he would." This definition suggests another question. It may include other contracts than those merely which inflict a detriment upon the conduct of the business of one of the parties, but, by its terms, it certainly does at least include that kind of a contract. The most common instance at common law of a contract in restraint of trade was a restrictive covenant, in connection with the sale of a business, prohibiting the seller from prosecuting his business in the future in competition with the buyer. Yet such restrictive covenants are now held by the Supreme Court,1 in a case in which Mr. Justice Holmes delivered the opinion, not to be within the Sherman Act, although that act includes -as has always been insisted by the majority of the court in the different cases arising under the Sherman Act, and as Mr. Justice Holmes again pointed out in his dissenting opinion in the Northern Securities cases The result seems to be that, not only is the Sherman Act not directed against those contracts only which inflict a detriment upon the conduct of the business of one tradesman for the benefit of another, but the commonest example of such a contract is not within the prohibition of the Sherman Act at all. In other words, contracts which impose only a restriction upon the conduct of business by one party for the benefit of the other may not be contracts in restraint of trade at all, while all contracts which impose a restriction upon the business of both parties - limit competition between them in the supposed interests of both are in restraint of trade and illegal. The reason for this result, and the ground of the distinction between restrictive covenants in connection with the sale of a business and contracts limiting or restricting competition between competitors, have not received the attention they deserve.

"every" contract in restraint of trade.

II.

It is commonly stated that restrictive covenants accompanying the sale of a business are valid because the limitation upon competition is incidental and collateral to the real object of the contract, which is the sale of business property, and that the restrictive covenant is unobjectionable in so far as it serves to insure the enjoyment of the property sold. Such covenants are not limited,

1 Cincinnati Packet Co. v. Bay, 200 U. S. 179. See also Brett v. Ebel, 29 N. Y. App. Div. 256; and for similar decisions under other anti-trust acts, see Espenson v. Koepke, 93 Minn. 278; Gates v. Hooper, 39 S. W. Rep. 1079 (Tex.).

however, to cases where there is an actual transfer of tangible property. All the business that there is to sell may, in some cases, be the competition, and the restrictive covenant will then constitute the whole of the undertaking. And even where there is a transfer of property the purchaser is not bound to make use of it. It has never been suggested that his right to enforce the covenant was conditional upon his continuous use and employment of the property or instruments of competition purchased. The restrictive covenant protects the business sold, not the use merely of particular property transferred under the terms of the sale. It may have been the competition that the purchaser was most desirous of buying, and if the vendor was willing to sell, for the price offered, his power to prosecute his existing and established business, the vendee was entitled to buy it.

Cases involving the sale of a business by means of a covenant to discontinue competition are not unusual. The most common instances have been sales of professional business, where there usually was no property to transfer. The business was all good will, an established competition. A recent New York case 2 affords a good illustration of the sale of a business by means merely of an agreement to discontinue competition. In that case one party, in consideration of the promise of the other to make a monthly payment, agreed to give up the business of dealing in moulding sand from sand banks in the county of Albany and not to engage further in the business personally or as agent for any one else. In holding the agreement valid the court says:

"Heretofore, in most of the cases which have come before the courts, the covenant to refrain from a calling within a territory described, accompanied a sale of the business itself, with all its appliances or appurtenances. For obvious reasons that would be so; but, if the calling be one which is followed without a business plant, is any principle of public policy the more violated by a covenant to discontinue it? Clearly not, and this court has not held to that effect."

1 Unless possibly in Western Wooden-Ware Ass'n v. Starkey, 84 Mich. 76, where it seems to be intimated that the sale of a business, for a sufficient consideration, which involved the abandonment of the manufacturing plant of the vendor, would be invalid. In other words, the owner of a business may not sell out to a competitor unless the purchaser will maintain the identical property used by the seller, though of course the owner might abandon his business if unprofitable.

2 Wood v. Whitehead, 165 N. Y. 545. See also Brett v. Ebel, 29 N. Y. App. Div. 256.

And in the recent case in the United States Supreme Court1 already referred to, where it was objected that the restrictive covenant was invalid because it was not collateral to a sale of good will, Mr. Justice Holmes used this language:

"It is said that there is no sale of good will. But the covenant makes the sale. Presumably all that there was to sell, beside certain instruments of competition, was the competition itself, and the purchasers did not want the vendors' names."

It is not accurate, therefore, to say that a restrictive covenant is valid only when and because it accompanies and is collateral to a sale of business property or good will. On the contrary, the restrictive covenant by itself may accomplish the sale of all the business there is to sell, and in every case of a sale of business the restrictive covenant must be regarded as making the sale of a part at least of the business and good will sold. The competitive. power of an existing business may be the essence of its good will. A person engaged in business in a particular locality, a physician for instance, located and doing business in a particular town, could not at the same time conduct a second business of the same kind within the same territory which should be in fact a rival and competitor of the first. The opening of a second office for the same purpose in the same town would not mean the beginning of a new business. Consequently, if the whole of such a business, good will and all, is to be sold to another party, the right of the seller to prosecute afterwards what would be, in fact, but a continuation of the business sold, must be excluded. A covenant prohibiting that would obviously be essential to an actual sale of the business.

