Section 26 – Agreements in Restraint of Marriage

Every agreement in restraint of the marriage of any person, other than a minor, is void.

Contract in restrain of marriage is considered to be void. Contract in restrain of child marriage is

considered to be valid.

# Rao Rani v. Gulab Rano

An agreement between two co widows that if anyone of them remarriages, she should forfeit the
right to her share in the deceased husband property was upheld because there was no restrain on
the widows to get remarried and the restrain was merely on inheritance of property. Similarly,

consider to be void.

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the agreement that upon remarriage, a widow would lose her right to maintenance also not

# Lowe v. Pears

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If the agreement is not in the form of a promise to marry a particular lady but it stipulates that the

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promisor will not marry any other lady is also a void agreement.

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Section 27 – Agreements in Restraint of Trade

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

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Exception 1.—Saving of agreement not to carry on business of which goodwill is sold.—One
who sells the goodwill of a business may agree with the buyer to refrain from carrying on a
similar business, within
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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.

# Madhub Chander v. Raj Coomar

This 9U0P5Q
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were rivals shopkeepers in a locality in a Calcutta the defendant agreed to pay a sum of money to
the plaintiff if he closes his business in that locality and go elsewhere. The plaintiff did so but the
defendant refused to pay. The court held the agreementtr-5M to2Rbe 9U0P5Q
void,
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restrained from exercising the lawful profession trade or business do not mean absolute restrain
only it also include partial restriction also.

Exceptions

Statutory Exceptions –
 1. Section 27 ICA (Goodwill)
2. Indian Partnership Act
Judicial Interpretations –

1. Trade Combinations
2. Exclusive Dealing Agreements (Solus) – Non Compete
3. Contract of Service
Indian Contract Act

# Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Private ltd. Co

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There accrued a sale of goodwill between Nordenfelt and maxim appellant was a Swedish gun
manufacturer with a valuable world-wide business, he sold the goodwill to the respondent and

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agreed to enter into a restrictive covenant not to work for any rival business for 25 years in an
unlimited geographical area. Later he worked for a revival business the case went to house of
lords and it was held that a clause by which someone restrain himself from exercise of his trade

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was prima facie on the face of it not lawful however it would discourage trade if someone who
has built up a valuable business could not dispose it off to his best advantage therefore restraint

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of trade would be upheld if it is reasonable. In this case a huge sum had been paid for the

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acquisition of the good and it was not injurious to public at large, it was hence held to be

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reasonable. If the object of agreement is to protect the rights of parties, the restrain will be valid.

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Indian Partnership Act p
On the other hand, it if restrain is merely to avoid competition it would be void.

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Section 11 – this enables the partner during continuance of firm to restrict their mutual liberties
by agreeing that none of them shall carry on any business other than that of the firm.
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Section 36- this enables the partner to restrict and outgoing partner from carrying on a similar
agreement within a specified period or local limits.

Section 54 - In this, a similar agreement may be made by the partners regarding the time of
dissolution
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of the firm and around the arrangement of non-compete.
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Section 55

Sale of goodwill after dissolution.— tr-5M2R1U6Q

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(1) In settling the accounts of a firm after dissolution, the goodwill shall, subject to contract
between the partners, be included in the assets, and it may be sold either separately or along with
other property of the firm. Rights of buyer and seller of goodwill.
 (2) Where the goodwill of a firm is sold after dissolution, a partner may carry on a business
competing with that of the buyer and he may advertise such business, but, subject to agreement
between him and the buyer, he may not,—

(a) Use the firm name,

(b) Represent himself as carrying on the business of the firm, or

(c) Solicit the custom of persons who were dealing with the firm before its dissolution.
Agreements in restraint of trade.

(3) Any partner may, upon the sale of the goodwill of a firm, make an agreement with the buyer

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that such partner will not carry on any business similar to that of the firm within a specified
period or within specified local limits and, notwithstanding anything contained in section 27 of

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the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions

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imposed are reasonable.

JUDICIAL INERPRETATIONS

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Trade Combination

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# Hari Bhai v. Sharaf Ali

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Four ginning factories enter into an agreement fixing uniform rate for ginning cotton and pooling

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their earnings to be divided between them in certain proportion. The agreement was held to be
valid as it seemed to be a profit distribution arrangement rather than a restraining covenant.
Agreement as to regulation of prices and output are valid. The primary objection of such
association is2Ito
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in the interest of trade itself and are permissible because they are enabling and not restricting.

# Kores v. Kulok

It was held that the court would not allow a restrain to be imposed disguised as trade regulation
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thus the agreement where two companies agreed not to employ the ex-employees of each other,
was held to be void.

Solus: Exclusive dealing agreement 9U0P5Q

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This is a business practice where in the producer or manufacturer market’s the product by a sole
agent or by distributor and later agrees not to deal with the goods of another manufacturer.

