that a system of contracts for the control of all sales and subsales of the article when produced will be outside of the rules in restraint of trade, simply because it is the product of such secret formula." The attempt has also been made to control resale prices by agreeing to give rebates to such dealers as maintain the list prices of the manufacturer. This method gives an inducement to resell only at fixed price, but imposes no obligation to do so. There is, therefore, less reason for objection and contracts of this sort have been upheld. 56 Another method, which involves no contract, is simply to name resale prices and refuse to supply more goods to any one who cut these prices,57 but in view of the latest decision of the United States Supreme Court, 58 and of the facts that the method of rebates can be so used as to produce practically the same effect as a restrictive covenant, and that if the effect is opposed to public policy the means used whatever their nature are likely to be so also, it seems probable that any contract, at least if resulting in a general maintenance of prices, or made for that purpose will be held illegal by that court. § 1650. Recovery of agreed payment for performing restrictive promise. So harmless did contracts in restraint of trade appear to the English courts in the nineteenth century, except for the oppression of the promisor, that if an agreement, invalid because imposing an unreasonable restraint of trade was actually performed by the party subjected to the restraint, he might recover any payment promised him in return for the restraint. 59 But this view is not now accepted in England, and would not be followed in the United States.61 In re Greene, 52 Fed. 104; Gottschalk v. Distilling, etc., Co., 62 Fed. 901; Clark v. Frank, 17 Mo. App. 602; Walsh v. Dwight, 40 N. Y. App. D. 513, 58 N. Y. S. 91. 57 This was held not indictable under the Sherman Act in the absence of an intent to create a monopoly. United States v. Colgate, 250 U. S. 300, 39 S. Ct. Rep. 465. See 19 Columbia L. 58 Boston Store v. American Graphophone Co., 246 U. S. 8, 38 S. Ct. Rep. 257, 62 L. Ed. Ann. Cas. 1918 C. 447. 59 Bishop v. Kitchin, 38 L. J. Q. B. 20. 60 Evans v. Heathcote, [1918] 1 K. B. 418. 61 Oliver v. Gilmore, 52 Fed. 562; § 1651. Public service corporations. Public service companies are more strictly limited than others in entering into contracts in restraint of trade, because of their duty to give equal service to the public. They can make no contracts inimical to that duty.62 Thus an agreement by a railway company to give a single telegraph company the exclusive right of establishing a line of telegraphic communication along its road is invalid, being both in restraint of trade, and contrary to the policy of a particular statute; 63 and an agreement for an exclusive right of way over a tract of land to be given a natural gas company or oil company, also has been held invalid.64 A carrier may contract with a particular transfer company that the latter shall have an exclusive right to solicit custom on its trains or premises.65 The same has been held in regard Bishop v. Palmer, 146 Mass. 469, 16 62 Gibbs v. Consolidated Gas Co., 130 U. S. 396, 32 L. Ed. 979, 9 S. Ct. Rep. 396; Chicago Gas Light, etc., Co. v. People's Gas Light, etc., Co., 121 Ill. 530, 13 N. E. 169, 2 Am. St. Rep. 124; Dunbar v. American Tel. & Tel. Co., 238 Ill. 456, 87 N. E. 521; West Virginia Trans. Co. v. Ohio River Pipe Line Co., 22 W. Va. 600, 46 Am. Rep. 527. The effect of the Interstate Commerce Acts must also be considered. 83 U. S. Comp. St., § 10072 (U. S. Rev. Stat., § 5263); United States v. Union Pacific Ry. Co., 160 U. S. 1, 40 L. Ed. 319, 16 S. Ct. 190; Western Union Telegraph Co. v. Burlington & S. Ry. Co., 3 McCrary, 130; Western Union Telegraph Co. v. American Union Tel. Co., 9 Biss. 72; Western Union Tel. Co. v. Baltimore & O. Tel. Co., 19 Fed. 660; Western Union Tel. Co. v. Balto., etc., Tel. Co., 23 Fed. 12; Mobile & O. R. Co. v. Postal Tel. Co., 76 Miss. 731, 26 So. 370, 45 L. R. A. 223. And see West Virginia Transportation Co. v. Ohio River Pipe Line Co., 22 W. Va. 600, 46 Am. Rep. 527; Western Union Tel. Co. v. American U. Tel. Co., 65 Ga. 160, 38 Am. Rep. 781; St Louis & C. R. Co. v. Postal Tel. Co., 173 Ill. 508, 51 N. E. 382. 64 Calor Oil & Gas Co. v. Franzell, 128 Ky. 715, 109 S. W. 328, 36 L. R. A. (N. S.) 456; West Virginia Trans. Co. v. Ohio River Pipe Line Co., 22 W. Va. 600, 46 Am. Rep. 527. 65 The D. R. Martin, 11 Blatchf. 