As said by Chief Justice Bigelow in the Supreme Court of Massachusetts: "Whenever such is the intent of the parties, it is carried into effect by an express stipulation, which, if not in undue restraint of trade, may be valid and binding. But we know of no case where any such agreement has been raised by mere implication, arising from the sale of the goodwill of a person's trade, in connection with a particular place of business where it has been carried on." 87

In a later case involving the sale of the goodwill of a medical practice, the same court distinguished the facts from those in the case quoted from, and held that a sale of this kind of goodwill contained by implication a covenant not to reengage in the medical practice in the same locality.ss

An English writer has said: "As the decisions at present stand, the title to this section is to some extent misleading, inasmuch as the legal position of the assignor of a business, after he has parted with it, is in no way different from that of any other member of the public, provided, of course, that he has not bound himself by additional restrictive coveEven in the absence of express stipulation, good faith requires of a party who has sold the goodwill of his business that he should do nothing which tends to deprive

nants.

77 89

V.

87-Bassett v. Percival, 87 Mass. (5 Allen), 345-347; and to the same effect see Porter v. Gorman, 65 Ga. 11; Knoedler v. Boussod, 47 Fed. Rep. 465; Knoedler Glaenzer, 55 Fed. Rep. 895; Bergamini v. Bastien, 35 La. Ann. 60; 48 Am. Rep. 216: White v. Jones, 1 Abb. Pr. N. S. 337; Howe v. Searing, 6 Bosw. 354; Cruttwell v. Lye, 17 Ves. 335; Dayton v. Wilkes, 17 How. Pr. 516; Hanna v. Andrews, 50 Ia. 462; Cottrell v. Babcock Mfg. Co., 54 Conn. 138; Costello v. Eddy, 128 N. Y. 650; Williams v. Farrand, 88 Mich. 473; Jackson v. Byrnes, 103 Tenn. 698; 54 S. W. Rep. 984; Holbrook v. Nesbit, 163 Mass. 120; 39 N. E. Rep. 794; Grimm v. Walker, 45 Iowa,

106; Smith v. Gibbs, 44 N. H. 335; Moody v. Thomas, 1 Disney, 294; Washburn v. Dosch, 68 Wis. 436; 32 N. W. Rep. 551; Bradford v. Peckham, 9 R. I. 250; Rupp v. Over, 3 Brewst. 133; Moreau v. Edwards, 2 Tenn. Ch. 347; Palmer v. Graham, 1 Pars. Eq. Cas. 476; Findlay v. Carson, 97 Iowa, 537; 66 N. W. Rep. 759; Drake v. Dodsworth, 4 Kansas, 135; Ranft v. Reimers, 200 Ill. 386; 60 L. R. A. 291; 65 N. E. Rep. 720; Counts v. Medley, 163 Mo. App. 546; Wessell v. Havens, 91 Neb. 426; 136 N. W. Rep. 70. 88-Dwight

Mass. 175.

V. Hamilton, 113

89-Allan on Goodwill, p. 32.

the purchaser of its benefits and advantages. It is clear that he has no right to hold himself out as continuing the business which he sold to the plaintiff, or as carrying on his former business at another place to which he has removed.90 In other words, in every case of the sale of a goodwill the vendor must not enter into an unfair competition with his purchaser.91 What will constitute such unfair competition must be determined in the light of all the facts in each particular case.

The Massachusetts court has gone far in holding the vendor liable to his vendee, in the absence of an agreement not to engage in competing business, wherever his conduct is found to be unfair, as directly tending to destroy the value of the goodwill conveyed by him. In the language of that court, "in each case where the goodwill of a business is sold and the vendor sets up a competing business it is a question of fact whether, having regard to the character of the business sold and that set up, the new business does or does not derogate from the grant made by that sale." 92 In this regard, it would seem clear that equity should, even in the absence of breach of contract, hold the vendor to a high degree of care in the installation and conduct of a business closely competitive with that which he has sold.

As to what length he may go in soliciting his former customers, some courts93 grant him a much greater latitude than others.94

90-Hoxie v. Chaney, 143 Mass. 592-597; 10 N. E. Rep. 713; Hall's Appeal, 60 Pa. 458; 100 Am. Dec. 584; Knoedler v. Glaenzer, 5 C. C. A. 305; 55 Fed. Rep. 895.

91-S. F. Myers Co. v. Tuttle, 188 Fed. Rep. 532.

92-Loring, J., in Old Corner Book Store v. Upham, 194 Mass. 101, 105; SO N. E. Rep. 228. For other illustrative Massachusetts cases, see Gordon v. Knott, 199 Mass. 173; Marshall Engine Co. v. New Marshall Engine Co., 203 Mass. 410, 422; Fairfield v. Lowry, 207 Mass. 352; Bachelder & Co. v.

Bachelder, 220 Mass. 173.

93-Cottrell v. Babcock Printing Press Co., 54 Conn. 122; Williams v. Farrand, 88 Mich. 473; Fish Bros. Wagon Co. v. LaBelle Wagon Works, 82 Wis. 546.

94-Snyder Pasteurized Milk Co. v. Burton, 82 N. J. Eq. 185; Von Bremen v. MacMonnies, 200 N. Y. 41; Ranft v. Reimers, 200 Ill. 386; Wentzel v. Barbin, 189 Pa. 502; Brown v. Benzinger, 118 Md. 29; Zanturjian v. Boornazian, 25 R. I. 151. "As the continued patronage of the customers of such a business is what makes the goodwill of

§ 100. Right of vendee to re-assign.-While, as a general rule, the vendee is clothed with all of the rights of his vendor as to the subject-matter conveyed, an exception has been insisted upon in the case of the assignment of the right to use the vendor's name, in which event the right of the vendee to assign that right to a third party is denied. "Where the contract is for the sale of the right to use a fictitious name or a tradename or a trademark, or a corporate name though composed of individual names, or where the good will of a business includes the right to use names of that character, then such right is assignable by the purchaser and follows the business. But where the contract merely gives to one person the right to use the name of another, such right is personal, and in the absence of an express stipulation can not be assigned or transferred by the purchase to a third party.

