184 Cal. 21, 192 Pac. 847 (1920); Rossiter v. Thompson, 66 Cal. App. 491, 226 Pac. 806 (1924).

A contract not to engage "in a similar business" contemplates and includes an agency to carry on a similar business. Meyers v. Merillion, 118 Cal. 352, 50 Pac. (1897).

The clause "as long as vendee engages in business" implies a "similar business" so as to bring a contract not to compete within the provisions of section 1674. Shafer v. Sloan, 3 Cal. App. 335, 85 Pac. 162 (1906).

A contract not to engage in a similar business includes employment in a similar business. Johnston v. Blanchard, 16 Cal. App. 321, 116 Pac. 973 (1911).

Restrictive Covenants Ancillary to the Sale of a Professional Practice.

The term "business" in section 1674 is broad enough to include the medical profession and the sale of medical practice. Crutchett v. Lawton, 139 Cal. App. 411, 33 Pac. (2d) 839 (1934).

Restrictive Covenants Ancillary to Employment.

Where defendant was employed as exclusive sales agent for plastic furnace lining in California and agreed not to sell a competing product for 2 years after the termination of the agency, this was held invalid as an unreasonable restraint. Davis v. Jointless Fire Brick Co., 300 Fed. 1 (C. C. A. 9th, 1924).

Contracts not to compete after termination of employment entered into by employees upon the commencement of employment have been interpreted under the Labor Code section 2860 (Civil Code sec. 1985) which provides that everything an employee acquires by virtue of his employment, except his compensation, belongs to his employer. Such a contract is not void under section 1673 of the Civil Code as being a contract in restraint of trade. See Empire Steam Laundry v. Lozier, 165 Cal. 95, 130 Pac. 1180 (1913).

Restrictive Covenants Contained in a Deed.

A condition subsequent in a deed prohibiting the sale of liquor in the property conveyed is invalid where the object is to secure a monopoly in the business to the grantor. Burdell v. Grande, 152 Cal. 376, 92 Pac. 1022 (1907). Such a condition is valid, however, where the question of monopoly is not involved. Los Angeles Land & Water Co. v. Kane, 96 Cal. App. 418, 274, Pac. 380 (1929).

Restrictive Covenants Not Ancillary to the Sale of a Business Interest.

A contract between the assignor and assignee of an invention under which the assignor agreed not to engage in the sale of orchard heaters

embodying the invention is void as in restraint of trade. Summerhays v. Scheu, 10 Cal. App. (2d) 574, 52 Pac. (2d) 512 (1936).

An agreement between parties to divide the sales territory of the State of California between them and that each would not compete with the other, is not within purview of section 1675 and is void under section 1673. Edwards v. Mullin, 220 Cal. 379, 30 Pac. (2d) 997 (1934) reversing 24 Pac. (2d) 936 (1933).

An order of a referee in selling the assets and good will of a bankrupt insurance agency corporation, whereby the employees of the bankrupt corporation are restrained from using in an unrestricted area confidential information and customer lists of the corporation is invalid under section 1674. A violation of such an order is not a contempt. Beauchamp v. United States, 76 Fed. (2d) 663 (C. C. A. 9th, 1935).

A contract under which plaintiff assigned executory contracts for the purchase of salt to defendant, agreed to purchase all salt required during the next 2 years from defendant, and further agreed not to purchase salt from any other party is invalid under section 1673. Getz Bros. & Co. v. Federal Salt Co., 147 Cal. 115, 81 Pac. 416 (1905). A stockholder selling shares of stock has no vendible interest in the good will of the business of the corporation and a contract not to engage in a business similar to the corporate business made upon the sale of the corporate stock is not within the statutory exception and is therefore void under section 1673 as in restraint of trade. Merchants' Ad-Sign Co. v. Sterling, 124 Cal. 429, 57 Pac. 468 (1899); Dodge Stationery Co. v. Dodge, 145 Cal. 380, 78 Pac. 879 (1904); Chamberlain v. Augustine, 172 Cal. 285, 156 Pac. 479 (1916); Cavasso v. Downey, 45 Cal. App. 780, 188 Pac. 594 (1920); California Linoleum & Shades Supplies, Inc. v. Schultz, 105 Cal. App. 408, 287 Pac. 980 (1930).

In order to keep control of the corporation an agreement between purchasers of stock in a corporation to vote their shares in a block for 5 years is not invalid under section 1673, the contract merely restraining disposition of property. Smith v. San Francisco & North Pacific Ry. Co., 115 Cal. 584, 47 Pac. 582 (1897).

Petitioner covenanted not to manufacture any machines for use anywhere at any time in manufacture of metal venetian blinds for anyone other than parties to an agreement without their consent, or for 10 years thereafter. The court held that this constituted an illegal restraint of trade contrary to Civ. Code, sec. 1673. Hunter v. Superior Court in Riverside County, 97 Pac. (2d) 492 (1939).

III. TYING CONTRACTS AND EXCLUSIVE DEALING

ARRANGEMENTS

Agric. Code (Deering, 1937)
Cooperatives

Section 1208 provides that a cooperative marketing association may enter into contracts with its members, requiring the members to sell all or any specified part of their agricultural products or specified commodities exclusively to or through the association for a period of not over 15 years, and that these marketing agreements shall not be deemed illegal or in restraint of trade. See Exceptions to General Antitrust Laws, supra. See also Vol. Cooperatives in projected study.

Gen. Laws (Deering, 1937)

Act 2947h, section provides that a cooperative marketing association for the manufacture, processing, canning, and distribution of fishery products may enter into contracts with its members, requiring the members to sell all or any specified part of their fishery products or specified commodities exclusively to or through the association for a period of not over 15 years and that these marketing agreements shall not be deemed illegal or in restraint of trade. Sec. 28. See Exceptions to General Antitrust Laws, supra.

