The Restraint of Trade That Sank The Sushi Bar

 

When you buy a business, think about whether the goodwill you are paying for will be damaged if the seller starts up a new business in
competition with you. If so, a “restraint of trade” clause is essential, but beware – it must be properly drawn to be valid. Our courts will
not enforce any restraint that is unreasonably wide in nature, geographical area, or duration.

 

Having said that, as a recent High Court case shows, even a widely-worded restraint clause can still be perfectly valid. The clause in question
restricted the seller of an Italian-style restaurant from carrying on any similar business, and in particular provided that she could not compete
with the buyer “in any form of Restaurant / Coffee Shop Business” for 3 years.  

 

 

The seller then opened up a sushi bar nearby, arguing that it did not compete with the original restaurant, being Japanese rather than Italian, and being largely take-away rather than sit-down in style. Unimpressed by these arguments, the Court interdicted the seller from continuing to run her sushi bar – which, held the Court, “still operates as a restaurant” regardless of the differences in cuisine and style. Nor was it relevant that the buyer of the Italian restaurant had changed its name, menu and décor – despite the changes it remained “a restaurant business”.

 

Every case will be different – reduce the risk of dispute and costly litigation (there is talk of an appeal now in the case in question) by ensuring that both parties are clear on what they are agreeing to, and by insisting on a properly-drawn agreement that is tailored to fit the particular circumstances of your sale.

 

 

Fixed Term Contracts: Banks Exempted From Consumer Protection Act

 

“A bank is a place that will lend you money if you can prove that you don’t need it” (Bob Hope)

 

The Minister of Trade and Industry has exempted banks from the provisions in the Consumer Protection Act that (with a few exceptions) limit fixed-term contracts to a 24 month period, give consumers the option of cancelling them subject to 20 business days’ notice (on payment of a “reasonable” penalty), and regulate notice of expiry and automatic continuation of such contracts.

 

So if, for example, you put money into a fixed deposit with a bank, you are still bound to its full term – you can’t give early notice to take advantage of an upward movement in interest rates. Counterparties will likewise remain bound to hedge and swap agreements.

 

 

New Trans-Fats Regulations: Read The Label!

 

It will be unlawful from 17 August to sell, manufacture or import any oils or fats with more than 2% “industrially produced trans-fatty acids”. Note that naturally occurring trans-fats (such as the small amounts found in the milk and meat of some animals) are not affected – it’s the artificially manufactured fats that are being targeted as serious health risks.

 

Nor can a product be advertised or labeled as “Trans-fat Free” unless it has less than 1% artificial trans-fats.

 

Manufacturers, importers and retailers have had 6 months to prepare for these restrictions so they should be fully compliant by the 17th. But it’s ultimately up to you to protect your own health, so if you aren’t already scrutinising the labels on foodstuffs, start now! Always look for the “content per 100g” figures – the “content per serving” figures won’t give you percentages, and it’s the percentages that count.