Case ID: cow_7/html/0306-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Curia, per Sutherland, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Nobles, Adm’x. of Nobles, against Bates.
    NEW YORK,
    May, 1827.
    A covenant todígenerdf ly, throughout YOia. other- ^®> °^a®0T^ trade, in aparan^for a par!
    dissolved their ^usiness^and their articles of dissolution declared one object of the dissolution to be, that N. should relinquish the business ; that B. should pay him $3000 in various instalments, the last being $750 ; and that if N. should set up the business within twenty miles of their former place of business, he should forfeit that instalment. N. having carried on the business within the twenty miles; held, that this was a bar to an action, on the covenant, for the $750.
    
      Held, also, that the covenant to relinquish the $750 was in nature of stipulated damages, and not a penalty; and, therefore, evidence showing that B. was not injured by N.’s trade was inadmissible.
    Covenant ; tried at the Delaware circuit, January, 1825, before Nelson, C. Judge.
    At the trial, the plaintiff gave in evidence sealed articles of dissolution of partnership between her intestate and the defendant, dated January 23d, 1810; by which, the parties dissolved their partnership, theretofore existing, from that date. After various stipulations in regard to winding up the concerns, the defendant agreed to pay the intestate $3000, in various instalments; the last one of $750, on the 1st of December, 1812, with interest from the 1st of Decernb6rj 1811; the'- whole payable in leather, at the works of the- firm.- The articles’ then recited, that the- object was, for the testator entirely to- quit the business in which they were concerne5i anq for Bates to- continue it; that such intention' was the basis’ of allowing the $3000'a'nd then proceeded, “ It is: hereby understood,- that in c'ase Nobles' shall be concerned in,- or carry" on the same" kind5 of business they are now concerned in, within 20 miles from- this present stand, then, and-in that case, tike last-instalment of $750 is not to' be paid-; but is entirely to'' be relinquished by the" said Nobles.”
    The" action- was" for" the last instalment only"; in- answer to’ which the defendant proved, that the- business of the partnership was- saddlery, harñess-making¡ tanning and-currying, át-Wáterville; that"after the dissolution^ thé-intestate went to- Boxbury to reside; in July' or’ August,-1811-, he went- to1 the head of the Delaware, 4 miles from Wáterville, and there commenced the business of saddlery and harness- making, tanning and currying.
    The plaintiff proceeded to show, that the business done by the intestate, was of no damage to the defendant. The defendant objected to, and the. judge overruled the evidence. *The plaintiff offered to prove, that in May", 1810. the defendant sold out all his interest in the works at Wáterville; and could not he injured by the intestate’s business. The judge overruled this" evidence. The plaintiff then offered to prove that the defendant' had acknowledged heir claim, in this action, to be just, and that it ought tó be paid. The judge overruled this evidence' also ; and directed á nonsuit, with leave to the plaintiff to move' to' set' it side;
    A motion was now made accordingly.
    
      L. Monson, for the plaintiff.
    The Covenant in" question was in restriction of trade-; and, therefore, void on- the grotind of public policy. Such co venants' áre void,, on the ground that the consideration is- not good. (2 Com. on Contr. 470.) ín this' respect,- the covenant is rio inore binding"tha'n if it had been without seal. The consideration is bad on its face. (Com. on. Contr. 468; 1 P. Wms. 191.)
    But if valid, the contract was in nature of a penalty; and not of liquidated damages. (3 John. Cas. 297; 5 Cowen, 144, and note to p. 150.) On this principle, the evidence that Bates had sustained no damage, was admissable. So as to his acknowledgment that the debt was justly due.
    S. Sherwood, contra.
    The articles show a sufficient consideration for the covenant. And although a contract in restraint of trade, generally, is void, upon principles of public policy; it is not so of those which limit the restraint, as to time and place. These, it is well settled, are an exception to the rule. (10 Mod. 85,130; id. 27; 7 Mod. 230, 248, and the cases there cited, 2 Str. 739.)
   Curia, per Sutherland, J.

It is expressly recited, as part of the consideration, for the covenant to pay the $3000, that Uobles should quit the business, in which he and Bates had been previously concerned; and he expressly agreed, that if he should establish and carry on the same kind of business within 20 miles of Waterville, the last instalment should not be exacted; but should be ^relinquished and given up. The agreement, by the confession of the parties, was founded on an ample consideration.

A bond, or promise, upon good consideration, not tc exercise a trade for a limited time, at a particular place, or within a particular parish, is good. But where it is general, not to exercise a trade throughout the kingdom, it is bad, though founded on good consideration, as being a too unlimited restraint of trade; and operating oppressively upon one party, without being of any benefit to either. (Mitchell v. Reynolds, 1 P. Wms. 181; 10 Mod. 27, 85, 130; 7 Mod. 230; 2 Saund. 156, a. note (1.) 2 Str. 739; 2 Ld. Raym. 1456; 3 Br. P. C. 349; Br. C. C. 418; 5 T. R. 118; Cro. Jac. 596.)

The surrender of the last instalment, must be considered as liquidated damages for carrying on trade within the 20 miles. On the face of the contract, there is nothing unreasonable in this. The relinquishing of the business by Nobles, and the agreement in question, are recited as part of the inducement or consideration on which the defendant agreed to pay the 3000 dollars. The parties have fixed the value of that item in the consideration at 750 dollars. In the nature of the case the precise injury which the defendant would sustain, from the establishment or continuance of the same kind of business, could not be accurately ascertained. ■ It must depend upon a variety of circumstances ; upon the capital which the party might invest; the industry, which he might exert; and the patronage, from these and other causes, he might be able to attract.

A more suitable case, for the liquidation of damages by the parties themselves, can scarcely be imagined.

In Spencer v. Tilden, (5 Cowen, 144,) it was apparent, if the $360 were to be considered as liquidated damages, the contract was oppressive to the defendant. We, therefore, felt ourselves at liberty to hold that the object of the contract was to secure the return of the cows; and that the $360 were inserted by way of penalty; and not as *stipulated damages. That case went quite as far as any which had preceded it. (Vid. note to that case, p. 150; 3 John. Cas. 297; 7 John. 72.

The evidence offered by the plaintiff was properly excluded.

Motion denied.