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:

Hindsight Bias

The tendency to believe, after learning an outcome, that one would have foreseen it, often referred to as the "I-knew-it-all-along" phenomenon.

Intuitions

The capacity to grasp something through intuition rather than through logical thought.

Accuracy

The extent to which the outcome of a measurement, calculation, or specification matches the true value or a standard.

False News

Incorrect or misleading information presented as news, often with the intention of deceiving the audience.