Esso Petroleum v Harper’s Garage, 1968 AC 279
Citation:Esso Petroleum v Harper’s Garage, 1968 AC 279
Rule of thumb:Where a contract is extremely strict cannot it be struck down? No, not unless it is virtually unworkable.
Background facts:
The facts of this case were that Esso agreed to supply petrol to 2 garages. They included an exclusivity with the first garage for 4 years, and 21 years for the second garage. There was also a clause that both garages had to stay open for a reasonable number of hours. Both garages wanted out of these contracts and argued that these clauses were so severe that they violated their right to trade and were invalid.
Judgment:
The Court held that the first contract for 4 years with these terms was valid. However, the Court held that the contract with the 2 year term was a violation of the right to trade and this contract was deemed null and void. The Court did affirm that no hard and fast rules could be made to ascertain what was a violation of the right to trade and what was not – for example if a contract was for a longer period of time but offered particularly excellent rates then this may counteract the length to make it valid etc, with many permutations possible.
Ratio-decidendi:
‘would not attempt to define the dividing line between contracts which are and contracts which are not in restraint of trade…to ascertain what were the legitimate interests of the [suppliers] which they were entitled to protect and then to see whether these restraints were more than adequate for that purpose’, Lord Reid
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.