193 Mass. 351 | Mass. | 1907
The defendants were manufacturing and dealing in needles, awls, drivers and similar articles, and on June 11, 1904, they sold their business to the plaintiff. The plaintiff is a corporation engaged in the business of manufacturing and selling machinery and devices for manufacturing boots and shoes, including needles, awls and drivers, and other similar articles. The bill of sale from the defendants to the plaintiff included the business previously carried on by them, “ together with the good-will thereof, and all business, good-will, property, interests and rights of every name and nature . . . relating to needles, awls, drivers, and like articles,” etc. Besides other covenants of the defendants designed to effectuate the purpose of the parties, the instrument contained a covenant as follows: “ And for the same consideration we and each of us do hereby covenant and agree to and with the said United Shoe Machinery Company, its successors and assigns, that we will not nor will either of us at any time within fifteen years from the date of these presents directly or indirectly, individually or in combination with others, as manager, agent or employee, or as officer or stockholder in a corporation, or otherwise, in any manner, enter into or be engaged or interested in or financially or otherwise assist any person, firm or corporation in entering into, developing or carrying on any business which consists in whole or in part of or relates to manufacturing or dealing in needles, awls or drivers.” In the spring of 1906 the defendants established a business in Lynn where the business previously sold to the plaintiff was conducted, for the purpose of manufacturing and selling needles, awls and other articles like those which they were manufacturing when they made the sale. This suit was brought to enforce the covenant quoted above, by an injunction to prevent the defendants from carrying on the business so established.
The more important and difficult question is whether the covenant is invalid as being against public policy. The defendants contend that it is void because it is to continue in force for an unreasonably long time, and is unrestricted in space.
The testimony shows that considerably more than half of the consideration paid by the plaintiff was for the good will of the business, or to obtain relief from the competition of the defendants. It is not disputed that the business of the plaintiff is conducted in all parts of the civilized world where shoes are manufactured by machinery. Although the business carried on by the defendants was not large, it was of such a kind, and might be so extended, as to affect the market throughout this country and in other countries. The plaintiff made its purchase with a view to obtain the advantage of controlling the good will of this business in every part of the extended area in which it was itself selling needles. It might derive profit from the ownership of this good will, either affirmatively through the sale of articles of recognized merit, as a successor to the defendants in their business, or negatively through freedom from the competition which previously had diminished its own profits, and which
The law on this point, as laid down in early times, has been materially changed by recent decisions. Formerly it seems to have been held that a provision for a general restraint of any person in his trade was necessarily invalid. But in this Commonwealth and in other jurisdictions this is no longer the law. The subject was considered and many of the cases were referred to in Anchor Electric Co. v. Hawkes, 171 Mass. 101, in which there is this statement of the law: “ In connection with the sale of the good will of a business, the vendor will be bound by any covenant which is reasonably necessary for the preservation and protection of the property which he sells. ... In cases in which such covenants have been held bad they were .deemed to go further than was reasonable to give full Value to the property sold.” Under this rule, in conceivable cases, a covenant may be valid which is- unlimited both in time and space. This is held by a unanimous decision of the House of Lords in Nordenfelt v. Maxim Nordenfelt Guns && Ammunition Co. [1894] A. C. 535. The reasoning in the later American cases leads to the same result. Leslie v. Lorillard, 110 N. Y. 519. Wood v. Whitehead Brothers Co. 165 N. Y. 545. Gibbs v. Consolidated Gas Co. 130 U. S. 396, 409. Oakdale Manuf. Co. v. Garst, 18 R. I. 484. Bancroft v. Union Embossing Co. 72 N. H. 402. National Enameling & Stamping Co. v. Haberman, 120 Fed. Rep. 415.
The value of a business with its good will may be enhanced to a purchaser by the fact that its competition is detrimental to a business conducted by him. A considerable part of the price paid may represent the value to the purchaser of relief from the interference of the vendor as a competitor. The mere fact that a contract looks to the withdrawal of the competition of one of. the parties to it does not render the contract invalid. Ordinarily, with the present methods of conducting business and the freedom of communication between centres of trade and industry, such a contract does not create a monopoly, to the danger of the general public. An owner of a business, who can sell it for s. large price in connection with a promise not to compete with
In the present case the justice who heard the witnesses found that the relations of the respective parties to the business sold were such that the time limit was not unreasonable, and that the general covenant as to place was such as the defendants properly might make, for a valuable consideration, to accomplish the purpose shown in the contract. We cannot say that he was wrong in his conclusion.
Decree affirmed.