Charles A. (Charles Andrew) Ray.

Contractual limitations, including trade strikes and conspiracies and corporate trusts and combinations online

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Cowden, 13 Mo. 211; Chalfant v. Payton, 91 Ind. 202; Bellairs v. Bellairs,

L. R. 18 Eq. 510.


by a husband agrees to pay his divorced wife a specified monthly
sura for so long a time as she does not marry again and shall
remain single and unmarried, is not void as in restraint of mar-

A condition in a will which holds out to the legatee an induce-
ment to live separate and apart from her husband is void as
against public policy. Thus, in Brown v. Peek, 1 Eden, 140, the
will provided that the legatee should be paid two pounds per
month if she lived with her husband, but if she lived from him, and
with her mother, she should be paid five pounds a month.

In Wren v. Bradley, 2 DeG. & S. 49, the bequest was " to my
daughter, Ann Jefferies AYren, the wife of Abraham Wren, in
case she shall be living apart from her said husband, the said
Abraham Wren, and shall continue so to do during the hfetime of
my said wife, an annuity of £30, by equal quarterly payments, the
first of such payments to be made at the expiration of three cal-
endar months next after my decease. And I do hereby further
direct that, if at any time the said Ann Jeflieries Wren shall
cohabit with the said Abraham Wren, the said annuity hereinbe-
fore given to her shall, during the time she shall so cohabit, abso-
lutely cease and determine."

In Conrad v. Long, 33 Mich. 79, the clause of the will was as
follows: " To my brother, Frederick S. Conrad, I give and
bequeath the one half so remaining, and the other half I give and
bequeath to my sister, Elizabeth Long, upon this condition: — if at
any time subsequent she should conclude not to live with her
present husband, Henry Long, as his wife. But if she continue
so to live as the wife of the said Henry Long until her death,,
then, in that case, I give and bequeath all my property, real and
personal, remaining after the burial of my mother aforesaid, tO'
my aforesaid brother, Frederick S. Conrad."

In all of these cases the conditions quoted were very properly
held to have been void. The reason is apparent. They held out
a direct inducement for the legatees to live separate and apart
from their husbands. The result may have been to bring about
the separation and violation of their marital duties and obligations
without any just cause, and in an unlawful manner. This was not

^Jones V. Jones, — Colo. — , 27 Pac. Rep. 85.


SO in the case of Born v. ITorstmann^ 5 L. R. A. 577, 80 Cal. 454,
where it was held that a bequest to testator's daii^^hters which
provides that in case either of them shall become a widow, or
otherwise become lawfully separated from her husband, she shall
receive her share of the property absolutely, instead of the income,
which is given to her while she remains a wife, is not void as
against public policy on the ground of encouraging the daughters
to live separate or be divorced from their husbands.

In that case the condition coxtW not be complied with except
by a legal separation, and for causes found by a court of justice to
be sufficient. This being so, there was nothing unlawful in the
condition. It is true it may be said that it would have a tendency
to induce the wife to assert her legal right to a divorce and sepa-
ration, and that but for such inducement such right might have
been waived, Imt it can hardly be said that it is against public
poHcy to attach to a legacy such a condition as will tend to induce
a legatee to do a lawful act in a lawful way.

The precise question presented here has been before the Supreme
Court of Vermont, in which the will provided that the legatee
should have the income of the estate, and such further sums as
her wants might demand, so long as she remained the wife of I.
A. Thayer; but if she was " left a widow, or for any cause should
cease to be the wife of said Thayer," the whole estate should be
given to her. In that case the court said: " The ground upon
which it is claimed that the provision of tlie will violates public
j)olicy is that it furnishes an inducement to the wife to become the
widow of her husband, or to separate herself from him in such a
manner that she would cease to be his wife. The appellants, to
sustain this claim, rely upon the rule as stated in 2 Kedf. Wills,
293; 1 Story, Eq. Jur. 291, and the case of Conrad v. Long, 33
Mich. 78.

