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Section 27 -The Indian Contract Act, 1872

The Indian Contract Act, 1872

 

27. Agreement in restraint of trade, void 

 

Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

 

Exception 1 : Saving of agreement not to carry on business of which good will is sold – One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the court reasonable, regard being had to the nature of the business.

1[***]

 

COMMENTS

 

Agreement in restraint of trade

The words “restrained from exercising a lawful profession, trade or business”, do not mean an absolute restriction, and are intended to apply to a partial restriction, a restriction limited to same particular place; Mahbub Chander v. Raj Coomar, (1874) XIV Bengal Law Reports 76.

  

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1.Exceptions 2 and 3 rep. by Act 9 of 1932, sec. 73 and Sch. II.

 

 

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The Indian Contract Act, 1872

 

 

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