Schroeder Music Publishing Co Ltd v Macaulay
Encyclopedia
Summary: Restraint of trade; exclusive services agreement; whether unreasonable
Abstract: In determining the enforceability of a contract in restraint of trade the court will consider the fairness of the bargain having regard to whether the restrictions are both reasonably necessary for the protection of the legitimate interests of the promisee and commensurate with the benefits secured by the promisor. The plaintiff, an unknown songwriter aged 21, entered into standard form agreement with the defendant publishers who were to have the exclusive benefit of the plaintiff's compositions, the full world copyright whereof was assigned to the defendants in return for a fixed percentage of any royalties received. The term of the agreement was expressed to be five years, which term was to be automatically extended by a further five years if the royalties payable to the plaintiff within the first five years should exceed GBP 5,000. The defendants could terminate or assign the benefit of the agreement whereas the plaintiff could do neither. There was no obligation upon the defendants under the agreement to publish or promote any composition of the plaintiff. The plaintiff obtained a declaration that the agreement was void as contrary to public policy.
Held, dismissing the defendant's appeal, that the standard form agreement could not be justified as moulded under the pressures of negotiation, competition and public opinion, the plaintiff having no bargaining power as against the defendants; that the defendants could under the agreement arbitrarily decline to exploit the plaintiff's work in which event the plaintiff's remuneration under the agreement would be limited to a GBP 50 advance payable thereunder during the five year period; that the defendants' power to assign precluded the argument that the restrictions would not be enforced oppressively; that the defendants had failed to justify restrictions which appeared unnecessary and capable of oppressive enforcement. (Decision of CA ([1974] 1 All E.R. 171) affirmed; Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] A.C. 269 considered).
Judge: Lord Reid; Viscount Dilhorne; Lord Diplock; Lord Kilbrandon; Lord Simon of Glaisdale
Abstract: In determining the enforceability of a contract in restraint of trade the court will consider the fairness of the bargain having regard to whether the restrictions are both reasonably necessary for the protection of the legitimate interests of the promisee and commensurate with the benefits secured by the promisor. The plaintiff, an unknown songwriter aged 21, entered into standard form agreement with the defendant publishers who were to have the exclusive benefit of the plaintiff's compositions, the full world copyright whereof was assigned to the defendants in return for a fixed percentage of any royalties received. The term of the agreement was expressed to be five years, which term was to be automatically extended by a further five years if the royalties payable to the plaintiff within the first five years should exceed GBP 5,000. The defendants could terminate or assign the benefit of the agreement whereas the plaintiff could do neither. There was no obligation upon the defendants under the agreement to publish or promote any composition of the plaintiff. The plaintiff obtained a declaration that the agreement was void as contrary to public policy.
Held, dismissing the defendant's appeal, that the standard form agreement could not be justified as moulded under the pressures of negotiation, competition and public opinion, the plaintiff having no bargaining power as against the defendants; that the defendants could under the agreement arbitrarily decline to exploit the plaintiff's work in which event the plaintiff's remuneration under the agreement would be limited to a GBP 50 advance payable thereunder during the five year period; that the defendants' power to assign precluded the argument that the restrictions would not be enforced oppressively; that the defendants had failed to justify restrictions which appeared unnecessary and capable of oppressive enforcement. (Decision of CA ([1974] 1 All E.R. 171) affirmed; Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] A.C. 269 considered).
Judge: Lord Reid; Viscount Dilhorne; Lord Diplock; Lord Kilbrandon; Lord Simon of Glaisdale