# Gujarat Bottling Company v. Coca Cola Company

 In this case an agreement for manufacturing bottling selling, distributing coca cola beverages
franchise was granted. The company was restrained from the bottling selling and distributing
beverages of another brand. This agreement was held to be valid however it was noted that if
there is a clause that monopolizes the trade, it should be discouraged. In this case such clause
was absent.

# SK Kalu v. Ram Sharan Bhagat

In this case a seller of comb entered into an agreement with all the manufacturers of combs in the
city of Patna where by the letter undertook during their lifetime to sell all their products to Ram
Sharan Bhagat and to his heir and not to sell the same to anyone else. Holding the agreement

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void under 27 section of ICA the court observed that “It bound the manufacturer from generation

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to generation, it was unrestricted both as to time & place it was oppressive, and it intended to
create monopoly.”

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Contract of Service

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For a certain duration and not anybody else during that period is a valid agreement.

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# Charles Worth v. Mac Donald

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A agreed to become assistant for 3 years to B who was a physician practicing in Zanzibar. The
appointment was subject to a clause against practicing. A left the service within a year and began

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to practice there on his own account but he was restrained from doing so for a period of three

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years. The court explained “An agreement of this class does not fall with in section 27. If it did

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all contracts of personal service of a fixed period would be void. An agreement to serve the
employer alone, even if it is for an hour necessarily prevents the person so agreeing to serve from
exercising his work during that period for anyone else than the person with whom he so agrees.”
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Section 28: Agreements in restraint of legal proceedings, void. — Every agreement,—

(a) By which any party thereto is restricted absolutely from enforcing his rights under or in
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respect
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the time within which he may thus enforce his rights; or

(b) Which extinguishes the rights of any party thereto, or tr-discharges

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any
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liability, under or in respect of any contract on the expiry of a specified period so as to restrict
any party from enforcing his rights, is void to that extent.

Exception 1 — Saving of contract to refer to arbitration dispute that may arise. —This section
shall not render illegal a contract, by which two or more persons agree that any dispute which
may arise between them in respect of any subject or class of subjects shall be referred to
 arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect
of the dispute so referred.

Exception 2 — Saving of contract to refer questions that have already arisen. —Nor shall this
section render illegal any contract in writing, by which two or more persons agree to refer to
arbitration any question between them which has already arisen, or affect any provision of any
law in force for the time being as to references to arbitration.

# New India Assurance Company v. Food Corporation of India

The clause of Notice valid and Limited the time void - A notice issued within 6 months as

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required for filing the suit was there after held to be with in time. However, the clause in the

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standard insurance policy curtailing the limitation period to 12 months after occurrence of the

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event or 3 months after the rejection of claim were not be invoked.

# Hakam Singh v. Gammon India Ltd.

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Parties cannot enter into an agreement to confer jurisdiction on a court which it does not possess
under the CPC but where two or more courts possess jurisdiction and there’s a question as to
which of them should entertain the matter – the parties according to the law – can confer

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jurisdiction on one of them. Where two courts would have jurisdiction and the agreement is that

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the dispute should be tried only by one of them, the court mentioned in the agreement would
have jurisdiction.

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Section 30 – Agreements by way of wager

Essentials -
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1. The event that is the contingency of agreement is generally a future event but it may be a
past event where the parties are unaware of the results. In either case the agreement should
be for an event that is uncertain. Neither party can have a control over the uncertain event, in
other words it should be a game of chance.
2. There
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9U0P5Qshould be a mutual chance of winning/gaining or losing. If either of the parties may
win but cannot lose or may lose but cannot win are not into a wagering agreement. (Carlil v.
Carbolic Smoke Ball Company)
3. The Parties have no other interest than winning or losing if a person
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consideration, then it is a mere bet and nothing else. Lotteries, even state regulated are wager
and are void.

A wagering agreement is void but it is not illegal or immoral. Wager mean an agreement the two
parties have an opposite view regarding an uncertain event and they stipulate that upon
 determination of the event in a certain way, the parties shall win or lose. These parties have no
other interest except this though a wagering agreement is void and unenforceable, but it is not
forbidden by law thus the transaction collateral to main transaction is enforceable.

Example - `A loan acquired to pay off the dues of a wager is recoverable.

Speculation v. Wager

Speculative transaction might seem like wager but are not necessarily so although all wagering
agreement are speculative in nature, but every speculation is not a wager in such transaction
when the parties intend the performance of the future contract and such a performance is not

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otherwise impossible it would be a valid business transaction rather than a wagering contract.

# Gherulal Parekh v. Mahadev Das

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The plaintiff who lent money to the defendant to enable him to pay off a gambling debt could
recover the same from the defendant. Such agreements are neither illegal nor wagering nor
immoral.

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