'' The cases cited in support of the rule laid down in Redfield
and Story, it will be found on examination, do not sustain the
rule as here sought to be applied. They are generally cases in
which an inducement was directly held out to encourage a volun-
tary separation of husband and wife, and where the intent to
enconrage such a separation could be found in the language
employed in making the bequest. They are none of them so sim-


ilar in their facts to the case at bar that they can be considered
authorities in it. Tlie first object is to ascertain, if possible, what
the intention of the testatrix was; and we find no difticultj in
reaching the conchision that it was to have her estate disposed of
just as it has been by the probate court. It was a wise and pru-
dent provision to make for her daughter. While she should
remain a wife, her husband would be under obligation to support
her, and hence the income only was absolutely left her during the
continuance of that relation; but when she should cease to be a
wife, and so become dependent upon her own resources, it was
just and wise to provide that she should have the entire estate." *
Not only may there be a good and sufficient reason, as stated in
the opinion cited, for providing that the legatee shall not have the
bulk of the property until she is deprived of the support of a hus-
band, but there may be the best of reasons for placing the same
in such condition that she cannot be improperly induced by a
worthless or profligate husliand to squander it, while she con-
tinues to be his wife, and, it may be, under his influence and con-
trol. Such a condition in a will is not only valid, but under certain
circumstances it may be just and commendable.'

'See Thayer v. Spear, 1 New Eng. Rep. 356, 58 Vt. 327; Buck v. EugTm,

127 Ind. 46.
''Clark V. Fosdick, 6 L. R. A. 132, 118 N. Y. 7.


§31. Excluding One from Pursuing His Trade or Employment.
'^'l. Vontracts in General Restraint of Trade are Void.

33. Contracts Imposing Limited Restraints TerritoriitUy as a Con-

dition of Employment.

34. Territorial Limitations Sustained — Distance, how Determined

— Instances.

35. Limit of State Lines.

36. Territorial Limitations Held too Restrictive — Instances.

37. Limitations in Regard to Time.

38. Brewers^ Contracts.

39. Limitations Imposed on Seller to Protect Purchaser of Busi-

ness or Stock.

40. Scde of Discovery.

41. 3Ionopoly Secured to a Patent Right.

§ 31. Excluding One from Pursuing His Trade or Employ-
ment. — The decision in Mltdiel v. Reynolds, 1 P. Wnis. 181,
Smith's Leading Cases, voL 1, pt. 11, 508, may be regarded as the
first announcement of the rule in relation to the invalidity of con-
tracts in restraint of trade. The rule was then adjusted to exist-
ing conditions and to the state of social and commercial life.

The object of government, as interpreted by the judges, was
not to interfere with the free and independent right of man to
dispose of his property or of his labor; it was to guard society, of
which he was a member, from the injurions consequences of his
agreements, whether they would arise from his own improvidence
in bargaining away his means of gaining a livelihood, or in the
deprivation to society of the advantages of competition in skilled

The attempt on the part of tiie law was to leave the party free
to contract in regard to his own labor and yet, consistent with
that freedom, to prevent injurious results to the public from loss
of the avails of labor, with regard to which he had contracted.

In Bishop V. Palmer, 6 New Eng. Rep. 129, 146 Mass. 469,

Wrcgon Steam Nav. Go. v. Witisor, 87 U. S. 20 Wall. 64, 22 L. ed. 315;
Skrainka v. ScharringhauKen, 8 Mo. App. 522; WeUer v. Heisee, 10 Hun,
A^i; Bishop V. Palmer, 6 New Eng. Rep. 129, 146 Mass. 469; Alger v.
Thacher, 19 Pick. 51.



the contract containsd inter alia, the followmg provisions: "And
the said party of the first part, hereby, for hinisslf, his executors,
administrators and assigns, covenant, etc., that for the period of
five years he will not continue in or carry on the business of man-
ufacturing or dealing in bed-quilts or comfortables, or of any
business of which they form a part; that he will not eiiter into the
cotton waste business in the city of Fall River, or influence others
to do so, or make any bid therefor or induce others to
do so." The first restriction was held clearly illegal, it being
a general agreement, without any limitation of space, that during
the period of five years he will not directly or indirectly continue
in, carry on or engage in the business of manufacturing or dealing
in certain articles of commerce.

So a contract was held void if it exclude the obligor from
engaging in a useful trade as an iron founder, everywhere and for
all time.'

