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Facts

Swedish gun manufacturer Thorsten Nordenfelt, the appellant, operated a significant, global business. He agreed to engage into a restrictive covenant not to work for any competing businesses for a term of 25 years in an unrestricted geographic area when he sold the business to the respondents. Eventually, he worked for a competing company. In order to enforce the covenant through injunction, the respondents filed a lawsuit. The House of Lords heard the case.

Issues

This clause, according to the appellant, was a restraint of trade provision and needed to be justified in order to be upheld. He argued that it was unreasonable to place a geographical restriction on the entire world. The responders countered that the constraint was solely necessary for their own protection.

Decision / Result

A clause that forbids someone from doing their trade, according to Lord McNaughton, is prima facie illegal. All trade should be free, according to English legal principles. But, if someone who has built up a valuable firm is unable to sell it to his greatest advantage, it will hinder commerce. Hence, if a restraint of commerce clause was reasonable, it would be maintained (at 564): constructed and guarded “with relation to the interests of the parties concerned and reasonable in reference to the interests of the public, so as to give adequate protection to the party in whose favour it is imposed, while at the same time it is in no way harmful to the public”

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