Peters American Delicacy Co Ltd v Patricia's Chocolates and Candies Pty Ltd

Peters American Delicacy Co Ltd and Peters Ice Cream Pty Ltd (the plaintiffs) appealed to the High Court of Australia from a decision of the Supreme Court of New South Wales. The Supreme Court had dismissed the plaintiffs' suit seeking to restrain Patricia's Chocolates and Candies Pty Ltd (the defendant) from breaching a covenant in a written contract. The dispute concerned the validity of a clause in the contract that restricted the defendant from selling any ice cream other than that supplied by the plaintiffs.

The High Court was required to determine whether the covenant contained in clause 9 of the contract was void as an unreasonable restraint of trade. Specifically, the court had to consider whether the restraint was reasonable in the interests of the parties to the contract and whether it was injurious to the public. The court also had to interpret the interplay between clause 9 and other clauses in the contract, particularly clause 4, which allowed for price alterations, and clause 14, which dealt with the discontinuance of the manufacture of certain goods.

A majority of the High Court, comprising Latham C.J., Rich, Starke, McTiernan, and Williams JJ., held that the restraint imposed by clause 9 was reasonable in the interests of the parties and not injurious to the public. They reasoned that the contract was between parties of equal bargaining power and that the restraint was limited in duration and area. The majority considered that the provisions for price alteration under clause 4 and the discontinuance of manufacture under clause 14 effectively limited the scope of the restraint, ensuring it only applied when the plaintiffs were able and willing to supply the goods at agreed prices. Dixon J. dissented, finding the restraint to be unreasonable.

The appeal was allowed, and the decision of the Supreme Court of New South Wales was reversed. The High Court granted the injunction sought by the plaintiffs.