An agreement not to engage for eight years in the manufacture
of a certain yeast powder, nor in any branch of the yeast business,
is unlimited and void;^ but a contract unlimited territorially, save
by the words " so far as the law allows," is not void as being in
conflict with public policy, nor as being too uncertain in its terms
to be capable of being enforced. Such a covenant is to be con-
strued as providing for a restraint to the full extent that the rule,
;.s enforced by the courts, will allow a person to contract against
his right of trading in a particular business, and will be given
efl^ect so as to secure to the covenantee the full benefit of that
Avliich he has purchased from the covenantor.' Such a contract
is transferable, with the assignment of the business to aid which
it was made.'' The courts will enforce such contracts where they

K^lger v. Thaclier, 19 Pick. 51, 31 Am. Dec. 119. See Perkins v. Clay, 54

N H. 519; Whitney v. Slayton, 40 Me. 230; Long v. Toiol. 42 Mo. 549;

Ward V. Byrne, 5 Mees. & W. 563; Taylor v. Blanclmrd, 13 Allen, 370;

Dean v. Ememon, 102 Mass. 480; AlUopp v. Wlieatcroft, L. R. 15 Eq 59;

Morse T. D. & M. Go. v. Morse, 103 Mass. 73; Divios v. Davies. L. R 36

Ch. Div. 339, 381; Acery v. Lang ford, Kay, 663, 667, 668; 2 Pars.

Cont. 748, note z; S-n'fh v. Western U. Teleg. Co. 11 Fed. R'^p. 10, note;

Skarp V. Whiteside, 19 Fed. Rep. 164, note; McCauU v. Bmham, 16 Fed.

Rep. 37, 42, note ; Hormr v. Ashford, 3 Bing. 322; Mallan v. May, 11

Mees. & W. 653; Mitchel v. Reynolds, 1 P. Wms. 181.
"Callahan v. Donnolly, 45 Cal. 152, 13 Am. Rep. 172.
*Dimes V. Divies. 56 L. J. Cti. 481; 35 Week. Rap. 6)7.
*Hedge v. Lowe, 47 Iowa, 137; Guerand v. Bandelet, 32 Md. 561; Gompers v.

HocJiester, 56 Pa. 194.


are reasonable and restrain all attempts to evade the restriction;'
l)nt an agreement not to sell milk in a town is not violated by
selling to anotlier residing outside the town, with knowledge mere-
ly that the purchaser intends to retail the milk within the town."

The fact that two men had been engaged as rivals in manu-
facturing an article for domestic use will not prevent one of
them from giving up the independent manufacture, and uniting
as a 25artner wdth the other for a term of years, the price of the
manufactured article being lixed in the contract of partnership."

The withdrawal of labor from a special business within a
limited locality is therefore sustained; under this theory the law
of partnership exists.*

Trade with a newly discovered line of coast may be limited by
contract to the actual business prospects for the Qpening of inter-
course profitably.*

A store-keeper may contract with a manufacturer that the latter
will induce his workmen to trade w^th the merchant, on con-
dition of his paying the manufacturer 8 per cent on all sales to
such employes;^ but it has been held that such a contract, by
which the lessee of a coal mine, as part of the rent of the mine,
contracted to use his^ eiforts to control the patronage of his
employes and their families, in favor of the lessor, and that the
lessee should refuse to recognize any orders given upon him by
any employe upon any other merchant for goods purchased from
them, nor would he give any order, due-bill or evidence of
indebtedness transferable to such other store-keeper for goods,
was void as in restraint of trade, injurious to the employes and
tending to extortion, opjDression, and to create a monopoly.'

§ 32. Contracts in General Restraint of Trade are Void. —
Oontracts in general restraint of trade are void, unless natural and

^ButUr V. Burleson, 16 Vt. 176; Treat v. Shoninger Melodeon Go. 35 Conn.
543; Duffy v. Shocket/, 11 Ind. 70; Smith v. Martin, 80 Ind. 260; Whitney
V. Stay ton, 40 Me. 234; Hankinson's App. 78 Pa. 196; Cook v. Johnson, 47
Conn. 175; Richardson v. Peacock, 28 N. J. Eq. 151.

^Smith V. Martin, 80 Ind. 260.