As a person could not, before the sale of his business, conduct a second similar business which should compete with the first, it follows that, after the sale of the first business (if public policy does not prohibit a man from realizing the full value of his established business by sale), there is no reason why the seller should be permitted to conduct a second business in all respects like the first. He cannot claim that public policy should permit him to

1 Cincinnati Packet Co. v. Bay, 200 U. S. 179.

2 This is so clear that the Massachusetts Supreme Court has held that upon the sale of the business of a physician with its good will a restrictive covenant would be implied. Dwight v. Hamilton, 113 Mass. 175. The fact that the courts do not, in the ordinary case of the sale of business property and good will, imply such a covenant, does not mean that such a covenant when made is not, in fact, instrumental in conveying a part of the business of the vendor.

sell his business and keep it too. There can be no doubt that it is this aspect of the matter that has influenced the more liberal attitude which the courts, in the more recent decisions, have assumed toward restrictive covenants in connection with the sale of a business. And in this view of it, it seems clear that the restrictive covenant is no more a contract in restraint of trade than is the simple agreement of a vendor to sell all of the business which he has.

It should seem clear, also, that if a man may sell all of the competition which his existing business fairly represents, there can be no objection, on the score of public policy, to his selling only a part of his business or competition. In the view of the earlier cases, apparently the less sold the better. Certainly a man engaged in business in two places might sell his business or competition in one of them and retain it in the other. The result would be the same as if he had originally had a business only in one place and had sold that, with a restrictive covenant covering that territory, and had immediately resumed business in the other place. And clearly public policy would be no more infringed by the sale of part of a single business which extended throughout both places. Would there be any objection to a contract between competitors whereby one party, in consideration for the agreement of the other party to discontinue business, we will say, in New York, agreed on his part to discontinue business in New Jersey?1 Would that be a sale of part of a business and valid, or a contract limiting competition and invalid?

As we shall have occasion to see later in discussing contracts limiting competition, the distinction between contracts falling within that class and contracts of sale is not one that is always easily drawn, and the authorities frequently fail to discriminate them properly. Such a leading case, for example, as that of Arnot v. Pittston & Elmira Coal Co.,2 presents difficulties in this. respect that are commonly overlooked. There a Pennsylvania coal company, also doing business in New York, agreed for one season to take at the market price as much as two thousand tons of coal a month from a rival Pennsylvania coal company, provided the vendor would agree during that time not to sell coal to any

1 Such an agreement was sustained in Wickens v. Evans, 3 Y. & J. 318. See Judge Taft's comment in the Addyston Pipe Company case, 85 Fed. Rep. 284. And a similar contract was sustained as a sale in National Benefit Co. v. Union Hospital Co., 45 Minn. 272.

2 68 N. Y. 558. See also Mill & Lumber Co. v. Hayes, 76 Cal. 387.

other dealer to come north of the Pennsylvania state line. The contract was held illegal. It was admitted that an absolute sale of any quantity or of all the coal of the vendor to a rival dealer, even though the object of the purchaser was to secure a monopoly and the vendor knew it, would have been valid. "But and this is a very important distinction," says the court, "if the vendor does anything beyond making the sale to aid the illegal scheme of the vendee" the contract is invalid. In other words, the agreement by the vendor to relinquish his competition with the vendee in New York, in consideration for the promise of the vendee to purchase a considerable proportion of the vendor's output of coal — apparently considered a good bargain by the vendor - was invalid and the contract unenforceable. And yet, an agreement to sell all the coal the vendor should produce, said by the court to be valid, would involve a restrictive covenant not to sell to any one else, and would be still more effective to accomplish the monopoly aimed at by the vendee. Apparently the vendor could sell all or a part of his coal and all of his competition, but not a part only of the latter.

Should the fact that the vendee in this New York case was seeking to obtain control of the New York coal market be sufficient to account for the result? If so, then a contract to sell the entire output of the vendor's mines should be invalid for the same reason. This the New York court does not hold, but, in spite of the fact that engrossing the market is repeatedly said to be an obsolete offense,1 there are a number of recent cases where other courts have refused to enforce, as between the parties, contracts of sale where the object of the purchaser was to obtain control of some particular market.2

These cases apparently rest upon the principle that contracts of sale between competitors, which have for their object the entire or partial removal of a competitor from business, will not be enforced by the courts if the direct result of their enforcement will be to give control of the market to the purchaser. We have seen that a restrictive covenant in such cases is ordinarily as much a part of the contract for the sale of the business as the agreement to transfer tangible property. So long as either remains unexecuted they stand upon the same footing. If, under the circumstances above

1 Davis v. A. Booth & Co., 131 Fed. Rep. 31, 37.

2 Detroit Salt Co. v. National Salt Co., 134 Mich. 103; Richardson v. Buhl, 77 Mich. 632; Pacific Factor Co. v. Adler, 90 Cal. 110.