A Provision in a Contract for the Sale and Purchase

question 129

Multiple Choice

A provision in a contract for the sale and purchase of a business reads 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 (the buyer) 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)Agreements such as these are always binding,being the result of a free bargain between the parties.
• C)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.
• D)Such provisions are always void,being an illegal restraint of trade.
• E)Although this provision would be void,the remainder of the contract for the sale of the business would be enforceable.

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Life-stressors

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