from entering them, to drive vehicles so as to injure his horses and omnibuses and prevent the doors from being opened, to otherwise interfere with persons about to enter his conveyances, and to insult and assault his employees while conducting his business.1 In another case it was held actionable for the proprietor of a colliery to place several cartloads of sticks and a tree across the highway for the purpose of obstructing the entrance to an adjoining colliery and diverting its customers.2 Similarly it has been held actionable for a railway company to obstruct a siding connecting its line with another's wharf, for the purpose of diverting trade to its own, or for a like purpose to obstruct one of the entrances to a station belonging to a rival line.1 3 A different method of interfering with the business of a competitor was before the court in 1719, when several persons concerned in the making of cards were indicted for a conspiracy to ruin the trade of the King's card maker, and it was shown that they had on several occasions paid his apprentices to put grease into the paste, thus spoiling the cards. Chief Justice Pratt, being of the opinion that there was evidence of a conspiracy, directed the jury accordingly.5 Section 13. Exclusive dealing. Contracts for exclusive dealing, though at the present time regarded by many as being in restraint of trade, are uniformly upheld at common law, unless unreasonably restrictive in character, the same test being used in determining their validity as is applied to other contracts in restraint of trade. Accordingly, contracts of this nature which afford only a fair measure of protection to the interests. of the party for whose benefit they are made without being so extensive in their operation as to interfere with the interests of the public, are valid and enforceable. The prevailing view of the courts appears to be that the chief effect of such a contract is to increase the trade of the parties thereto and that any resulting restriction of competition is merely incidental. 1 Green v. The London General Omnibus Co., 7 C. B. (N. S.), 290 (1859). Iveson v. Moore, 1 Ld. Raymond, 486 (1699); 1 comyns, 58; 12 Mod., 262; Cf. Rose et al. v. Miles, 4 M. & Selw., 101 (1815). 2 Bell v. Midland Ry. Co., 10 C. B. 287 (1861). London & North Western Railway Co. v. Lancashire & Yorkshire Railway Co., L. R. (1867), 4 Eq., 174. Rex. v. Cope et al., 1 Strange, 144 (1719). See also Kinkead, Reid & Co. v. The Johannesburg Chamber of Mines, Official Reports, High Court, South African Republic, 139 (1894), where the plaintiff, who supplied laborers to mining companies, complained that an agent of the Johannesburg Chamber of Mines, who desired to secure for himself the exclusive business of supplying the mines with laborers, took a body of Kafirs from the plaintiff's agent and lodged them under the charge of the police. It appearing that the plaintiff had been informed that such acts would be continued so long as he continued to import natives, the court restrained the defendant from further interference with the plaintiff's business. While the view is held by some that contracts for exclusive patronage necessarily eliminate or prevent competition in that all of the dealers in a given line may be thus bound to handle the goods of a single manufacturer, few actions for damages appear to have been brought against those practicing this policy of exclusion. Whether such contracts are regarded by the courts as in restraint of trade, or as otherwise unlawful, must therefore be chiefly determined from cases arising between the parties to such contracts. AMERICAN DECISIONS. CONTRACTS TO BUY FROM OR DEAL EXCLUSIVELY IN THE GOODS OF ONE PERSON.—The validity of contracts by which one of the parties agrees to buy exclusively from or to deal only in the goods of the other has been questioned in many cases. The weight of authority appears to be that contracts of this character are valid at the common law. In one of the earliest American cases on the subject, decided by the Supreme Court of Massachusetts in 1825, a contract was held valid where one of the parties agreed, in connection with the sale of his business, to give the other all of his freighting up and down the Connecticut River in consideration of a covenant by the latter to handle such freight at the usual rates.' And where one of the parties to a contract agreed to purchase certain building materials exclusively from the other for a period of five years, the agreement was held valid and damages awarded for a failure to observe its terms. Similarly the Supreme Court of Oklahoma recently held that an agreement of a retail dealer to purchase his entire supply of wall paper from a certain wholesaler was valid, and that the latter could recover for the goods sold pursuant to the contract. So also a contract by which one of the parties agreed to deal exclusively in sewing machines and accessories made by the other was held valid and enforceable by the Illinois Supreme Court in 1875. And where a manufacturer of paper patterns agreed to furnish them to a dealer for two years, upon condition that the latter would not sell nor allow to be 1 Palmer v. Stebbins et al., 3 Pick., 188 (1825). 