Illegal Contracts

Question 1

What are the two factors relevant to determine reasonableness of a restriction of trade clause in an employment contract?

Answer 1

1. The employer has some legitimate interest to protect
2. The clause must be reasonable

Question 2

What are the two proprietary rights under a legitimate interest to protect?

Answer 2

1. Trade secrets
2. Employers trade connections

Question 3

What are the three things an employer must prove to enforce a restraint under trade secrets?

Answer 3

1. The information to be protected is a trade secret
2. The employee has sufficient knowledge of the secret to exploit it
3. The employees acquired the knowledge in the course of their employment

Question 4

Cases for Trade Secrets (2)

Answer 4

1. Broadcasting Corp of NZ v Nielsen (Enforceable)
2. Herbert Morris v Saxelby (Unenforceable)

Question 5

What does an employer need to prove in the case of employers trade connections?

Answer 5

1. The ex employee had been in a position of influence over those customers
2. Such influence was gained in the course of employment having regard to the nature of the business between them

Question 6

Case for Employers Trade Connections

Answer 6

Landzeal v Kyne (Trade Connections)

Question 7

State the sections of the effect of illegality and how to answer a question on this

Answer 7

s 73: Every illegal contract is void
s 76: Court has wide discretionary powers to grant relief
s 79: Must not grant relief if it is not in public interest

Question 8

What is the effect of restraint of trade at common law?

Answer 8

It is void if against public interest. The court will sever it if it is unreasonable, or enforce it if it is reasonable.

Question 9

What section is relevant to restraint of trade clauses?

Answer 9

s 83

Question 10

Cases for s 83 restraint of trade clauses (3)

Answer 10

1. H&R v Block (Modified)
2. Brown v Brown (Voided)
3. Transpacific case (Enforced)

Question 11

Cases for trade secrets (2)

Answer 11

1. Broadcasting Corp NZ v Nielsen (Enforceable)
2. Herbert Morris (Unenforceable)

Question 12

6 elements to determine the reasonableness of restraint of trade clause

Answer 12

1. Relationship between employee and customers
2. Nature of employees work
3. Nature of the business
4. Areas of restraint
5. Duration of restraint
6. Public interest

Question 13

Cases for reasonableness test of restraint clause (2)

Answer 13

1. H&R Block
2. Brown v Brown

Question 14

Case for commercial transactions

Answer 14

Fletcher Aluminium