^Dolph V. Troy Laundry Mack. Co. 28 Fed. Rep. 553.

^Cooper V. Twibill, 3 Campb. 286, note; Catt v. Tourle, L. R. 4 Ch. 654.

^Perkins v. Lyman, 9 Mass. 523.

^Oeorge v. East Tennessee Coal Co. 15 Lea, 455.

^Crawford v. Wick, 18 Ohio St. 190.


not unreasonable for the protection of the parties,' because they
impose too great a restraint on trade and are oppressive to one
j)artj without being of benefit to the other/

It has often been held that an agreement in general restraint of
trade is illegal and void. For a contract in restraint upon trade
to be valid must not be general; the consideration must be
adequate, not colorable, and the restriction must be reasonable;*
so an agreement in general or total restraint of trade has been
held to be void without regard to the consideration upon wliich
it is founded. Such an agreement is one not to carry on a certain
business anywhere, whether for a limited or unlimited time.*

At a public auction, if the purpose be not to prevent competi-
tion, nor this result likely to follow, one may bid as the agent of
others;' but if made, or if it tend to stifle competition, the act is

An agreement among stockholders of a corporation that they
will neitlier of them give powers of attorney to anyone to vote
their stock, nor will they sell any portion of such stock to other
parties, is in restraint of trade and void.' But an agreement
between a corporation and its stockholders, tliat the latter should

Wftnppel V. Brockway, 21 Wend. 157; Maier v. Roman, 4 Daly, 168; Bunlop
V. Gregory, 10 JS. Y. 243; Hedge v. Loice, 47 Iowa, 187, 140; Smalley v.
Greene, 52 Iowa, 241; Ward v. Byrne, 5 Mees. & W. 548; Hinde v. Gray,
1 Man. & G. 195; Alhopp v. Wheatcroft, 27 L. T. N. S. 372, L. R. 15 Eq.

^Eeichew v. Hamilton, 3 G. Greene. 596, 598; Mitchel v. Reynolds, 1 P. Wms.
184, lOMod.27, 85, 130; Hu-nlocke v.BlacMowe, 2 Saund. 156, note 1; Col-
mer v, Clark, 7 Mod. 230; Chesman v. Nainby, 2 Ld. Raym. 1456; Davis
V. Mason, 5 T. R. 119.

^Morris Ran Coal Co. v. Barclay Coal Co. 68 Pa. 173; Oregon Steam Wav.
Co. V. Winsor, 87 U. S. 20 Wall. 64, 22 L. ed. 315; Boutelle v. »mith, 116
]VIass. Ill; Hubbard V. Miller, 27 Mich. 15; Wiggins Ferry Co. v. Chicago
& A. R. Co. 73 Mo. 389; Sinn v. Sigsbee, 67 111. 75; Bowser v. Bliss, 7
Blackf. 344; Holmes v. Martin, 10 Ga. 503; Brewer v. Marshall, 19 N.
J. Eq. 537.

^Story, Cont. § 650; Dean v. Emerson, 102 Mass. 480; Rousillon v. Rousillon,
L. R. 14 Cii. Div. 351.

^Ifational Bank of the Metropolis v. Spragne, 20 N. J. Eq. 159; Smith v. Ull-
man, 5o Md. 183; Hunt v. Elliott, 80 Ind. 245; Kearney v. Taylor, 56 U.
S. 15 How. 494, 519, 14 L. ed. 787, 797; Woodruff v. Berry, 40 Ark. 251;
Marie v. Gartison, 83 N. Y. 14; Huntington v. Bardwell, 46 N. H. 492;
Smith V. Greenlee, 13 N. C. 126; Breslin v. Brown, 24 Ohio St. 565; James
V. Fulcrod, 5 Tex. 512; McMinn v. Phipps, 3 Sneed, 195.

^G-ibbs V. Smith, 115 Mass. 592; King v. Winants, 71 N. C. 469: Jones v. Cas-
well, 3 Johns. Cas. 29; Swan v. Ghorpenning, 20 Cal. 182; Hannah V.
Fife, 27 Mich. 172; Wooten v. Huikle, 20 Mo. 290.

