RESTRAINT OF TRADE, that which tends unreasonably to restrict or prevent trade. By common law a contract which deprives a person of the right freely to engage in lawful business is void as contrary to public policy. However, contracts which are in partial re straint of trade, for a valuable consideration and which are a reasonable protection to a con tracting party are legal. For instance, an agree ment by A with B never to carry on business again or not to carry it on for 100 years at any place would be void, but an agreement by A with B not to carry on a business in the same town with B for 10 years would be reasonable and, therefore, valid. The tendency of the law in the United States and that of Great Britain are similar, but there are minor differences. Interstate and international commerce in the United States became subject to the provisions of the Sherman Act in 1890. In effect, this statute declares that old contracts, combina tions, etc., in restraint of interstate or inter national commerce are void. It subjects to a
penalty all persons found guilty of such acts and provides for forfeiture of goods in trans portation in violation of the act by the govern ment and dissolution of such contracts. For merly it was held by the Supreme Court of the United States that all such restraints of trade, whether reasonable or unreasonable, violated the statute, but in later decisions this rule was modified by the adoption of the so-called 'rule of reason,* which practically follows the old decisions that no restraint is void which is rea sonable. Various States have passed laws pun ishing restraint of trade, notably Kansas, Ohio, Missouri and Texas. It has been suggested, as an aid to Federal enforcement of laws pun ishing restraint of trade, that all industrial concerns doing an interstate business be com pelled to incorporate under Federal laws but this would probably require a constitutional amendment and is, therefore, impracticable.