A Provision in a Contract for the Sale and Purchase

question 43

Multiple Choice

A provision in a contract for the sale and purchase of a business read as follows: "The vendor (Jones) shall not, directly or indirectly, in any capacity whatsoever, carry on a similar business in any location for one year." Six months later, Kates found that Jones was competing directly by opening up a similar business, contrary to the contract drafted by Kates. Kates sued Jones for breach of contract, namely, breach of the restrictive covenant. Which of the following best describes the legal position of the parties?

• A) This provision is in restraint of trade and causes the whole contract to be void.
• B) Although this type of provision is illegal, this particular one would be enforceable because it is reasonable between the parties and not contrary to public policy.
• C) Such provisions are always void, being an illegal restraint of trade.
• D) Although this provision would be void, the remainder of the contract for the sale of the business would be enforceable.
• E) Agreements such as these are always binding, being the result of a free bargain between the parties.

---

Definitions:

Acetylcholine

A neurotransmitter involved in many functions including muscle movement, heart rate, memory, and learning.

Muscle Contractions

The process whereby muscle fibers shorten or lengthen to produce movement or maintain posture as a response to stimulation by nerve impulses.

Dependent Variable

The variable that is being measured in an experiment or study to see if it is affected by changes in another variable.

Perfect-Tasting Pancake

An ideal or most desirable pancake, characterized by optimal flavor according to an individual's preferences.