''Fisher v. Bush, 35 Hun, 641.


not purchase goods of a certain class, during a limited period, of
anyone other than tlie members of an association with which that
corporation had entered into a contract, resulting in benefits to
itself and members, is not in restraint of trade.'

So agreements or conditions imposed in the conveyance of real
property, restricting its use to certain purposes, or excluding cer-
tain named uses of the property, come under the same general
rules and are often held invalid as without a justifiable purpose,
or without sufficient consideration, or as creating and sustaining

A contract entered into between a baker and a grocer, for a
fixed payment of money, on conditions which would naturally
tend to enhance the price of the baker's Ijread and render it a
monopoly, is void as in restraint of trade. So are all agreements
to create corners in grain, produce, etc."

A contract entered into by the grain dealers of a town, the true
object of which is to form a secret combination, which would
stille all competition, control the price of grain, cost of storage
and of shipment, is in restraint of trade, and void as against pub-
lic policy.*

Where one producer enters into a contract witli another pro-
ducer, binding the latter to withhold and keep out of the market
his supply, the contract is against public policy and void."

An agreement of members of a trade protection society not to
employ any commercial travelers, salesman or outside employe
who had left the service of another member of the trade union,
without his written consent, for the period of two years, is void."

Persons controlling water powers individually in a stream can-
not bind themselves in a liquidated sum as damages, not to sell to
certain persons negotiating for the purchase of some of the rights,
nor to make, without any limit in time, any compromise or set-

^Van MartevY. Babcock, 23 Barb. 033; Curtis v. Gokcy, 68 N. Y. 304; Live

Stock Asso. of N. 7. v. Levy. 3 N. Y. S. R. 514.
^Taylor v. Blanehard, 13 Allen, 370; Morris Run Coal Co. v. Barday Goal

Co. 68 Pa. 173; Craft v. McConoughv. 79 111.346; Arnot v. Pittston & E.

Coal Co. 68 N. Y. 553; Crawford v. Wick, 18 Ohio St. 190.
^ v. Leavitt, 46 Mich. 447.
*Craft V. McConougJiy, 79 111. 346.
"Arnot V. Pittston & E. Coal Go. 68 N. Y. 558.
^Mineral Water Bot. Ex. & Tr. Prat Soc. 31 Solic. Jour. 626.


tlement with such persons except on the written consent of the
others. Such a contract, while it restrains the parties from com-
promising htigation, which is favored in law, also tends to the
same evil consequences as attend the enforcement of a contract
in restraint of trade ; ' but if the restraint be natural and not
unreasonable for the protection of the parties it will be sus-
tained. "

§ 33. Contracts Imposing Limited Restraints Territorially
as a Condition of Employment.— Where the restraint con-
tracted for appears to have been for a just and honest purpose,
for the protection of the legitimate interests of the party in whose
favor it is imposed, reasonable as between the parties and not
.specially injurious to the public, the restraint will be held valid. '
Thus a contract in restraint of trade as to a particular place is
valid, * such as a contract not to engage in a particular trade or
business in a certain place within a specified time. '

A limit in space to the exercise of a trade, where there are rea-
sons for the limit imposed, will be sustained. '

One may contract not to run steamboats on a particular river,
as between Albany and New York. '

An agreement that a steamer should not be used in the waters
of a State for a fixed period was held legal."

' Ford V. Gregson, 7 Mont. 89; Horner v. Ashford, 3 Bing. 322, 336; Mitchel
V. Reynolds, 1 P. Wnis. 1«1; Median v. May, 11 Mees. & W. 603.

« Leather Cloth Co. v. Lorsont, 39 L. J. Ch. 86, L. R. 9 Eq. 345; Smith's App.
5 Cent Rep 209, 113 Pa. 579; Mandeville v. Barman, 5 Cent. Rep. b2n,
42 N J Eq.l8o; Bousmon\.Iiousillon,h.R.UCh.J)\y.35l; Diamond
Match Co. V. Roeber, 9 Cent. Rep. 181, 106 N. Y. 473; Herreshoffv. Bou
tinemi, 8 L. R. A. 469, 17 R. I. — ; Alcock v. Gilberison, 5 Duer, 76;
Jo,.es V. Lees, 1 Hurlst. & N. 189; Mumford v. Gethtng, 7 C. B. N. S, 305;
Harmo v. Parsons, 32 L. J. Ch. 247; Keeler v. Taylor, 53 Pa. 467.

