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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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Consists of legal proposition(s)/ principle(s) (hereinafter referred to as 'principle') and facts. Such principles may or may not be true in the real and legal sense, yet you have to conclusively assume them to be true for the purposes of this Section. In other words, in answering these questions, you must not rely on any principle except the principles that are given herein below for every question.
Further, you must not assume any facts other than those stated in the question. The objective of this section is to test your interest in the study of law, research aptitude, and problem-solving ability, even if the 'most reasonable conclusion' arrived at may be absurd or unacceptable for any other reason. It is not the objective of this section to test your knowledge of the law.
Therefore, to answer a question, the principle is to be applied to the given facts and to choose the most appropriate option.
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Facts: ‘X’ made a promise to ‘Y’ to repair his car engine. ‘Y’ made the payment for repair. After the repair, ‘Y’ went for a drive in the same car. While driving the car, ‘Y’ met with an accident due to the bursting of a tire.
A and B Hindu couples were married to each other. Owing to differences between them they decided to get divorced. They entered into a contract laying down the conditions that both parties had to adhere to. One of the terms of the contract was that their children would not be entitled to claim the ancestral property of A, the husband.
Principle: Strike is a collective stoppage of work by workmen undertaken in order to bring pressure upon those who depend on the sale or use of the products of work, whereaslock-out is a weapon in the hands of the employer, similar to that of the strike in the armoury of workmen, used for compelling persons employed by him to accept his terms or conditions of or affecting employment. While in closure there is permanent closing down of a place of employment or part thereof, in lay-off an employer, who is whiffing to employ, fans or refuses or is unable to provide employment for reasons beyond his control.
Facts: Workmen of a textile factory went on strike as per law, demanding the payment of bonuses. The employer of the factory refused to pay any extra allowances, including a bonus, and besides, he closed down the factory till the strike was stopped.
Principle: The consideration or object of an agreement is unlawful if it is forbidden by law. Every agreement of which the object or consideration is unlawful is void.
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Principle: The transferor of goods cannot pass a better title than what he himself possesses.
Facts: 'X' sells a stolen bike to 'Y' 'Y' buys it in good faith. As regards the title to bike, which of the following derivations is correct?
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DECISION:
LEGAL PRINCIPLES:
1. Once a person accepts another's an offer, and signifies such acceptance to the former, a contract comes into existence between them.
2. Uncertain agreements are void agreements.
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FACTUAL SITUATION: Bakshi wanted to purchase a particular land. He sent a letter to his cousin. Dutt, offering him ₹4 lakhs for it. Dutt replied that he would not sell it below 5 lakhs. Bakshi communicated his willingness to pay this amount. Dutt did not sell the land to Bakshi. Bakshi sued him for breach of contract.
DECISION:
LEGAL PRINCIPLE: A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.
FACTUAL SITUATION: Mr. X who is usually of sound state of mind, but occasionally of unsound state of mind, enters into a contract with Mr. Y when he was of unsound state of mind. Mr. Y having come to know about this fact afterward, wants to file a suit against Mr. X.
DECISION:
Given below is a statement of legal principle followed by a factual situation. Apply the principle to the facts given below and select the most appropriate answer.
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Assume it is a case of undue influence. Decide whether the bank has done enough to allay concerns of undue influence?
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