233; Fed. Cas. No. 1030; Jencks r. Coleman, 2 Sumn. 221, Fed. Cas. No. 7258; Kates v. Atlanta Baggage, etc., Co., 107 Ga. 636, 34 S. E. 372, 46 L. R. A. 431; Dingman v. Duluth, etc., R. Co., 164 Mich. 328, 130 N. W. 24, 32 L. R. A. (N. S.) 1181; Godbout v. St. Paul Union Depot Co., 79 Minn. 188, 81 N. W. 835, 47 L. R. A. 532; Barney v. Oyster Bay, etc., Co., 67 N. Y. 301, 23 Am. Rep. 115; Lewis v. Weatherford, etc., R. Co., 36 Tex. Civ. App. 48, 81 S. W. 111. Exclusive to express business, 66 but not without dissent.67 privileges to hackmen,68 and to load logs between stations, 69 have been held not invalid as a monopoly in restraint of trade. § 1652. Agreements unduly restricting personal liberty are invalid. One of the prominent reasons for holding contracts invalid which restrict the right of a party to carry on trade or business, is the hardship upon him, and though in most cases this reason is combined with others as that the scope of the promise is wider than the requirements of the promisee, or that the public will suffer some more direct injury than that due to the individual hardship of the promisor-there is a broad policy for "Express Companies' Cases, 117 U. S. 1, 29 L. Ed. 791, 6 Sup. Ct. 542; Blank v. Illinois, etc., R. Co., 182 Ill. 332, 55 N. E. 332; Louisville, etc., R. Co. v. Keefer, 146 Ind. 21, 44 N. E. 796, 38 L. R. A. 93, 58 Am. St. 348; Dulaney v. United Railways, etc., Co., 104 Md. 423, 65 Atl. 45; Atlantic Express Co. v. Wilmington, etc., R. Co., 111 N. C. 463, 16 S. E. 393, 18 L. R. A. 393, 32 Am. St. Rep. 805. 67 New England Exp. Co. v. Main R. Co., 57 Me. 188, 2 Am. Rep. 31; Kidder v. Fitchburg R. Co., 165 Mass. 398, 43 N. E. 115; McDuffee v. Portland, etc., R. Co., 52 N. H. 430, 13 Am. Rep. 72; Sandford v. Catawissa, etc., R. Co., 24 Pa. St. 378, 64 Am. Dec. 667; Texas v. Missouri, etc., R. Co., 99 Tex. 516, 91 S. W. 214, 5 L. R. A. (N. S.) 783. 63 Barker v. Midland Ry. Co., 18 C. B. 46; Beadell v. Eastern Counties Ry. Co., 2 C. B. (N. S.) 509; Painter - v. London, B. & S..C. Ry. Co., 2 C. B. (N. S.) 702; Donovan v. Pennsylvania Co., 199 U. S. 279, 50 L. Ed. 192, 26 Sup. Ct. 91; Jencks v. Coleman, 2 Sumn. 221; The D. R. Martin, 11 Blatch. 233; Union Depot & R. Co. v. Meeking, 42 Colo. 89, 94 Pac. 16, 126 Am. St. 145; New York, N. H. & H. R. Co. v. Scovill, 71 Conn. 136, 41 Atl. 246, 42 L. R. A. 157, 71 Am. St. Rep. 159; Kates v. Atlanta Baggage & Cab Co., 107 Ga. 636, 34 S. E. 372, 46 L. R. A. 431; Hart v. Atlanta Terminal Co., 128 Ga. 754, 58 S. E. 452; Old Colony R. Co. v. Tripp, 147 Mass. 35, 17 N. E. 89, 9 Am. St. Rep. 661; Boston & A. R. Co. v. Brown, 177 Mass. 65, 58 N. E. 189, 52 L. R. A. 418; Boston & M. R. Co. v. Sullivan, 177 Mass. 230, 58 N. E. 689, 83 Am. St. Rep. 275; Godbout v. St. Paul Union Depot Co., 79 Minn. 188, 81 N. W. 835, 47 L. R. A. 532; Hedding v. Gallagher, 72 N. H. 377, 57 Atl. 225, 64 L. R. A. 811, overruling 69 N. H. 650, 45 Atl. 96, 76 Am. St. Rep. 204, and 70 N. H. 631, 47 Atl. 614; Barney v. Oyster Bay & H. S. B. Co., 67 N. Y. 301, 23 Am. Rep. 115; Snyder v. Union Depot Co., 19 Ohio C. C. 368, rev'g 7 Ohio N. P. 64; State v. Union Depot Co., 71 Ohio St. 379, 73 N. E. 633, 68 L. R. A. 792; Oregon Short Line R. Co. v. Davidson, 33 Utah, 370, 94 Pac. 10, 16 L. R. A. (N. S.) 777. 69 Yazoo & M. V. R. Co. v. Crawford, 107 Miss. 355, L. R. A. 1915 C. 250, 65 So. 462. 71 bidding a man from contracting himself into slavery or unduly restricting his personal liberty.70 This policy is apparent not only in cases where employees make restrictive promises "1 (wherefore a contract to withdraw from all business whatever even within a limited space is invalid),72 but also where creditors for greater security impose restrictive contracts upon their debtors; 73 or the owners of patents exact excessive and ineq 70 "There are certain fundamental rights which no man can barter away, such, for instance, as his right to life and personal freedom, and, in criminal cases, the right to be tried by a jury of his peers." Pope Manufacturing Co. v. Gormully, 144 U. S. 224, 234, 36 L. Ed. 414, 12 Sup. Ct. 632. 71 See, e. g., Herbert Morris, Ltd., v. Saxelby, [1916] 1 A. C. 688. 72 Baker v. Hedgecock, 39 Ch. D. 520; Perls v. Saalfeld [1892] 2 Ch. 149. A contract for "permanent employment " was, however, enforced against the employer in Carnig v. Carr, 167 Mass. 544, 46 N. E. 117, 35 L. R. A. 512, 57 Am. St. Rep. 488. See supra, § 39 n. 27. 