Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd
⚖️ Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd
Citation: [1894] AC 535 (House of Lords)
Court: House of Lords (UK)
Date of Judgment: 1894
🧑⚖️ Facts of the Case
Nordenfelt, an inventor and businessman, owned a company manufacturing guns and ammunition.
He sold his business to Maxim Nordenfelt Guns and Ammunition Co Ltd for a large sum.
As part of the sale agreement, Nordenfelt agreed not to compete with Maxim Nordenfelt anywhere in the world for 25 years.
Later, Nordenfelt started a competing business.
Maxim Nordenfelt sued Nordenfelt for breach of the covenant not to compete (a restrictive covenant).
⚖️ Legal Issues
Whether the covenant restraining trade was valid and enforceable.
Whether the geographical and time restrictions imposed were reasonable.
The test of reasonableness of restrictive covenants in contracts.
🏛️ Judgment
The House of Lords upheld the validity of the restrictive covenant in the contract.
The covenant restrained Nordenfelt from competing worldwide for 25 years.
The Lords held that the restriction was reasonable because:
Nordenfelt had sold the entire business.
The restriction was necessary to protect the goodwill and interests of the purchaser.
The time period and territorial extent, though broad, were justified given the nature of the business.
🧩 Ratio Decidendi
A restrictive covenant will be upheld if it is reasonable in scope (time and geography) and necessary to protect legitimate business interests such as goodwill.
The courts balance between the right to trade and protection of contractual interests.
The test of reasonableness is key: if the restraint is broader than necessary, it will be void.
But a worldwide and 25-year restraint can be valid if justified by the facts.
⚖️ Significance
The case is a leading authority on restrictive covenants in contracts.
It clarified that restraints of trade are prima facie void, but can be enforced if reasonable.
The case introduced the reasonableness test in terms of duration and territorial scope.
It protects businesses buying goodwill from unfair competition by the seller.
It is a cornerstone case in contract law dealing with post-sale non-compete agreements.
🔍 Related Principles and Cases
Mitchel v Reynolds (1711) 1 P Wms 181 – Early case on reasonableness of restraint.
Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 – On restrictive covenants.
Herbert Morris Ltd v Saxelby [1916] 1 AC 688 – On reasonableness test in employment contracts.
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