II. CONTRACTS NOT TO COMPETE No statutory provisions. Judicial Decisions Restrictive Covenants Ancillary to the Sale of a Business. An agreement in connection with the sale of goodwill that the seller will not compete with the buyer is valid, if the public is not adversely affected, and if the restriction is no greater than is reasonably necessary for the buyer's protection. The court looks with favor on contracts for the sale of goodwill and will seek to enforce them whenever possible. Sale of plate-glass company with agreement not to compete for 10 years in Colorado was held valid. Barrows v. McMurtry Mfg. Co., 54 Colo. 432, 131 Pac. 430 (1913). Seller's agreement not to "reside or work, in any capacity whatever," within a radius of eight blocks of location of a tailoring business sold was held valid, in view of the nature of the business, which can be carried on at home. Garf v. Weitzman, 72 Colo. 136, 209 Pac. 809 (1922). Sale of bakery business with covenant not to compete limited territorially, but unlimited as to duration, was held valid. Wife and daughter of seller were likewise enjoined from operating or attempting to operate a competing bakery. Weber v. Nonpareil Baking Co., 85 Colo. 232, 274 Pac. 932 (1929). In a suit to restrain defendants from competing with plaintiff under an agreement not to compete entered into for the sale of a business, the burden of proof is on defendants to show that the transaction is bona fide and that the family ownership was not fictitious to avoid the restrictive covenant. Id. Two persons, jointly owning two drug stores, sold them and agreed not to compete with the buyer for a period of 5 years within a radius of five blocks of the stores. One of the two vendors in violation of the agreement subsequently engaged in a similar business. A restraining order was granted as the agreement was held enforceable against both vendors jointly or severally. Smith v. Woodward, 51 Colo. 311, 117 Pac. 140 (1911). Restrictive Covenants Ancillary to Employment. A physician hired an assistant on a month-to-month basis, who agreed not to compete in the same city for a period of 5 years after the employment terminated. The assistant having been employed for a number of years, the agreement was held to be reasonable. An employee's agreement not to compete with his employer at termination is valid, if the restraint is necessary for the protection of the employer, is of no longer duration than is necessary to protect employer's interest, is not injurious to the public, and is founded on legal consideration. Freudenthal v. Espey, 45 Colo. 488, 102 Pac. 280 (1909). Agreement by a laundry employee not to solicit customers of employer for a period of 6 months was held reasonable. Axelson v. Columbine Laundry Co., 81 Colo. 254, 254 Pac. 990 (1927). An agreement by a tea and coffee salesman not to compete by taking orders for teas, coffees, "or other merchandise," after termination of employment was held reasonable. Rule of ejusdem generis was applied to "or other merchandise." Jewel Tea Co. v. Watkins, 26 Colo. App. 494, 145 Pac. 719 (1915). Restrictive Covenants Not Ancillary to Sale of a Business Interest. In consideration of loans made by certain brewers to the Dacono Town Site Co., it was agreed that the real-estate firm would include covenants prohibiting the sale of liquor within restricted areas in their conveyances of land. Defendant, a purchaser of such land, violated the covenant, contending that the prohibition was illegal and in restraint of trade. The court held the covenant valid, notwithstanding the agreement between the brewers and real-estate firm. The court added that the sale of intoxicating liquors is injurious to the public and should be restrained. Fusha v. Dacono Town Site Company, 60 Colo. 315, 153 Pac. 226 (1915). (The court failed to discuss a number of relevant objections raised by the defense.) Provision for payment of a fixed sum for violation of a covenant not to compete held void as a "penalty" where intended to coerce performance by the covenantor rather than to compensate the covenantee for nonperformance. Gougar v. Buffalo Specialty Co., 26 Colo. App. 8, 141 Pac. 511 (1914). But on a second appeal the court held there was no jurisdiction over the subject matter of the case. Buffalo Specialty Co. v Gougar, 26 Colo. App. 523, 144 Pac. 325 (1914). III. TYING CONTRACTS AND EXCLUSIVE DEALING ARRANGEMENTS Stat. Ann. (Michie, 1935), c. 106 Sections 31 and 42 provide that an agricultural cooperative marketing association organized under sections 14 to 45 may enter into contracts with its members, requiring the members to sell for a period of not over 10 years, all or any specified part of their agricultural products or specified commodities exclusively to or through the association, and that these agreements shall not be deemed illegal or in unlawful restraint of trade, or a conspiracy or combination to accomplish an illegal purpose. See Exceptions to General Anti-Trust Laws, supra. See also Cooperatives in projected study. Liquor Stat. Ann. (Michie, 1935) c. 89, sec. 28 provides that it shall be unlawful for any owner or person interested, directly or indirectly, in any retail business to enter into any agreement with any other person to receive, possess, or accept any money, fixtures, supplies, services, or things of value from any other person whatever, whereby a retail licensee may be influenced or caused directly or indirectly to buy, sell, dispense, or handle the product of any manufacturer of alcoholic beverages. See Special Antitrust Laws: Liquor. Judicial Decisions A railway company owning a strip of land at a railroad station may, unless there is evidence of injury to the public, grant to one taxi company an exclusive license to use the land as a hack stand, provided the other companies have free access to and from the station to deliver and take away passengers. Union Depot and Ry. Co. v. Meeting, 42 Colo. 89, 94 Pac. 16 (1908). The burden was on defendant, a salesman having an exclusive sales territory, to show that the contract was illegal when he defended an action by the plaintiff company for the sales price of goods sold. Defendant contended that plaintiff manufacturing company illegally and arbitrarily fixed unreasonably high retail prices for said goods. Richards v. Rawleigh Co., 74 Colo. 463, 222 Pac. 650 (1924). CONNECTICUT I. TRUSTS, COMBINATIONS, AND MONOPOLIES A. GENERAL ANTITRUST LAWS CONSTITUTIONAL PROVISIONS Const. art. I, sec. 1. That all men when they form a social compact, are equal in rights; and that no man or set of men are entitled to exclusive public emoluments or privileges from the community. STATUTORY PROVISIONS Sec. 6352. Combination to increase price of necessities.-Any person who, for himself or as a member of any firm or an officer or agent of any corporation, shall conspire with or enter into any combination or agreement with any other person or any firm or corporation for the purpose of fixing or maintaining a higher price, at wholesale or retail, for ice, coal, or any other necessity of life, than would prevail except for such conspiracy, combination, or agreement, or of limiting or restraining the production, manufacture, shipment or sale of any such commodity for the purpose of increasing the price thereof, shall be fined not more than one thousand dollars or imprisoned not more than five years or both. 1918, S. 6503. Judicial Decisions GENERAL ANTITRUST LAWS Application of the Common Law. Where one company agreed to manufacture copper bands for a second company with copper furnished by the latter, the object being to aid the latter in performing its contract to deliver the finished bands to a third party, the arrangement was held not to be monopolistic nor 210235-40-vol. 1-11 81 |