Business Law for Guns and Ammunition Company - myassignmenthelp.com

Question: Discuss about theBusiness Law for Guns and Ammunition Company. Answer: Legal area The case study is related to the provisions of Restraint of trade clause or restrictive covenants. Issue In the given situation it has to be analyzed that whether the restrictive covenant which has been imposed on Clare by Maddie can be enforced by law or not Rule Although restrictive covenant are used commonly they cannot be presumably be enforceable and valid in law unless they are reasonable and have been incorporated to trigger legitimate interest of the business. The concept had been ruled by the case of Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Company [1894] AC 535. The burden of proof lies on the parties which seeks to implement the restrictive covenant to show that the clause dose not seek to provide more restraint that what is possibly required to protect the legitimate interest of the business as provided by the case of Lindner v Murdocks Garage (1950) 83 CLR 628. In the case of Stenhouse Australia v Phillips [1974] AC 391 it had been ruled that an employer cannot incorporate a clause just to prevent the other from giving competition to the business. The legitimate interest of the business which the courts would be satisfied towards making a restrictive covenant includes the trade secrets and confidential information of the employer, clients and customer of the employer and the staff of the employer. In the case of Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 it had been ruled by the court that a restraint clause can be implemented for a period of six moths and in the case of Seven Network (Operations) Limited v Warburton (No 2) [2011] NSWSC 386 for a period of eight months. This signifies that the period of implementation must be reasonable and legitimate. Application In the given situation an agreement has to be entered upon by Maddie with Clare who has sold her hair dressing saloon business to Maddiie. One of the clauses of the agreement provides that she must not carry on any business in Adelaide for a period of 10 years. In order to analyze whether the clause is reasonable or not the above discussed rules have to be applied. Firstly the business which have been started by Clare is a cafe and has no connection with the hear dressing business. There is no possibility of any threat which can be said to exits in relation to the Hair dressing business which is owned by Maddie. It has been provided that few of the saloon customers are also going to the caf stared by Clare. However such an situation is causing no harm to Maddie as both the business operations are totally different. Thus as per the above discussed rules the restrictive covenant would not be legally enforceable as it is not for a reasonable cause. In addition the clause has been imposed for a period of 10 years. The various cases which have been discussed in relation to restrictive covenants signify that they can at maximum be for a period of 12 months. Thus the period of the clause is also unreasonable. Conclusion The clause imposed by Maddie on Clare is unenforceable References Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Company [1894] AC 535. Seven Network (Operations) Limited v Warburton (No 2) [2011] NSWSC 386 Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 Stenhouse Australia v Phillips [1974] AC 391