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Illegality

In this case, A is … in the ABC Company. When he decided to leave the company because other company offered him a better contract, ABC use a contract of employment to protect its interest and wrote to A that he would be in breach of the contract of the employment if he left the company. (陳述事件) Such employment contract appears to be “in restraint of trade”. The contract of employment is a contract that an employee may be required not to compete with the employer if he leaves employment. But such contracts are not in the public interest because they hamper competition and free movement of labor. The contracts for the sale of a business is a contract where a business is sold “as a going concern”, the seller may agree not to set up a rival business. The solus agreement is an agreement where the owner of a company agrees with a particular supplier at special discount and agrees not to sell products of other suppliers. Such contracts are not in the public interest because they hamper competition and free movement of labor. However if any part of such contract is valid, then the valid part can be enforced in court. A contract in restraint of trade is void, unless the restraint is a reasonable one to protect legitimate interest. {Nordenfelt v. Maxim Nordenfelt (1894)} Whether A is in the breach of the contract depends on whether the contract is reasonable. Therefore the next step is to determine whether a restraint of trade clause is reasonable. In determining whether a restraint of trade clause is reasonable, the court will ask three questions:1. Is the purpose of the restraint to protect a business interest that can be legally protected? Only two legitimate business interests will be protected by the law: business connections and trade secrets. Employment contracts that require an employment not to disclose trade secrets or not to make use of business connections to entice away the employer’s customers are reasonable and therefore enforceable. We can see that A is one of the employees who frequently handle major accountancy matters of multi-national companies. So A must have acquired a lot of information about the customers and the customers’ list in the period of his employment in his position. These things all belong to trade secrets and

However. the contract is unenforceable as it was against the public interests. deterring the employee from leaving the firm rather than protecting the firm’s client connections. . So generally speaking. there is no need for A to worry about the contract too much. the part remaining part must make sense after striking out the bad. In conclusion. 3. How long does the restraint last? The clause also provided the period of 5 years. He can just accept the offer from the CBA firm. It is also too wide. because it is not enforceable. the court may adopt the narrow interpretation and give effect to the clause. or otherwise … for five years ” to make it reasonable. and the other narrow and reasonable. if the clause contains one single promise. The five year period was aimed at stifling(reducing) competition. The ambit of restraint imposed on him is wider than necessary to protect the company’s interests because it would prevent him from working in other firm in any capacity. nothing can be severed. Severance is possible only if several independent promises are contained in one clause. What is the geographical area covered by the restraint? There isn’t any geographical area limit here. the court may remove the unreasonable parts “in any profession whether …. In this case. Where a restraint of trade clause is capable of two interpretations. 2. {Goldsoll v Goldman (1915)} The court may strike out the unreasonable parts but not redraft them. the court may remove unreasonable parts to make it reasonable and hence enforceable. {Home Countries Dairies v Skilton (1970)} 2. the statement in the employment contract “he will not engage in any profession whether as an accountant or otherwise” means that A even cannot work as an employee in any other firms. it is too long for protecting the company’s legitimate interests. one too wide and unreasonable. and this may mean the employee cannot work anywhere in the world in the period of 5 years. especially A does not planning to accept an offer from an Australian firm. According the Criteria for doctrine of severance. If a restraint of trade clause is too widely drafted and is unreasonable. But the remaining parts of the contract don’t make sense because there is no geographical area limit yet. So it seems unreasonable on the purpose.business connection. And he may not be in breach of the contract if he works as accountant in CBA. 1.