1 El. & Bl. 391; Morse Machine Co. v. Morse, 103 Mass. 73. Under Sec. 1674, Civ. Code, a contract for the sale of the good will of a business and agreeing not to do a similar business in several counties is void as to all but the county in which the business is carried on. City Carpet Beating Works v. Jones, 102 Cal. 506; s. C., 36 Pac. Rep. 841. Civ. Code, § 1673, provides that a contract in restraint of trade otherwise than provided in the next two sections, "is to that extent void," and section 1674 provides that the seller of "the good will of a business may

agree with the buyer to refrain from carrying on a similar business within a specified territory, so long as the buyer or any person deriving title to the good will from him carries on the business." Held, that a provision, on sale of a good will, that the seller shall not engage in the business for three years in a certain city, is not void, but the contract will be limited to such time, not exceeding three years, as the buyer or his assignee carries on the business. Brown v. Kling, 101 Cal. 295; s. C., 35 Pac. Rep. 995. Defendants were the owners of a tobacco warehouse, and had built up quite a trade in the vicinity. Plaintiff purchased the property and good will of their business from them, defendants executing a deed of conveyance which contained a clause to the effect that defendants were selling also all our good will in said warehouse business, as members of" the firm or as individuals; and we agree with said company not to engage in said business, directly or indirectly, for a period of ten years from this date." One of defendants engaged in the same business in the same city within less than five years from the sale. Held, that it was error to sustain a demurrer to the petition asking for an order restraining defendants from continuing such business. Western Dist. Warehouse Co. v. Hobson, 96 Ky. 550; s. c., 29 S. W. Rep. 308.

with the good will of the business, and engaged not to carry on the business at any time in the future, at the town of F, or at any place within such distance of said town, as would interfere with such business, whether the same was carried on by the purchasers or by their successors. It was held that such agreement in equity is binding, and that in an action brought by the successors of the purchasers, M will be enjoined from carrying on such business in violation of the agreement.1

§ 73. Farther Application of the Rule.-The value of a good will is largely determined by the peculiar circumstances under which the business to which it relates has been established and developed. It may be of special value and importance in the sale and transfer of an establishment for the publication of a newspaper, and such sale, if the limitations are reasonable, will be upheld. In a recent case in North Carolina, F and his wife sold a newspaper owned by them in D county, and agreed that F would not edit, print or conduct a newspaper, nor be in anywise connected with one, printed anywhere in the State of North Carolina, and that, for a like period, Mrs. F should not edit, print or conduct a newspaper or magazine, and be in anywise connected with one anywhere in the county of D, said State, without the consent of such purchaser or his assignees. It was held that such contract was not void as an unreasonable restraint of trade.2

1 Morgan v. Perhamus, 36 Ohio pathos, his humor, his learning, or St. 517.

2 Cowan v. Fairbrother, 118 N. Car. 406; s. c. 24 S. E. Rep. 212. "Where a person acquires a reputation for skill and learning in his profession, as a lawyer or a physician, he often creates an intangible but valuable property, by winning the confidence of his patrons and securing immunity from successful competition for their business. So, where an editor by reason of his style, his power, his

of any gift or attainment, attracts
subscribers solely by such personal
qualities, he imparts a peculiar
value to the good will and prop-
erty of a newspaper, which goes
with him, to its injury when he
leaves it and lends the talent and
accomplishments that have given
it patronage and popularity to a
rival journal in the same vicinity.
Where he owns the press and plant
the enhanced value so imparted by
him becomes an element of his

[ocr errors][merged small]

§ 74. Agreement not to Buy or to Sell.-Contracts under which one of the parties is bound not to buy or to sell a particular article, if there is a valid consideration and the restraint is not unreasonable, will be upheld. In a recent case it was held that a contract between an ice manufacturer and a brewer, whereby the former agreed to sell the latter all the ice he needed, the brewer not to retail nor to sell to retailers, is not invalid, there being nothing in the contract to show that the brewer either did, or intended to, make and sell ice. In a recent case in New York, defend

property, with the same incidental power to dispose of it as attaches to any other of his acquisitions which has a market value. Beal v. Chase, 31 Mich. 529. But it is not like other property which ordinarily passes by delivery or assignment to the purchaser. Neither an editor, a lawyer nor a physician can transfer to another his style, his learning or his manners. Either, however, can add to the chances of success and profits of another who embarks in the same business in the same field, by withdrawing as a competitor. So that the one sells and the other buys something valuable, and the policy of the law limits the right to enter into such contract of sale only to the extent that they are held to injure the public by restraining trade. The one sells his prospective patronage and the other buys the right to compete with all others for it, and to be protected against competition from his vendor. The law intends that the one shall have the lawful authority to dispose of his right to compete, but restricts his power of disposition territorially so as to make it only co-extensive with the right of protection on the part of the purchaser. To the extent that the

contract covers territory from which the vendor has derived, and will probably in future derive, no profit or patronage, it needlessly deprives the public of the benefit of open competition in useful business, and of the services of him who sells without any possible advantage to his successor. When the reason upon which a law is founded ceases, the rule itself ceases to operate. The older cases in which the courts attempted to fix arbitrarily geographical bounds, beyond which a contract to forbear competition would not be enforced, have given away to the more rational idea of making every case dependent upon the surrounding circumstances, showing the extent as to time and territory of the protection needed." Ibid. 411.

Crystal Ice Mfg. Co. v. San Antonio Brewing Ass'n. 8 Tex. Civ. App. 1; s. c., 27 S. W. Rep. 210. An agreement made by a traveling man with a purchaser not to sell a certain kind of goods to any one else in the same town is not contrary to public policy. Keith v. Herschberg Optical Co., 48 Ark. 138; s. c., 2 S. W. Rep. 777. As to exclusive telegraph grants by railroad companies there is a

« EelmineJätka »