Professional Documents
Culture Documents
Charu Srivastava
Assistant Professor
CoLS, UPES
Section 2(g) of the Contract Act.
Apart from those void agreements the Acts
declares the following types of agreement as
void:
1. Agreement in restraint of marriage (S. 26)
2. Agreement in restraint of trade (S. 27)
3. Agreement in restraint of legal proceedings
(S. 28)
4. Agreement void for uncertainty (S. 29)
5. Agreement by way of wager (S. 30)
Agreement to do impossible act (S. 56)
Agreement in restraint of marriage (S. 26)
Restriction on Lease
Vidya Wati vs Hans Raj AIR 1993- Lesor of
a property can put a restriction on what kind of
business can be done on the property. It is an
outlet of carrying business and not a restraint .
Exceptions
1. Sale of goodwill
2. Partnership: Under Partnership Act, partners of a firm may restrict their
mutual liberty to do any tradeother than within their firm. An outgoing
partner may also be restricted from carrying on similar trade for a period of
time.
Statutory Exceptions
(1) Under contract Act (Sale of Goodwill)
(2) Under Partnership Act
i) S. 11(2)
ii) S. 36(2)
iii) S. 54
iv) S. 55(3)
The liberty to trade is not an asset which a person can barter away for money
except in special circumstances and within well recognized limitations.
3. Trade Combinations: Companies doing business in
the same field may regulate their trade practices for
example opening and closing time of business even if
they marginally put restraint. However, restrain on
employment are not allowed in disguise of regulation.
Korus Mfg vs Koluk Mfg 1959- Companies made an
agreement that they would not hire anybody who has
worked in the other company in past 5 yrs. Held void.
4. Exclusive dealing agreements
Shaikh kalu v ram saran (1908) 8 CWN 388, Respondent entered
into a contract with all the manufacturers of combs of patna whereby the
latter undertook during their lifetime to sell alltheir product to the former
and not to anyone else. The agreement held to be void as it bound the
manufacturers from generation to generation, it was unrestricted both as
to time and place, it was oppressive to create monopoly.
5. Restraint upon employees/Negative covenants in service
contracts