Section 27 of ICA : Section 27: Agreement In Restraint Of Trade, Void

Explanation using Example

Imagine that Priya is a talented chef who has been working at a popular restaurant in Mumbai. She decides to leave her job and start her own restaurant in the same city. However, her employment contract with the previous restaurant includes a clause that prevents her from opening or working in any restaurant within Mumbai for a period of 5 years after leaving the job.

Under Section 27 of The Indian Contract Act, 1872, the clause in Priya's contract is void because it restrains her from exercising her lawful profession. She is legally allowed to start her own restaurant in Mumbai despite the clause in her previous employment contract.

However, if Priya had sold her own restaurant along with its goodwill and agreed not to open a similar business in the nearby area to protect the buyer's interests, this would be an exception under the Act. Such an agreement could be enforceable if the court finds the geographical limits and duration to be reasonable.