Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535
Contract; vitiating circumstances; illegal contracts; restraint of trade.
Facts: Nordenfelt was a manufacturer of guns. His business was conducted worldwide. He sold the business to the Maxim Nordenfelt Guns and Ammunition Company and, as part of the agreement, promised not to engage in a competing business anywhere in the world for 25 years.
Issue: Was the restraint clause reasonable and enforceable?
Decision: In the circumstances the clause was reasonable and therefore enforceable.
Reason: Although the clause was very extensive in both its geographical extent (the whole world) and its length (25 years), the restriction was necessary to protect the investment being made by the purchaser of the business. In return for the restriction, Nordenfelt was able to sell his business for its full value. A worldwide restraint was justified in the case of a business conducted on a worldwide basis, with customers in many countries. The length of the restraint reasonably protected the value of what the purchaser had bought. In these circumstances, the restraint was not against the interests of the public.