Category: Void Agreements

ISSUE:

Whether there was an agreement between the two parties?

If an agreement for three years was entered into by the defendant with the plaintiff, was it obtained by the misrepresentation of the plaintiff’s agent?

Whether the plaintiff in any event is entitled to an injunction?

RULE:

The restrictive covenant in the employment contract due to the fact that contracts of personal service for a fixed period do not fall within Section 27 of Indian Contract Act.

ISSUE:

Whether the injunction raised by plaintiff to the defendant garage company is reasonable or not, and can they restrain defendants from trade?

Whether the court may enable the defendant to terminate the solus agreement with the plaintiff, and can they proceed to seek supply from other party?

RULE:

If there is any kind of discrimination rendering the commercial operation, the court has to involve in the examination of the business and its commercial relations.
However, this is inevitable when dealing with the doctrine of the restraint of the trade.

Such extremes should not imply a term stopping certain types of discrimination could lead to absurdity. Further, when the degree of discrimination is as such to render the defendants’ commercial operations impracticable, it is prohibited.

ISSUE:

Whether a post-restrictive covenant in restraint of trade as contained in clause (10) of the service agreement between the parties is void under the Section 27 of the Indian Contract Act?

RULE:

The doctrine of restraint of trade never applies during the continuance of a contract of employment; it applies only when the contract comes to an end. While during the period of employment, the courts undoubtedly would not grant any specific performance of a contract of personal service.

Negative covenants operating during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade and therefore do not fall under Section 27 of the Contract Act.

ISSUE:

Whether the covenants of this agreement are unreasonable or not, and whether whole agreement is unenforceable or not?

Whether the injunction claimed by the defendants should be granted or not?

RULE:

It is therefore futile to contend that the existence of a negative covenant in a service agreement makes the agreement void on the ground that it is in restraint of trade and against the principles found in Section 27 of the Indian Contract Act.

In truth a man who works for a particular wage and for a certain period agrees to work in fact and such an agreement does not restrain him from doing so.

ISSUE:

Whether the agreement between the appellant company and the respondent under the doctrine of the restraint of trade, is void or not?

Whether the damages under the Section 74 of the Contract Act, is to be awarded or not?

RULE:

An agreement of service by which a person binds himself during the term of the agreement not to take service with anyone else, or directly or indirectly take part in, promote or aid any business in direct competition with that of his employer is different.