» Hubbard v Miller, 27 Mich. 15, 19. See Giterand v. Bandelet, 32 Md 562;
Berl V. Chase, 31 Mich. 490; Eicing v. Johnson, 34 How. Pr. 202; Fierce
V. Woodward, 6 Pick. 206; Hedge v. Lowe, 47 Iowa, 137, 140.

* Chappel V. Brockway, 21 Wend. 157; Jenkins v. Temples, 39 Ga. 655; Stnal-
lev V Greene, 52 Iowa, 241; Hedge v. Lowe, 47 Iowa, 137; Guerand v
iJnndelet, 32 Md. 562; Beal v. Chase, 31 Mich. 490; Ewing v. Johnson, 34
How. Pr. 202; Pierce v. Woodward, 6 Pick. 206.

» Arnold v. Kreutzer, 67 Iowa. 214; Hedge v. Lowe, 47 Iowa, 137; ^maUey v.
Greene 52 Iowa, 241; Baumqarten v. Broadimy, 11 N. C. 8; lallis v.
Tallis, 1 El. & Bl. 391.

< Smith V. Fell, 5 Cent. Rep. 208, 113 Pa. 579.

^ Bunlop V. Gregory, 10 N. Y. 241.

« Oregon Steam Nav. Co. v. Winsor, 87 U. S. 20 Wall. 64, 22 L. ed. 315.


A contract restraininaj a party from following a particular busi-
ness in a designated city for five years is held valid, as the party
may pursue any other employment in the same locality.'

An agent of a wholesale house may contract not to sell his goods
to but one purchaser in the towm.''

A contract by a dealer in Kew Jersey not to ship poultry to
New York or Washington has been held not to contain an un-
reasonable restriction/

An agreement not to sell marl off the vendor's land was held
valid;* and so of an agreement not to manufacture goods in general;^
so a restriction as to the use of a particular name in doing busi-
ness for a period of five years is held reasonable, although the space
is unlimited.'

A tailor may limit his sphere of business by excluding himself
from a space within ten miles of Charing Cross for three years.^

All contracts in restraint of trade are not void; it is not against
public policy for a person entering an employment to enter into a
covenant restricted as to space not to carry on the same business in
his own country, even if his employer should leave the business.
The employer wishes to have security given to the business, not
only while he is carrying it on himself, but in favor of his suc-
cessors and during the whole life of the covenantor; and if reason-
able when made, subsequent circumstances will not affect the
operation of the contract under the rule as to contracts in restraint
of trade.*

One who on entering a merchant's employ covenants not to ei:
gage in or carry on the same business within a mile of the shop at
any future time, will be restrained from violation of his covenant,
l)ecause the business was sold with its good will to another and re-
moved to another shop, near by. The covenant was held to exist
in favor of the purchaser and to bind the covenantor for his hfe.

1 Washburn v. Dosch, 68 Wis. 486.

^Eeifh V. HerscMerg Optical Co. 48 Ark. 138,

^Richardson v. Peacock, 33 N. J. Eq. 597.

*Brewer v. Marshall, 19 N. J. Eq. 537.

''Taylor v. Blanchard, 13 Allen, 370.

^Vernon v. Hallom, 35 Week. Rep. 156, 56 L. J. Ch. 115.

''NicoU V. Beere, 53 L. T. N. S. 059.

^Eare v. Whitmore, 49 L. T. N. S. 335.


If the removal had been to a new neighborhood the result might
have been otherwise. But the right of an employer to guard his
business and his good will as an aiticle of value in the market was
recognized as against those he took- into his employ, and thus af-
forded them access to his customers and information as to the
details of his business.'

A contract in restraint of trade, made on good consideration and
not extending beyond the obligee's sphere of actual business, is

§ 34. Territorial Limitations Sustained — Distance, how
Determined — Instances. — A contract not to carry on a trade in

Online LibraryCharles A. (Charles Andrew) RayContractual limitations, including trade strikes and conspiracies and corporate trusts and combinations → online text (page 23 of 56)