4 Formalities

Certain contracts have to be made in a formal way:

4.1 Some contracts must be in writing:

(a) consumer credit agreements

(b) transfer of company shares

(c) money lending contracts

(d) contract for the sale or other disposition of land e.g. leases: LP(MP)A'89

4.2 Some contracts do not have to be in writing. But written evidence must be available to enable an action to be brought. eg. Contract of guarantee.

4.3 Certain contracts must be executed as a Deed (and are called speciality contracts):

(a) Gratuitous promises: Deeds of Covenant

(b) Transfers of a legal estate in land

4.4 Contracts of employment need not be in writing or evidenced in writing but the main details must be outlined.

5 Terms in restraint of trade

5.1 Contracts or contract terms in restraint of trade are prima facie void but will be upheld if there is a legitimate proprietary interest to protect and the term is reasonable between the parties and for the community.

Legitimate Proprietary Interest

5.2 The following are legitimate proprietary interests:?

(a) Trade Secrets.

(b) Business Goodwill.

5.3 It is not legitimate to restrain the use of personal skills.

Reasonableness

5.4 The clause must only be sufficiently wide to protect the legitimate proprietary interest and no wider.

5.5 Factors to consider:

(a) Area.

(b) Duration.

(c) Activity (i.e. the drafting must restrict the specific activity and no other).

5.6 The burden of proof is on the claimant.

The bargaining position of the parties is taken into account.

Severance

5.7 The court will not rewrite a restraint which is too wide: Office Angels Ltd v Rainer-Thomas and O’Connor.

5.8 (a) The court may apply the "blue pencil test" if clauses are severable; Home Counties Dairies v Skilton.

(b) The blue pencil test will not be used if the restraint is really one covenant.