An exclusivity covenant given by a landlord of a shopping centre to an anchor tenant was not declared unenforceable under the common law doctrine of restraint of trade.
An exclusivity covenant given by a landlord of a shopping centre to an anchor tenant was not declared unenforceable under the common law doctrine of restraint of trade.
A developer of a shopping centre in Northern Ireland granted in 1980 a long lease of part of the site to an anchor tenant (D). Under the lease, the developer covenanted that no part of the rest of the retail development would contain a retail unit measuring 3,000 square feet or more used for the purpose of trading in textiles, provisions or groceries. The developer subsequently transferred the reversion to the whole of the site to the respondent (P).
P was looking to reverse the decline in the shopping centre and sought a declaration that the exclusivity covenant was unenforceable.
Was the exclusivity covenant unenforceable under the common law doctrine of restraint of trade?
The Supreme Court took the opportunity to change the law in this area and adopted the ‘trading society’ test as the correct one to use to determine an issue such as this. Under this test, a covenant which restrains the use of land will not engage the restraint of trade doctrine if it was of a type which has “passed into the accepted and normal currency of commercial or contractual or conveyancing relations” and which may therefore be taken to have “assumed a form which satisfies the test of public policy”.
As the exclusivity covenant entered into by the developer in 1980 was an accepted and normal type of covenant to find in a long lease of part of a retail centre let to an anchor tenant, the doctrine of restraint of trade was not engaged.
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