2 Trentman et al. . Wahrenburg et al., 65 N. E., 1057 (Ind. App. Ct., 1903). J. W. Ripy & Son v. Art Wall Paper Mills, 136 Pac., 1080 (Oklahoma Sup. Ct., 1913). Per Brewer, Commissioner: "It seems to us that the effect of this agreement, when all of its terms are considered, is to promote and foster the trade of both parties rather than otherwise. The contract does not undertake to fix the price at which defendants might sell the goods. It does not restrict the plaintiff from selling its goods to others, nor does it restrict either party from selling goods to any other person or class of persons. The parties themselves are not competitors, nor does the contract affect the competitors of the defendants, nor can we see wherein it could injuriously affect the public. A contract between individuals the main purpose and effect of which is to promote, advance, and increase the business of those making it will not be held to be in restraint of trade and commerce merely because its operations might possibly, in some slight or theoretical way, incidentally and indirectly restrict such trade and commerce." Brown v. Rounsavell, 78 Ill., 589 (1875). sold in his store, any other make of paper patterns, an injunction was granted restraining the dealer from selling patterns of any other make during the life of the contract.1 Substantially similar contracts for exclusive purchasing or dealing have been upheld in many other cases. Upon like principles covenants or conditions in leases to the effect that the lessee shall sell only beer of the lessor's manufacture on the leased premises have been generally upheld. Thus the Supreme Court of Indiana has held that such a covenant was not void as being against public policy and granted an injunction restraining the lessee from violating the agreement.3 In the same way contracts to sell exclusively to one person are upheld. For example, where one of the parties to a contract, in consideration of a covenant by another to purchase a given amount of peppermint oil from him, agreed not to sell such oil to anyone else and not to distill any such oil for anyone not under contract to sell to the other contracting party, the court held the agreement to be only in partial restraint of trade and therefore valid. And a contract whereby one of the parties agreed to purchase all sash weights manufactured by the other was held valid. So, also, a contract by a manufacturer to sell garments of a certain design or pattern exclusively to one firm has been held to be only in partial restraint of trade and valid. Similarly, the California Supreme Court held that a contract whereby one party bound himself to manufacture a specified number of barrels of lime for the other within a given time, and agreed that during the life of the contract he would not sell lime to any other person, was not illegal as being in restraint of trade. And a contract by the terms of which one of the parties agreed to buy electric current exclusively from the other for a period of five years has been upheld by the Appellate Court of Indiana. Contracts of this general character have been held valid in a number of other cases." 1 Standard Fashion Co. v. Siegel-Cooper Co., 157 N. Y., 60 (1898). See also Butterick Pub. Co. v. Rose, p. 173; Butterick Pub. Co. v. Fisher, 203 Mass., 122 (1909). 2 Heimbuecher r. Goff, Horner & Co., 119 Ill. App., 373 (1905); Southern Fire Brick & Clay Co. v. Garden City Sand Co. et al., 223 III., 616 (1906); Fuller v. Hope, 163 Pa. St., 62 (1894); George & Chapman e. East Tennessee Coal Co., 15 Lea, 455 (Tenn. Sup. Ct., 1885). Ferris r. American Brewing Co., 155 Ind., 539 (1900). To the same effect see Joseph Blauner et al. v. The Williams Co., 36 Misc., 173 (N. Y. Sup. Ct., 1901). * Beck et al, r. Indianapolis Light & Power Co., 36 Ind. App., 600 (1905). "State ex rel. Berryhill r. St. Paul Gas Light Co., 92 Minn., 467 (1904); Long v. Towl, 42 Mo., 545 (1868); Clark v. Crosby, 37 Vt., 188 (1864); Saddlery Hardware Mfg. Co. v. Hillsborough Mills, 68 N. H., 216 (1894). But see Reeves r. Decorah Farmers' Cooperative Society, 160 Ia., 194 (1913); Ludewese v. Farmers' Mutual Cooperative Co., 164 Ia., 197 (1914). In like manner where a corporation, with the consent and approval of its stockholders, entered into a contract with an association of sheep brokers whereby it was agreed that the stockholders of the corporation should for a period of three years buy their sheep and lambs exclusively from the association, and that members of the association should during the same period sell sheep and lambs for the New York market to the stockholders of the plaintiff only, and where the stockholders of the corporation subsequently agreed among themselves and with the corporation that each of them should pay to the latter a penalty for each carload of sheep and lambs purchased from a member of the brokers' association as distinguished from the association itself, it was held that the corporation could lawfully collect the penalty from a stockholder who bought from a member of the association in violation of his agreement. But in a more recent case where there was an arrangement of a similar character, coupled with an agreement by the controlling parties to pool their commissions as a means of protecting their business from loss "by unreasonable competition," it was condemned by the New York Court of Appeals as being unlawful.2 While contracts between individuals or private corporations for exclusive dealing or patronage are very generally upheld, a different rule is sometimes applied to contracts of certain classes by publicservice corporations binding the patrons of such corporations to deal only with them, and to contracts between such corporations for exclusive dealing with each other, though the courts are not agreed as to the validity of these contracts. Where a telephone company contracted to install a telephone exchange in a hotel, the proprietor of the hotel agreeing, among other things, to give the company the exclusive right to place instruments in the hotel, the New York Court of Appeals held the contract void, and denied an injunction restraining the installation of another system in the hotel. A similar contract between a telephone company and a 1 Live Stock Association v. Levy, 54 N. Y. Superior Ct. Reps., 32 (1886). 