Liquor

Laws 1939, c. 16, provide that no manufacturer, manufacturer's agent, rectifier, distiller, bottler, importer, or wholesaler or any officer, director, or agent of any such person shall give or furnish, directly or indirectly, to any employee of any holder of a retail on-sale or offsale license only, anything of value for the purpose or with the intent to solicit, acquire, or obtain the help or assistance of any such employee to encourage or promote either the purchase or the sale of the alcoholic beverage sold or manufactured by the licensee giving or furnishing any such thing of value, and any such employee who shall accept or acquire any such thing of value contrary to the provisions of this subdivision shall be guilty of a misdemeanor. See Special Antitrust Laws: Liquor.

Judicial Decisions

A condition in an installment sale of gas ranges that until payments were completed vendee would purchase from vendor exclu

sively all gas that was required at the place where equipment was installed is invalid as tending to stifle competition and create monopoly. The defendant being a public utility, the extent of the restraint is immaterial. Combs v. Burk, 40 Cal. App. 8, 180 Pac. 59 (1919).

An ancillary agreement that defendant, purchaser of filling station equipment on installment basis, agrees to purchase his entire requirements of gasoline and oil from conditional vendor exclusively is invalid under Civil Code section 1673 as in restraint of trade. Fidelity Credit Assurance Co. of California v. Cosby, 90 Cal. App. 22, 265 Pac. 372 (1928). See also Vath v. Hallett, 21 Cal. App. 290, 160 Pac. 1065 (1916), where an agreement under which plaintiff made loans to defendant liquor dealers on condition that defendants purchase all liquor supplies from plaintiff was held invalid and unenforceable for vagueness and lack of mutuality of obligation. Exclusive Dealing Arrangements.

The provision in a cooperative marketing agreement that the grower sell all his products through the association is valid. Poultry Producers of Central California Inc. v. Nilsson, 197 Cal. 245, 239 Pac. 1086 (1925); Poultry Producers of Central California Inc. v. Murphy, 64 Cal. App. 450, 221 Pac. 962 (1923); California Canning Peach Growers v. Downey, 76 Cal. App. 1, 243 Pac. 679 (1925); California Prune & Apricot Growers Inc. v. Baker, 77 Cal. App. 393, 246 Pac. 1081 (1926); California Bean Growers' Ass'n v. Sanders, 86 Cal. App. 689, 261 Pac. 717 (1927); Colma Vegetable Ass'n v. Bonetti, 91 Cal. App. 103, 267 Pac. 172 (1928); California Canning Peach Growers v. Harris, 91 Cal. App. 654, 267 Pac. 512 (1928). See General Antitrust Laws: Cooperatives, supra.

Under Civil Code section 1673, a contract under which defendant agreed to sell limestone only to plaintiff and to no other person for a period of 6 months is not illegal as being in restraint of trade. Schwalm v. Holmes, 49 Cal. 665 (1875).

A contract whereby defendant leased property to plaintiff for storage of petroleum products and advertising purposes and plaintiff licensed defendant to use the property for the purpose of selling plaintiff's and other specified petroleum products at prevailing prices is not invalid under section 1673. Defendant was enjoined from selling petroleum products not specified in the license. Associated Oil Co. v. Myers, 217 Cal. 297, 18 Pac. (2d) 668 (1933); General Petroleum Corporation of California v. Loughead, 218 Cal. 554, 24 Pac. (2d) 457 (1933).

A contract whereby the plaintiff agreed to purchase warehouse receipts from defendant for all the whiskey plaintiff sells in the

state and not to sell whiskey from any other distillery as long as defendant will not sell its warehouse receipts in the State to any other person, except one, is valid under Civil Code section 1673. The contract was not in restraint of trade but aided plaintiff in promoting its business. Great Western Distillery Products Inc. v. John A. Wathen Distillery Co., 10 Cal. (2d) 442, 74 Pac. (2d) 745 (1937) aff'g. 66 Pac. (2d) 717 (Dist. Ct. App. 1936).

Defendants contract to sell lumber to plaintiff only for a period of one year in aid of plaintiff's plan to control the supply is an unlawful restraint of trade. Santa Clara Valley Mill & Lumber Co. v. Hayes, 76 Cal. 387, 18 Pac. 391 (1888).

A contract under which defendant agreed to sell grain bags manufactured by him to plaintiff exclusively is void as such contract is part of a scheme to create a monopoly. Plaintiff actually controlled 75 percent of the annual supply of the article. Pacific Factor Co. v. Adler, 90 Cal. 110, 27 Pac. 36 (1891).

An exclusive dealing arrangement for the sale of lobsters during the closed season in California and several other States was held invalid in an action for failure to accept lobsters as agreed. Morey v. Paladini, 187 Cal. 727, 203 Pac. 760 (1922).

A contract restraining trade may be invalid under Civil Code section 1673 whether the restraint is partial or complete. Morey v. Paladini, supra. Where the contract is reasonable, competition is not stifled and the public interest is not involved, the agreement is valid. Associated Oil Co. v. Myers, supra. See also, Great Western Distillery Products, Inc. v. John A. Wathen Distillery Co., supra, where the court stated that if the public welfare is not involved and the restraint upon one party is not greater than the protection required by the other, the contract will be sustained even though trade may be restrained in some degree.

Under Civil Code section 1673 providing that any contract whereby anyone is restrained from exercising a lawful trade is "to that extent void," a contract of sale containing a clause in restraint of trade will be upheld as to the valid provisions; the illegal terms will be disregarded. Fidelity Credit Assurance Co. of California v. Cosby,

supra.