73 In Horwood v. Millar's Timber & Trading Co., Ltd., [1916] 2 K. B. 44, the plaintiff as assignee of the earnings of one Bunyan, an employee of the defendant, sued to recover them. The court denied recovery, Lush, J. saying (p. 50): "The question is whether this contract can be said to operate, if I may use a comprehensive term, in restraint of trade; whether it is a contract which unduly and improperly fetters the free disposal of the assignor's labour. If it so restricts it, if it applies such fetters upon it as to make it injurious not only to the man himself but injurious to the public interest, we should be justified in holding, and indeed bound to hold, that the contract is not one which can be enforced at the suit of the plaintiff. I propose, therefore, to examine somewhat closely the terms of the deed. In it more Bunyan is called 'the mortgagor' and is described as a clerk in the employment of the present defendants. It recites that the mortgagor is indebted to the various persons mentioned in the schedule and has requested the lender to pay those debts, which the lender agrees to do on having the repayment secured. [His Lordship read clause 1 [which assigned all future wages in any employment] and continued:] Clause 2 provides for redemption; then follow certain covenants by the mortgagor which go to strengthen the security. Clause 3, sub-clause (d), is as follows: "That during the continuance of these presents the mortgagor shall diligently and faithfully devote himself to his duties wheresoever he may be employed and will not do or suffer anything to be done which may or might cause him to be dismissed or liable to be dismissed or have his salary reduced but shall use his best endeavours to advance his position wheresoever employed.' So far no objection can be taken to that provision, but then follow these words: 'and shall not without the express sanction in writing of the lender determine his engagement with Messrs. Millar's Timber and Trading Company Limited or other his employer for the time being.' By sub-clause (h) the mortgagor covenants not to borrow or attempt to borrow, and not to enter into any gambling contract, bet, or wager. Sub-clause (i) says 'Not without the consent of the lender in writing first had and obtained uitable promises not to contest the validity of the patents.74 A contract to remove from a city or limited district and remain away from it is, however, enforceable; 75 and one entering an asylum may contract that he will submit to restraint of his personal liberty for a limited stated period.76 1653. Any contract may be rendered invalid if tending to produce monopoly. A fundamental objection of public policy to contracts in unreasonable restraint of trade is their tendency to produce monopoly and enhanced prices; and any contract which is part of a scheme to produce an obnoxious monopoly will be unenforceable. Thus, though a purchase of a business may be accompanied by a promise of the seller not thereafter to compete, if the purchaser made such contracts with a large number of competitors so that, if all the transaction were carried out, a monopoly would be effected, each one of them though on its face apparently valid, would be rendered unenforceable by the other circumstances of the case." It may even be supposed that the first purchase and contract was made without evil intent on the part of the purchaser, but thereafter with a view of to remove from or take any other dwelling-house or residence.' If these clauses are indivisible and the deed has to be construed as one entire contract I can come to no other conclusion than that this contract did so unduly fetter and restrict the disposal of the mortgagor's labour, and 80 unduly restrict him in his mode of living and in choosing the mode of living best adapted for the purpose he had in view, as to be against public policy. . . . "The illegal clauses are so many and so mixed up with the legal clauses that it is impossible to separate them or to apply to them the divisibility doctrine." An agreement by a daughter to cancel indebtedness due from her mother on condition that the latter should not sell or mortgage her property or incur any indebtedness in excess of $1000, is not an unlawful restraint. Robinson v. Thurston, 248 Fed. 420, 160 C. C. A. 430. 74 Pope Mfg. Co. v. Gormully, 144 U. S. 224, 36 L. Ed. 414, 12 Sup. Ct. 632; Buffalo Specialty Co. v. Gougar, 26 Colo. App. 523, 144 Pac. 325. 75 Upton v. Henderson, 106 L. T. 839; Wallace v. McPherson, 138 Tenn. 458, 197 S. W. 565, L. R. A. 1918 A. 1148. 76 In re Baker, 29 How. Pr. (N. Y.) 485. Finck v. Schneider Granite Co., 187 Mo. 244, 86 S. W. 213, 106 Am. St. Rep. 452. See also Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U. S. 227, 53 L. Ed. 486, 29 Sup. Ct. 280; G. W. McNear, Inc., v. American & British Mfg. Co. (R. I.), 107 Atl. 242. |