A Provision in a Contract for the Sale and Purchase

question 92

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) Such provisions are always void, being an illegal restraint of trade.
• 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) Although this provision would be void, the remainder of the contract for the sale of the business would be enforceable.
• E) This provision is in restraint of trade and causes the whole contract to be void.

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Definitions:

Afferent nerves

Nerves that carry sensory signals from the body's periphery toward the central nervous system.

Synaptic knob

The bulbous end of a nerve fiber where neurotransmitters are stored before being released into the synaptic cleft to transmit nerve impulses.

Axon branches

Projections from the neuron's axon that transmit electrical impulses to different areas, facilitating communication within the nervous system.

Neurotransmitter

A chemical substance released at the end of a nerve fiber by the arrival of a nerve impulse, which diffuses across the synapse or junction, causing the transfer of the impulse to another nerve fiber, a muscle fiber, or some other structure.