Johnson and Wilson were the principal shareholders in Matthew Corporation, located in the city of Jonesville, Wisconsin
Johnson and Wilson were the principal shareholders in Matthew Corporation, located in the city of Jonesville, Wisconsin. This corporation was engaged in the business of manufacturing paper novelties, which were sold over a wide area in the Midwest. The corporation was also in the business of binding books. Johnson purchased Wilson’s shares of the Matthew Corporation, and in consideration thereof, Wilson agreed that for a period of two years he would not (a) manufacture or sell in Wisconsin any paper novelties of any kind that would compete with those sold by the Matthew Corporation or (b) engage in the bookbinding business in the city of Jonesville. Discuss the validity and effect, if any, of this agreement.
It is necessary for Individual M's business to restrict Individual W from conducting business in the state for two years, so that the competition may decrease. But at the same time, Individual W is not going to be able to serve the people of the whole state for a long time and also may have to conduct some other business or may have to move to some other state to earn a living, which is unreasonable. The part of the contract that restricts Individual W from conducting business for two years in the city is quite reasonable and is also valid and enforceable by law since the business can be carried out in some other part of the state as well.
The part of the contract that restricts Individual W to conduct business in any part of the state for two years is necessary to decrease the competition for Individual J. It is unreasonable to deprive the people of the state from the services of a skilled person; it is also unreasonable to ask the person to conduct some other business or to move to some other state to conduct the same business. But the part of the contract that restricts the conduct of business only in the city for two years is valid and enforceable under the law since it is reasonable for both parties of the contract.