was necessary to condemn rights of riparian, cluding Bayonne. East Jersey was entitled owners, and it was deemed wise to fortify to assume that the Water Company would the legal position of the diverter by resort make the best contract that it could with its to the charter powers of the city available to customers. As the situation now stands, the Water Company. There was no change Bayonne is both buyer and seller. There is in actual operation. The contract of May no way by which the amount to be paid East 18, 1911, contains a provision that nothing Jersey can be determined by reference to the therein should release East Jersey from its amount which Bayonne would be obliged to contract obligations to furnish to the Water pay the Water Company after June 21, 1929. Company a supply of water sufficient to ful- It is suggested by complainant that the court fill the requirements of the existing contracts ought not to determine, if it finds the attemptbetween the Water Company and Bayonne ed extension is legal, but may be inequitable, from some available source, or from any oth- that it must be inequitable. Counsel do not er obligation or liability to the Water Com- quite precisely state the position. It is not a pany then existing or otherwise. I think the question of inequity nor of illegality. The contract rights of the Water Company as question is whether the contract, in so far as against East Jersey were assignable. it relates to the city of Bayonne, is possible of performance. I find it to be impossible because of the lack of a factor which is necessary to determine the amount which Bayonne would pay to East Jersey for water furnished to it for municipal purposes. The ab

contract, so that there might be gross receipts of that party, upon the amount of which could be based the compensation to East Jersey, leaves a factor impossible to supply, but essential to the performance of the contract. For this reason East Jersey is not obliged to supply Bayonne with water for its municipal purposes after June 21, 1929. I need hardly point out that what I have said has no reference to conditions up to June 21, 1929, for up to that date the contract price between the Water Company and Bayonne has been fixed, and the only effect of the transaction between the Water Company and Bayonne is to substitute Bayonne as the direct purchaser from East Jersey.

[4] Bayonne insists that under the renewal clause contained in the contract of July 12, 1895, it may compel East Jersey to furnish water to it for its municipal and other purposes, including sales to outside consumers, for successive periods of 25 years, ad infini-sence of the party with whom Bayonne could tum, upon one year's written notice of such intention to renew to East Jersey, its successors or assigns. Bayonne gave notice to the Water Company on September 6, 1918, that it elected to renew the contract of July 12, 1895, for a period of 25 years, or until September 12, 1944, the original contract period being 24 years and 2 months. The contract of July 12, 1895, as I have before pointed out, was expressly made assignable. The option of renewal was given to the Water Company, its successors and assigns. In the notice to East Jersey the Water Company joined. I think this unimportant. The agreement of May 18, 1911, between the Water Company and East Jersey, did not release East Jersey from its contract obligations under the contract of July 12, 1895. Bayonne, as the assignee of the Water Company, was entitled, therefore, to exercise the option given to the Water Company. I think that no serious argument can be made that, assuming that the Water Company might assign to Bayonne, Bayonne did not have the right to exercise the option. The real question is not whether the contract between the Water Company and East Jersey is extended until September 12, 1944, but what, assuming such extension, in view of the changed conditions, the obligation of East Jersey is. I am still of the opinion, which I expressed on the oral argument, that Bayonne cannot compel East Jersey to furnish water to it for its municipal purposes under the contract of July 12, 1895, and its modifications and supplements, after June 21, 1929. By the terms of the contracts between the Water Company and East Jersey the amount of compensation to East Jersey was fixed at a certain percentage of the gross receipts of the Water Company. The amount of these gross receipts depended upon the amount which the Water Company would re

[5] The remaining question is whether Bayonne is entitled to a supply from East Jersey up to September 12, 1944, under the contracts between East Jersey and the Water Company, for the purpose of furnishing outside consumers.

Counsel with defendant conceded upon the oral argument and in their briefs (page 34 of their original brief, pages 20, 21, and 22 of their supplemental brief) that Bayonne, occupying the position of assignee of the Water Company, might assert the right, under the contract of July 12, 1895, between the two water companies, to renew the contract of July 12, 1895, for successive periods of 25 years, forever, so far as consumers outside of Bayonne are concerned. Aside, now, from counsel's concession, I think there is no doubt but that Bayonne was and is authorized to exercise such right. By the modifying agreement between East Jersey and the Water Company of May 29, 1902, East Jersey bound itself to furnish the Water Company with sufficient water to supply its consumers in Hudson county outside of Bayonne. This modifying agreement became a part of the agreement of July 12, 1895, and the Water

clause. There is, of course, as conceded by [fendant do not claim that this court ought counsel with defendant, no impossibility of not, in this litigation, determine all of the performance so far as consumers outside of rights of the parties arising under these Bayonne are concerned. Bayonne must be contracts. assumed to deal with outside consumers precisely the same as the Water Company would, and the option was specifically made exer cisable by assignees.

