Lawer Entered into a Contract for the Sale of His

question 113

Multiple Choice

Lawer entered into a contract for the sale of his business, a barbershop, to Cutter. The contract provided that Lawer would not open up a similar business within 25 kilometres of the barbershop being sold. About two weeks after the sale, Cutter noticed a new barbershop opening across the street in brand-new facilities. When he learned that the owner of the new shop was the very Lawer who sold the business to him, he sued for breach of contract. Which of the following correctly indicates the legal position of the parties?

• A) The court needs to determine only that the distance of 25 kilometres is reasonable; if it does, the restriction is valid and Cutter will succeed.
• B) The provision will be void as it is broader than necessary to protect the goodwill of the business.
• C) Any attempt to restrict competition is illegal, and no matter how reasonable the terms are, the provision will be void.
• D) To determine whether or not the restriction is binding, the court asks only one question: does it reduce competition?
• E) If the restriction is illegal, the whole contract for the sale and purchase of the business is necessarily void and Cutter can return the barbershop for the return of the purchase price.

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Definitions:

Rental Income

This is income received from renting out property or equipment. It is often considered passive income and must be reported for tax purposes.

Revenue

The total income generated from normal business operations and before any expenses are deducted.

Asset

Anything of value owned or controlled by a business, entity, or individual that can be used to generate income or settle liabilities.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated for financial reporting and tax purposes.