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Section 27, Contract Act 1872: Agreement In Restraint Of Trade, Void

Section 27 under Chapter II (of contracts, voidable contracts and void agreements) of the Contract Act, 1872 of India - 'Agreement in restraint of trade, void', is reproduced hereunder:—

“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 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 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.”

Extra Notes for Readers

(1) Exceptions 2 and 3 relating to agreements between partners upon, or in anticipation of, dissolution of partnership and during continuance of partnership, respectively were repealed by the indian partnership act 1932 (Act 9 of 1932). [see sections 11 and 36 (2) of that Act]

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