(108 A.)

In the brief of counsel it is insisted that contracts for an indefinite or extremely long period or in perpetuity are not favored in the law (citing three Pennsylvania cases). There is no claim that the option of renewal provided for in the contract of July 12, 1895, contravenes any principle of law. In the decision of the Supreme Court on the application for a writ of certiorari to review the ordinance under which Bayonne purchased the rights of the Water Company in denying the writ the court said:

"The city is to acquire, not only the pipe lines and land, but the right practically, ad infinitum, to receive water from a responsible source at a fixed price, and has the right to add to the existing supply by condemnation."

I have not considered whether under the contract of July 12, 1895, as modified, East Jersey would be obliged, in case of the exercise of the option by the Water Company, to furnish water to the Water Company to enable it to fulfill contracts which it might have with Bayonne other than the contracts specifically referred to in the agreement of July 12, 1895, and subsequent agreements. Such determination is not necessary because of my conclusion that East Jersey is bound to furnish water to the Water Company necessary to enable it to perform its contractual relations with Bayonne up to June 21, 1929, and that a necessary factor is absent which would permit the performance of the contract so far as it relates to furnishing water to Bayonne for its municipal needs after June 21, 1929, even if the renewal clause applied.

I will advise a decree settling the rights of the parties as indicated by this opinion. I will determine that (1) Bayonne may require East Jersey to furnish water to it for its municipal purposes until June 21, 1929, at the rates prescribed by the contracts between the Water Company and East Jersey. The method of computing the amount payable to East Jersey and the method of payment may also be settled. (2) That Bayonne may require East Jersey to furnish water to it for sale to outside concerns until September 12, 1944. The method by which the amount to be paid and the method of payment may also be settled. (3) That Bayonne may, by the exercise of the renewal option

It was suggested by counsel of defendant in the original brief that the question as to whether Bayonne, as assignee of the Water Company, might exercise the right of renewal, so far as customers outside of Bayonne are concerned, was not in this suit. But the bill prays for a determination of the rights of the parties with respect to the entire subject-matter. Notice of the exercise of the option had been given at the time of the filing of the bill. Defendant, by its answer unites with complainant in submitting to the court its rights and obligations and those of complainant, to the end that the same may be adjudged and determined. The rights arise under written instruments; they contained in the contract of July 12, 1895, are cognizable in a court of equity. The subject-matter of the supply of water is of such a nature as that the aid of this court may properly be invoked to obtain the remedy either of specific performance or injunction. Section 7 of the Chancery Act of 1915 (P. L. 1915, p. 184) is relied upon by both sides. I have considered that statute in Renwick v. Hay, 106 Atl. 547, 551, and reiterate what I there said. In the oral argument and in their subsequent briefs counsel with de

require East Jersey to furnish it with water for sale to consumers outside the city of Bayonne for continuing periods of 25 years each after June 12, 1944, ad infinitum. (4) That Bayonne may not require East Jersey to furnish water to it for its municipal purposes subsequent to June 21, 1929, under any contracts existing between the Water Company and East Jersey at the time Bayonne took over the Water Company's property. Settle decree on two days' notice.

(Court of Chancery of New Jersey. Aug. 24, The bill is set out in detail in my conclusions

on the motion to strike it out. The proofs now before me demonstrate that the allega1. CONTRACTS 116(3) - RESTRICTION UPON tions of the bill are well founded; that com

plainant has built up a large business as a A contract between manufacturer of watch-manufacturer of watches sold under its name es and retailer against price cutting, unless certain notices and names on watch are detached,

6. COMMERCE 42-POLICE POWER OF STATE. A state may, in the exercise of its police power, prevent fraud upon its citizens by the

use of a trade-name or good will of another, even though that trade-name and good will is attached to an article which prior to its being brought into the state has been a subject of interstate commerce.

