Shute v. Heath

• Decision Date: 18 November 1902
• Citation: 131 N.C. 251,42 S.E. 704
• Court: North Carolina Supreme Court
• Parties: SHUTE et al. v. HEATH et al.

42 S.E. 704

131 N.C. 251

SHUTE et al.

v.HEATH et al.

Supreme Court of North Carolina.

Nov. 18, 1902.

CONTRACT IN RESTRAINT OF TRADE—INDEFI-NITENESS AS TO TERRITORY.

1. A provision in a contract of sale of a business of manufacturing timber and ginning cotton that the seller will not eugage in the business in any territory from which he secures his patronage, so as to compete with the buyer, is void for indefiniteness as to territory.

Appeal from superior court, Union county; McNeill, Judge.

Action by H. A. Shute and others against W. C. Heath and others. Judgment for defendants, plaintiffs appeal. Action dismissed.

Maxwell & Keerans, for appellants.

Armfield & Williams and Adams & Jerome, for appellees.

MONTGOMERY, J. Contracts in partial restraint of trade can be made and enforced of common right. This court said in Kramer v. Old, 119 N. C. 1, 25 S. E. 813, 34 L. R. A. 389, 56 Am. St Rep. 650: "The modern doctrine is founded upon the basic principle that one who by his skill and industry builds up a business acquires a property at least in the good will of his patrons which is the product of his own efforts, and has the fundamental right to dispose of the fruit of his own labor, subject only to such restrictions as are imposed for the protection of society, either by expressed enactments of law or by public policy." An indefinite restriction as to duration will not make such contracts void. Kramer v. Old, supra. But there must be a definite limitation as to space, and the reasonableness of such limitation will depend upon the nature of the business and good will sold. A contract, for instance, for a valid consideration, not to engage in the manufacture and sale of firearms in general use, would be allowed to cover a larger extent of territory than would a contract not to engage in the manufacture of timber or the ginning of cotton. And the reasonableness of the limitation as to space is a matter of law for the court to decide. Chitty, Cont. 738. And the test of that reasonableness is whether the space or territory is greater than is necessary to enable the assignee to protect himself from competition on the part of his assignor, and thereby to get the benefit of what he has bought. The assignee would have the right to freedom from the competition of the assignor in the whole territory from which the assignor derived the profits of his business. The contract before us is silent as to restriction as to time, but under the decision made in Kramer v. Old, supra, that would be construed to be for the lives of the assignors. The trouble in the present case grows out of that part of the contract in respect to the limitation as to space. The defendants, after selling to the plaintiffs a tract of land and gin ning and sawmill machinery, agreed with them that they "would not erect conduct, or carry on the business of ginning and baling cotton or making brick in any territory now occupied by them, or from which they secure their patronage, so as to compete with them or injure their business in any of the lines of ginning and baling cotton or making brick, either for ourselves, or as agents for another or others." The defendants in this court filed a motion to dismiss the action on the ground that the complaint did not state a cause of action, in that the contract set out in the complaint is void for indefiniteness as to territory within which defendants were not to gin cotton. We think the motion must be allowed. The infirmity of the contract does not consist in the reasonableness as to the extent of territory in which the plaintiffs were to conduct their business free from competition on the part of the defendants, but it is in the indefiniteness of that territory. No rule can be laid down by which the area can be made certain. No instructions could be given, even to an expert surveyor, by which he could define the bounds of the space. It is without shape, — without course or distance from any object or pointer. The fixing of the bounds would depend upon the testimony of witnesses, each testifying as to what he knew as to who were the patrons of the plaintiffs, and where they resided. The attempted enforcement of such contracts would, in the nature of things, be likely to produce litigation between the assignor and assignee as to the extent of the territory, with the probability that large numbers of witnesses would be called, and great expense incurred both by the litigants and the public. A retrospect of the course of the law in respect to contracts in restraint of trade confirms us...