Contract; vitiating circumstances; illegal contracts; restraint of trade.
Facts: Murdock's Garage operated its business of selling and repairing cars in two towns, Crystal Brook and Wirrabara, which were about 10 miles apart. Murdock's Garage employed Lindner as a mechanic in its repair workshop in Crystal Brook. To prevent Lindner from using his knowledge of the business if he left this employment, the contract contained terms that would restrain Lindner from working in either Crystal Brook or Wirrabara for a year after leaving Murdock's employment. When Lindner stopped working for Murdock's garage, Murdock's wanted to enforce this restraint.
Issue: Was the restraint clause enforceable?
Decision: In a majority decision, the restraint clause was held to be unreasonable in extent, making it contrary to public policy and therefore unenforceable.
Reason: In the course of his employment Lindner might acquire knowledge and information that Murdock's would reasonably wish to prevent him from using in competition with it after leaving its employment. However, for a geographical limitation on employment to be reasonable, it must relate to the information (eg the customers, their creditworthiness, peculiarities etc) that the employee is actually likely to learn. The restraint clause in this contract extended to two towns, whereas Lindner had been employed only in one. He was unlikely to have contact with, or acquire information about, customers in the other. The extent of the restraint was therefore unreasonable.