Bill by Robert H. Ingersoll & Bro. against Hahne & Co. Decree advised in favor of complainant.

See, also, 88 N. J. Eq. 222, 101 Atl. 1030. George L. Record, of Jersey City, and Gilbert H. Montague, of New York City, for complainant.

Maximilian M. Stallman and Jeremiah F. Hoover, both of Newark, for defendant.

(108 A.)

son of the offer of this standard priced arti- [essary, in the circumstances of the particular cle, known to the public, at a cut price, all case, for the protection of the covenantee. the goods offered in the store were similar- Otherwise restraints of trade are void as ly low priced; that as a matter of fact all the against public policy." goods offered in the store were not similarly low priced, the defendant intending to make up on sales of other articles higher priced the losses which it would sustain by a sale of watches; that the effect of the act of defendant is to defraud the public.

[3-5] If the distinguished justice meant that all restraints were void at common law, I think he was mistaken; but, be that as it may be, it is now well settled that restraints which are reasonable in the absence of statThe affixing of the notice is justified under ute are valid. It is also well recognized that the provisions of a statute of this state, a person has a property interest in his tradeLaws of 1916, c. 107, which provides that it name and good will, and will, even in the shall be unlawful for any merchant, firm, or absence of statute, be protected against incorporation to appropriate for his or their jury to that trade-name and good will. This own use a name, brand, trade-mark, reputa- right has in this state been as above indition, or good will of any maker in whose prod-cated recognized by statute. Since the opinuct such merchant, firm, or corporation ion of the Supreme Court in Standard Oil deals, or to discriminate against the same by Co. v. United States, 221 U. S. 1, 31 Sup. Ct. depreciating the value of such product in the 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, public mind, or by misrepresentation as to Ann. Cas. 1912D, 734, it has been recognized value or quality, or by price inducement, or that the Sherman Act July 2, 1890, c. 647, by unfair discrimination to their buyers, or 26 Stat. 209 (U. S. Comp. St. §§ 8820-8823, in any other manner whatsoever, except in 8827-8830) and Clayton Act Oct. 15, 1914, case where said goods do not carry any no- c. 323, 38 c. 323, 38 Stat. 730, must be construed tice prohibiting such practice, and excepting in the light of reason. To say that Congress in case of a receiver's sale or a sale of a con- intended to prohibit an act which had the cern going out of business. effect of stimulating interstate commerce and stimulating competition rather than putting a restraint upon either is, I think, to state an absurdity. The proofs before me demonstrate that, if defendant and others are permitted to pursue their practice of price cutting, the business of complainant will be ruined and thereby the volume of interstate trade be reduced, or a method of distribution will have to be adopted which will greatly increase the price to the consumer, which will necessarily result in reducing the volume of interstate traffic; that in either event competition will be effectively reduced. And to what useful purpose? So that retailers may make use of the trade-name and good will established after extensive advertising, to the extent that the public have associated with the article a standard of value, to fool the public into a belief that because a standard priced article can be sold at a cut price all other goods sold are similarly low priced; in other words, to defraud the public. It is no answer to say that full value is given by the retailer for each article sold. If such be the fact, a person is defrauded if he buys an article at full price for which he has no immediate need because he is induced to believe it a bargain and thereby deprive himself of the use of the purchase price for other purposes for which he might have used it if he did not think he was getting a bargain.

It is insisted by defendant that the contract against price-cutting evidenced by the notice is contrary to public policy and to the Sherman and Clayton Acts, and defendant relies upon the cases in the Supreme Court of the United States, the last of which is Boston Store of Chicago v. American Graphophone Co. et al., 246 U. S. 8, 38 Sup. Ct. 257, 62 L. Ed. 551, Ann. Cas. 1918C, 447.

