Callahan v. Donnolly

By the Court: The contract which provides that the Donnollys will not engage in the manufacture of “ Donnolly’s Yeast Powders,” nor in any branch of the yeast powder business, is in the latter clause plainly in restraint of trade, and therefore void. (Wright v. Ryder, 36 Cal. 357; More v. Bonnet, 40 Cal. 251.)

It does not appear that the Donnollys are manufacturing “ Donnolly’s Yeast Powders.” A contract in restraint of [154]trade, and which is not by its terms limited as to the territory embraced in its operation, is not to be supported. “It is to be remembered, however (said Tindal, C. J., in Horner v. Graves, 7 Bing. 744), that contracts in restraint of trade are in themselves, if nothing more appears to show them reasonable, bad in the eye of the law.”

A contract in restraint of trade must designate the space within which it is to operate, and must not be unreasonably extended. Such contracts, when upheld, are only in cases where the parties have restricted the territory in which they are to operate, and where the Court, in considering the nature of the business in connection with the territorial limits assigned, is of opinion that the designated limits are not unreasonable in extent.

Here, no limits being given by the contracting parties, the case falls within the general rule that prohibits contracts in restraint of trade.

Order reversed.