2 Judd v. Harrington, 139 N. Y., 105 (1893). Per O'Brien, J.: they (the articles of agreement) manifestly were intended for the purpose of creating a combination between the butchers engaged in buying and the brokers engaged in selling sheep and lambs, in order to control the market, fix the price, and destroy competition. The brokers were to sell only to the butchers, and the butchers to buy only from the brokers. The owners of sheep, or the drovers or consignees who had them for sale, and the public who were interested in the price of meat, as an article of food, might have been prejudiced by the agreement. Whether they were in fact is not material." 3 Central New York Telephone & Telegraph Co. v. Averill et al., 199 N. Y., 128, 138 (1910). Per Bartlett, J.: "While it may, of course, adopt every proper expedient to enlarge its own business, this does not include the right to pursue a policy of exclusion which is distinctly injurious to the public by restricting their circle of communication by telephone. It matters not that the customer may be willing to agree to exclude others or that the contract to do so is supported by a sufficient consideration as between the parties. The evil in such an agreement is its antagonism to the interests of the public. If a telephone company may make a contract of exclusion with one of its customers it may make such a contract with all-and thus preclude all from any telephonic com private subscriber was held invalid by the Supreme Court of South Carolina. The same rule appears to be applied by some of the courts to contracts between telephone companies whereby one company agrees to transmit messages only for or over lines of the other party to the contract. For example, where a long-distance telephone company which had just entered the field, made contracts with local telephone companies whereby the latter, which had previously been refused long-distance connection by the company formerly monopolizing the field, agreed to transmit its long-distance messages only over and to receive such messages only from the other party to the contract for a period of 99 years, the contracts were held void as tending to create a monopoly. The fact that as a result of these contracts the public had for the first time been given the benefit of competition in long-distance telephone service was not, in the opinion of the court, sufficient to justify the making of contracts of this character covering such a long period. And in a similar case where a long-distance telephone company entered into a contract with a local company whereby it was agreed that the latter should send its long-distance messages only over the lines of the former and that the long-distance company would give the local company all messages destined for points in a given county, the Supreme Court of Illinois held the contract void. In contrast with the above decision, the Supreme Court of Missouri held that a contract whereby a local telephone company undertook to build an extension of its lines to connect with those of another local line, and under the terms of which each company agreed to transmit over the lines of the other all messages destined to points on such lines, was valid and enforceable, the object of the contract not being to stifle competition but to build up competition against a long-distance line.5 So also the Supreme Court of Pennsylvania held in 1895 that an munication with persons who happen to be served by a rival company It is on this broad ground that I think we ought to condemn the exclusive clause of this contract as against public policy and, therefore, void. It tends to nullify the consideration moving to the public for the grant of the franchise, by lessening the sphere of telephonic service; and it is impossible to regard a contract as consistent with public policy which would defeat the very policy that induced the State to bring one of the parties to the contract into existence as a public-service corporation." But see Lough v. Outerbridge, 143 N. Y., 271 (1894). 1 Gwynn v. Citizens' Telephone Co., 69 S. C., 434 (1904). 2 Contracts binding public-service companies to serve one person exclusively, being opposed to the fundamental obligations of such companies to serve all impartially, are clearly invalid. Sammons v. Kearney Power & Irrigation Co., 77 Nebr., 580 (1906). The validity of grants of certain classes of exclusive privileges by these companies, however, in connection with the conduct of their business, has been frequently upheld. For the leading cases in the Federal courts see Express Cases, 117 U. S., 1 (1886); Chicago, St. Louis & Northern R. R. Co. v. Pullman Southern Car Co., 139 U. S., 79 (1891); Donovan v. Pa. Co., 199 U. S., 279 (1905). U. S. Telephone Co. v. Central Union Telephone Co., 202 Fed., 66 (C. C. A., 1913). Union Trust & Savings Bank of East St. Louis et al. v. Kinloch Long Distance Telephone Co., 258 III., 202 (1913). See Home Telephone Co. v. Sarcoxie Light & Telephone Co., 236 Mo., 114 (1911). also Cumberland Telephone & Telegraph Co. v. State ex rel. Attorney General, 100 Miss., 102 (1911). |