Page:Harvard Law Review Volume 4.djvu/144

128 HARVARD LAW REVIEW. ON CONTRACTS IN RESTRAINT OF TRADE. IT is commonly understood that the general rule of law on this subject is, that a condition in a contract in restraint of trade is valid even if unrestricted in point of time, but is invalid if unre- stricted in extent of territory. If asked to explain the latter part of this statement, the answer would probably be, without criti- cal examination of the subject, that a condition in restraint of trade covering the whole country, kingdom, or perhaps even the whole of one of the United States, is invalid, while, in the latter case, if the condition were restricted, so as not to cover the whole of a State, it would be valid. It is the aim of this paper to show, firsty that this is not the law ; second^ that the law is that a condi- tion in restraint of trade, unrestricted as to territory, even though it covers the whole of a State, the United States, or the whole world, is valid if reasonable ; while it is invalid if tPtreasonable, even though the condition cover but a part of the State or country ; and, third, the effect of the application of this rule of reasonable- ness to the determination of the vital question, arising in conse- quence of the new-fashioned "trusts." ^ The old error that covenants in restraint of trade are bad, is repeated even in so late a case as that of Davies v. Davies,^ in 1887, by Cotton, L. J., who says, " And in the year books in Henry V.'s reign, there was a case which laid down generally that covenants in restraint of trade are bad (2 Hen. 5, Term. Pasch. pi. 26)." But the condition in that case was in fact limited to one town in space and to half a year in time, and the opinion that it was against the common law was expressed by one judge only 1 I P. Wms. 181. See also the note to this case in i Smith's Leading Cases, 705, and 9th Am. ed., which, however, is extremely unsatisfactory, except as a list of authorities there being no elucidation of principle therein. In 2 Parsons on Contracts, 748, note (2), may be found a list of principal cases on this subject, stated in chronological order, and a table of such cases may also be found in Avery v. Langford, Kay's Rep. 663, at 667, 668. See also the notes by Francis Wharton to Smith v. Tel. Co., 1 1 Fed. Rep. i, and to Sharp v. Whiteside, 19 Fed. Rep. 156. As to conditions in restraint of artists, etc., see 1883, McCauU v. Braham (N. Y.), 16 Fed. Rep. 37, and p. 42, an excellent note by B. F. Abbott. See also 3 Am. & Eng. Ency. of Law, 882, note 4. a L. R. 36 Ch. Div. 359, at p. 381.