[1, 2] On the motion to strike out the bill (88 N. J. Eq. 222, 101 Atl. 1030), I contented myself with holding that I was dealing with the public policy of this state and that the decisions in the Supreme Court of the United States were not controlling, as the subjectmatter of the legislation was within the police power of the state. Since the final hearing I have re-examined the cases in the Supreme Court of the United States in the light of counsels' briefs, and have come to the conclusion that the restrictions upon the resale of the article would be valid at common law, and their validity is not affected by either the Sherman or Clayton Acts, and that the Supreme Court of the United States has not yet dealt with the precise situation presented here. As Mr. Justice Hughes said, in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, at page 406, 31 Sup. Ct. 376, at page 384, 55 L. Ed. 502 at page

518:

"With respect to contracts in restraint of trade, the earlier doctrine of the common law has been substantially modified in adaptation to modern conditions. But the public interest is still the first consideration. To sustain the restraint, it must be found to be reasonable both with respect to the public and to the parties and that it is limited to what is fairly nec108 A.-9

In the cases which have gone to the Su

preme Court of the United States, there have been involved questions of patent or copyright law not here present. In those cases in which the right to fix a resale price has been under consideration, the prohibition against the resale has been against the re

interstate commerce, legislate with respect to child labor, notwithstanding the fact that the permission of the use of child labor, in one state might lead to unfair competition to manufacturers in other states, and might have the effect of reducing the volume of interstate commerce, holding that the matter of regulation was one for the states. Similarly, I think it is clear that a state may, in the exercise of its police power, prevent fraud upon its citizens by the use of the tradename or good will of another, even though that trade-name and good will is attached to an article which prior to its being brought into this state for distribution has been a subject of interstate commerce.

sale of the article itself. The name or trade- [gress might not, under its power to regulate mark or what not has been so much an integral part of the article as that a resale of the article without reference to the trademark or trade-name would be practically impossible. In the case at bar the prohibition is not against the resale of the article, nor is it impracticable to resell the article without reference to the trade-name. Indeed, complainant offers to manufacture watches similar to those marked with its trade-name without the trade-name. Complainant does not seek to retain any right in the article itself; it merely seeks to restrain the use of its trade-name and good will, except under conditions fixed by it. It may permit the purchaser of the article to use its trade-name and good will under such conditions as it sees fit. It has an interest, in addition to that of mere protection to its trade-name and good will, for it guarantees the article sold, and scrupulously performs its guaranty, maintaining a large and expensive repair department for this purpose.

It seems to me that there is a clear distinction between those cases in which the nature of the restraint is such as necessarily to affect the resale of the article itself and

the case at bar where the nature of the re

straint is not such.

I find the restraint reasonable both with respect to the public and to the parties, and that it is limited to what is fairly necessary in the circumstances of the particular case for the protection of the covenantee; that it does not offend either the Sherman or the Clayton Act; that to permit defendant to avoid the effect of the notice would be to permit an act which would tend to restrain interstate trade if the subject be one of interstate commerce and to stifle competition and to defraud the public. I reiterate my agreement with the remarks of the Supreme Court of Washington in Fisher Flour Mill Co. v. Swanson, 76 Wash. 649, 137 Pac. 144, 51 L. R. A. (N. S.) 522.

[6] In addition to what I said in my conclusions on the motion to strike out the bill with respect to the validity of the legislation on which the notice is based as an exercise of the police powers of the state, I refer to the so-called Child Labor Cases. Hammer v. Dagenhart, 247 U. S. 251, 38 Sup. Ct. 529, 62 L. Ed. 1101, Ann. Cas. 1918E, 724. In that case the Supreme Court held that Con

In the case at bar it is proper to say that we are not left to conjecture as to the purpose of the defendant or as to the effect of permitting defendant to continue its practice; both are plainly demonstrated by the record.

On any appeal my conclusions on the motion to strike out the bill (88 N. J. Eq. 222 101 Atl. 1030) are to be considered as a part of this opinion and printed therewith. will advise a decree in accordance with this opinion. Settle decree on three days' notice.

I

Since writing the above I have come across the case of Reed v. Saslaff, 78 N. J. Law, 158, 73 Atl. 1044. In that case the Supreme Court. held valid a contract made between certain rolling chair proprietors in Atlantic City to maintain a fixed schedule of rates for service where it appeared that the schedule rates were exactly the same as the maximum rates fixed for such service by the ordinance of the city, and that the rates were reasonable, and it did not appear that the parties to the agreement had a monopoly of the business in that community.

I think that the case has a distinct bearing upon that at bar. The fact that in the Reed Case the maximum rates were fixed by ordinance could have only entered into the consideration of the court as indicating that the rates fixed by the contract were not ex cessive.

I think that the Supreme Court held generally that an agreement to maintain rates where the rates are reasonable, and it does not appear that the parties to the agreement have a monopoly, is valid. And I think this also applies to prices.