§ 101. Covenants not to re-engage in business.--As we have seen, the mere sale of a goodwill does not carry with it by implication a covenant that the vendor will not re-engage in the same business. Consequently, such covenants must be expressed in terms, and the construction of such covenants is a matter of law. While, as we have seen, the goodwill itself will be passed by the conveyance of the business, without special mention, the agreement of the vendor not to re-engage in the same business should be as explicit, both as to time and as to the territory, as the circumstances of the case will permit. A frequent defense to an action, based upon covenants not to re-engage in business, is that the contract is void at common law as being an unreasonable restraint of competition in trade. The general rule of the common

value, and as it is utterly repugnant to the contract by which it was assigned that the vendor should be allowed to seek to regain it by soliciting the customers to come back to him, and as the damages thus inflicted is irreparable and is difficult, if not impossible, in such a business as this to compute, I

think a court of equity should not hesitate to grant a remedy by injunction." Morris, J., in Acker, Merrall & Condit Co. v. McGaw, 144 Fed. Rep. 864.

95-Bagby & Rivers Co. v. Rivers, 87 Md. 400; 40 Atl. Rep. 171; 40 L. R. A. 632; followed in Marcus v. McFarland, 119 Md. 269; 86 Atl. Rep. 337.

law is stated by Mr. Bishop to be as follows: "An agreement, without limitation, not to carry on a particular trade, which is lawful and beneficial to the community and to the individual, is void as against public policy." 96

A covenant not to re-engage in business will not be implied from the vendor's covenant in the bill of sale "to warrant and defend the sale of the said property and interest, as herein stated." 97

A verbal agreement not to engage in a rival business does not come within the statute of frauds. It may be valid when made as collateral to and distinct from a lease of premises, provided the parol agreement is made in consideration of the execution of the written lease.98 But in an action at law upon a contract of sale, such collateral parol agreement can not be shown or recovered on.99

A contract not to re-engage in business must, like any other contract, be founded on a sufficient consideration or it will not be enforced. And the plaintiff in an action upon such a contract must not be guilty of any breach on his part, or he will be denied relief in equity.2

A covenant not to re-engage in business may not specify the territory in which the vendor is precluded from doing business. If from all the circumstances of the case it appears that it was the intention of the parties to limit the territory to a town, county or state, the contract will be so construed,

96-Bishop on Contracts, § 515. 97-Costello v. Eddy, 12 N. Y. Supp. 236. Agreements upon dissolution are construed by the same rules as other contracts, with a view of ascertaining the actual intent in the minds of the parties. Thus in a covenant which read "the said Rivers covenants that he will not engage in the manufacture of furniture so long as said Bagby continue such business," it was held that Bagby's conveyance of the business to a corporation was a discontinuance of the business by him,

and Rivers was entitled to resume the furniture business if he saw fit. Bagby & Rivers Co. v. Rivers, 87 Md. 400; 40 L. R. A. 632.

98-Welz v. Rhodius, 87 Ind. 1; Spier v. Lambdin, 45 Ga. 319.

99-Costello v. Eddy, 12 N. Y. Supp. 236; Herbert v. Dupaty, 42 La. Ann. 343.

1-Onondaga Co. Milk Association v. Wall, 17 Hun, 494.

2—Cassidy v. Metcalf, 1 Mo. App. 593-601; s. c. 66 Mo. 519; Hollis v. Shaffer, 38 Kas. 492; Johnson v. Moss, 45 Cal. 515.

and the vendor will be enjoined from continuing or re-entering business in the territory so fixed.3

The courts of late years have relaxed the old rules so that the restrictive covenant may be unlimited as to area. "It can not be said that the early doctrine that contracts in general restraint of trade are void, without regard to circumstances, has been abrogated. But it is manifest that it has been much weakened, and that the foundation upon which it was originally placed has, to a considerable extent at least, by the change of circumstances, been removed." 4

The subject of contracts in restraint of trade is outside of the scope of this book, but the following extract from an opinion of Mr. Justice Bradley concisely covers the principles which govern the construction of all covenants of the kind under consideration: "There are two principal grounds on which the doctrine is founded, that a contract in restraint of trade is void as against public policy. One is, the injury to the public by being deprived of the restricted party's industry; the other is, the injury to the party himself by being precluded from pursuing his occupation and thus being prevented from supporting himself and his family. It is evident both these evils occur when the contract is general, not to pursue one's trade at all, or not to pursue it in the entire realm or country. The country suffers the loss in both cases; and the party is deprived of his occupation, or is obliged to expatriate himself in order to follow it. A contract that is open to such grave objection is clearly against public policy. But if neither of these evils ensue, and if the contract is founded on a valid consideration and a reasonable ground of benefit to the other party, it is free from objection and may be enforced.

"In accordance with these principles it is well settled that a stipulation by a vendee of any trade, business or estab-. lishment, that the vendor shall not exercise the same trade or business, or erect a similar establishment within a reason

15.

3-Hubbard v. Miller, 27 Mich.

4-Andrews, J., in Diamond Match Co. v. Roeber, 106 N. Y. 473-484. The cases are reviewed at

length in this opinion, and also in Hall Mfg. Co. v. Western Steel & Iron Works, 227 Fed. Rep. 588, 592 (C. C. A. 7).