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Question
Legal Principle: Agreements in restraint of trade are void and unenforceable.
Fact Situation: Manu has been working as a blacksmith in his village for many decades. Somu has been undergoing training with him for the past three years. After his training is over, Somu enters into an agreement with Manu that he will not start a competing business in the same village while Manu is alive.
Which of the following statements is the most appropriate in relation to the legal principle stated above?
Options
This agreement is void and unenforceable since it is a restraint on trade.
This agreement is valid and enforceable since Manu is Somu’s teacher.
This agreement is valid but not enforceable after Manu’s death.
This agreement is valid and enforceable since it is to protect Manu’s interest in consideration for teaching Somu to be a blacksmith.
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Solution
This agreement is void and unenforceable since it is a restraint on trade.
Explanation:
Under section 27 of the Indian contract Act, 1872 agreements in restraint of trade are void. It stipulates that an agreement, which restrains anyone from carrying on a lawful profession, trade, or business, is void to that extent. In the given case Manu is restraining Somu to carry on a lawful profession thus the agreement between them is void. Hence option (a) is the most appropriate.
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