X sold his retail clothing business to Y. The business was located in a small town, and most of the customers lived within a radius of eight kilometres of the clothing shop. As a part of the sale agreement, X agreed not to set up a similar business in competition with Y for a period of five years or within a radius of eight kilometres of the shop. The "five-year; eight-kilometre radius" restriction is probably reasonable, as it protects the goodwill purchased by Y, and does not unnecessarily restrict X's right to set up business elsewhere.

Question

Quizplus · Accepted Answer

The restriction is likely considered reasonable because it is limited in both time (five years) and geographical scope (eight kilometres), aiming to protect the buyer's (Y's) investment in the goodwill of the business while not unduly limiting the seller's (X's) ability to engage in business elsewhere.

X Sold His Retail Clothing Business to Y