Legal Case Summary
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535
Whether restraint of trade clauses are unlawful.
Facts
The appellant, Thorsten Nordenfelt, was a Swedish gun manufacturer with a valuable, world-wide business. He sold the business to a company, the respondents, and agreed to enter into a restrictive covenant not to work for any rival business for a 25 year period in an unlimited geographical area. Later, he worked for a rival business. The respondents brought an action to enforce the covenant by inunction. The case came to the House of Lords.
Issues
The appellant argued that clause was a restraint of trade clause and had to be reasonable to be upheld. He argued that a worldwide geographical limitation was unreasonable. The respondents argued that the restraint was only such as was necessary to protect themselves.
Decision / Outcome
Lord McNaughton said a clause by which someone restrains themselves from the exercise of his trade was prima facie unlawful. It was a principal of English law all trade should be free. However, it would discourage trade if someone who has built up a valuable business could not dispose of it to his best advantage. Therefore, restraint of trade clauses would be upheld if they were reasonable (at 564):
“in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.”
It was not disputed that this particular clause was reasonable, as a huge sum had been paid for the business. Nor was it injurious to the public. Therefore, the clause was upheld.
Updated 20 March 2026
This case summary accurately states the facts, issues, and outcome of Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535. The legal principles described remain good law. The Nordenfelt test of reasonableness — requiring that a restraint of trade clause be reasonable as between the parties and in the public interest — continues to be the foundational common law test applied by English courts in restraint of trade cases. It has been consistently affirmed in subsequent leading authorities, including Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 and more recent Court of Appeal and Supreme Court decisions. No statutory change has displaced this common law framework in the context of commercial sale-of-business covenants. The article remains broadly accurate and suitable for introductory study, though students should note that the wider restraint of trade doctrine has been developed considerably through later case law, particularly regarding employment covenants, where courts apply the principles with greater strictness than in sale-of-business contexts as illustrated here.
