Contract and Agency Law: Restraint of Trade

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Introduction

Restraint of trade is a clause that is included in contracts to bar the employees from taking clients, information, or competing with the original business when the employment contract is completed. It is important to note that restraint of trade clauses need to be clear and reasonable for them to be enforceable (O’Sulluian & Hilliard, 2012). Restraint of trade is most likely to be used in cases where the employer has legitimate property for example property rights to protect. In addition, there should be satisfactory reasons to believe that employees can use the same to their gain or the benefit of a competitor. In this case, the employer can institute the restraint of trade on employees. Another scenario is between suppliers and customers. Suppliers can use the restraint of trade clause to restrict their customers from using the information they gain during their business to benefit themselves or other third parties (Chitty, 2012).

Example of Restraint of Trade in Employment Contract

It is important to note that in most cases, restraint of trade clauses are applied by employers on employees. A typical restraint of trade clause on an employment contract will be: The employee agrees that he or she shall not, after the termination of the employment contract with the employer, either directly or indirectly, acting alone, with others or as an agent, for 18 months and within the estate where the employer has his business:

Be involved in the manufacture or distribution of alcoholic drinks or
Finance or guarantee the obligations of such activity

For the above restraint to be enforceable it should meet the conditions for restrain of trade clauses. As was held by the court in the case of CLAAS Medical Center Pte Ltd v Ng Ching (2010), all restraint of trade clauses is void unless they are meant for the interest of the public. Additionally, there should be a legal proprietary interest to protect. On the same note, any restraint of trade clause should have a time limit, the scope of activities as well as a definite geographical area where it applies. In the case of Heller Factoring (Singapore) Ltd v Ng Tong Yang (1998), the court held that the duration of two years was reasonable. Consequently, since the above clause gives a definite time of 18 months, geographical area as well as the specific activity it will be enforceable (Tabulujan & Toit-Low, 2009).

Rights and Obligations of the University and Speedy Coach in Case of Monsoon Rains

The contract between the University and speedy coach is binding on both parties given the fact that both parties agreed on the reason for the contract and the contract was sealed by a price. In this regard, the university is obliged to pay speedy coach the remaining amount when the contract is executed. However, due to natural conditions which are beyond the control of the speedy coach they are unable to execute the contract. It is important to note that in law, impossibility excuses for one not perform his or her part of the bargain. It is the right of the university to demand that speedy coach performs their duty as agreed in the contract. In law, extreme conditions which are referred to as acts of God can exempt both parties from the performance of the contract. As was held in the case of Hackney Borough Council v Dore (1922), in instances of physical or material restraint either party can be exempted from performance (Lundmark, 1998). It should however be noted that the force majeure has limitations on how it can be applied. In the case of Matsoukas v Priestman & Co. (1915), issues like bad weather, football matches, or a funeral are not included in the explanation of force majeure. However, in the case of speedy coach mudslides can be considered an act of God. In the case of re Dharnrajmal Gobindram v Shamji Kalidas (1961), the court held that consequences beyond a pert’s control can be used as an excuse for non-performance. In this regard, the university can reschedule the trip to another day or seek a refund from a court of law.

Rights and Obligations of the University and Speedy Coach in Case of Exhibition Postponement

In the second case, the university entered into a contract with a speedy coach to be transported to Cameron hills but this has changed. Under these circumstances, it is the university that changed the conditions of the contract. The fact that the exhibition was postponed is not a legal excuse because that was not specified in the contract. Therefore, the contract is frustrating since the destination has changed. As was held in the case of Nicholls and Knight v Ashton, Eldridge & Co (1901), specifying the name of the ship frustrated the contract. In the case of the university and speedy coach, the reasons for the journey have changed and it will be useless to go there (Tan, 1999).

This is a case of contract discharge where performance is unreasonable. Truly, it will be a waste of time and resources to go on a futile journey to the mountains. Unlike the case of Herne Bay Steamboat Co v Hutton (1903) where the contract included a cruise around the fleet, the university booked the coach for the sole purpose of the exhibition. In the above case, it was held that the appellant should be paid. In the case of Kerry v Henry (1903), the court of appeal held that there was an implied condition that never came into being and thus the contract was void. The defendant was therefore not obliged to pay the remaining money (Fisher S. & Fisher D., 1998). The university is obliged to report to speed coach the reasons why the contract would not be carried out as planned. Consequently, the university and speed coach company would then agree on what percentage of the deposit will be returned. However, this will depend on the interpretation of the implied conditions.

Rights and Obligations of Sonata Gallery and Red Stars Gallery

According to the law of agency, the principal is bound by all actions of the agent provided they are within the conditions of the contract. The conditions are well stipulated in the case of Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964). It is important to note that once an agent has agreed to work for the principal, he or she is bound to undertake the tasks as outlined by the terms of the agency (Campell, 2008). The duties should be carried out with care and diligence while avoiding conflict of interest. Consequently, the agent is supposed to carry out the duties that benefit the principal and not any other party at the peril of the principal.

However, there are instances where an agent cannot wait for the authorization of his or her activities. In such instances, the principal may ratify the actions after they have occurred. Therefore Sonata Gallery has the legal authority to ratify Mark’s actions. To begin with, Mark acted on the pretext that he was representing Sonata Gallery (Tuunanen, 2011). As was held in the case of Keighly v Durand, L. R. (1900), a principal is allowed to ratify any action of the agent if the act was carried out in the name of the principal. It is important to note that ratification will make the transaction look like it was originally done by the principal and all benefits therein should revert to the principal. Therefore, after ratification Sonata Gallery can demand the proceeding of the sale. In the case of Keppel v Wheller (1927), the court held that the agents were liable to pay damages to the owners because of a breach of their implied duty. In this regard, Mark should give back all the profits from the sale (Phang & Yihan, 2012). This is also explained in the case of Lucifero v Castel (1887) as well as Boardman v Phipps (1967). Sonata Gallery should ratify the actions of mark quickly before Red Stars decides to decline the ratification.

Red Stars was not aware and were in no position to know that Mark did not have authority from Sonata Gallery. In addition, having confirmed before that Mark was acting on behalf of Sonata Gallery it was just reasonable for Red Stars to assume that he always had authority. Therefore, Red Stars can communicate to Sonata Gallery about its intention not to be bound by the ratification. However, this should be done before ratification (Phang, Chan & Chiu, 2012). On the same note, Red Stars can sue Mark for deceit as well as breach of the implied warranty of authority and demand damages on the same.

References

Campbell, D. (2008). International Agency and Distribution Law 2008. Raleigh: Lulu Publishers.

Chitty, J. (2012). Chitty on Contracts. London: Sweet & Maxwell.

Fisher, S. & Fisher, D. (1998). The Best Practice: Commercial and Legal Aspects. Annandale: Federation Press.

Lundmark, T. (1998). Common Law Tort & Contract. Munster: LIT Verlag

O’Sullivan, J. & Hilliard, J. (2012). The Law of Contract. London: Oxford University Press.

Phang, A. B., Chan, G., & Chiu, H. Y. (2004). Basic Principles of Singapore Business Law. Stanford: Thomson Learning.

Phang, A. B. & Yihan, G. (2012). Contract Law in Singapore. Alphen aan den Rijn: Kluwer Law International.

Tabalujan, B. S. & Toit-Low, V. D. (2009). Singapore Business Law. Singapore: Business Law Asia.

Tan, K. (1999). The Singapore Legal System. Singapore: NUS Press.

Tuunanen, M. (2011). Developments in the Theory of Networks. New York: Springer

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