Short note on Restraint of Marriage, Restraint of Trade and Restraint of Legal Proceedings are
Restraint of Marriage (sec.26)
Under sec.26 every agreement in restrain of the marriage of any person, other than minor is void. This sec. places a prohibition on all forms of restrain on marriage whether partial or complete. Thus under the sec. a contract limited to not marrying a certain person or a certain class of person will be void. This is not so in English law, where a restraint on marriage is void only if it is absolute, e.g. agreement to marry no one but the promise. An agreement restraining the marriage of a minor, however, is valid under the sec.
Restraint of Trade (sec. – 27)
Under sec. 27 every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent, void. The sec. makes every agreement in restraint of trade, whether the restraint is absolute or partial, void. This certainly differs from English law, which, as it now stands, though making all restraint of trade invalid, does make exceptions in cases where special circumstances justify some kind of restraint being placed on one’s liberty of trade.
A restraint according to English law is justified, if it is reasonable (a) having regard to the interest of contracting parties and (b) the interest of public (l). Thus contract against competition entered into by the seller of a business if confined to the area within which competition would injure the seller’s business, has been upheld, while a covenant against any completion at all, has been held to invalid. In the leading case of Maxim Nordenfelt and Co. v. Nordenfelt a convenant by Nordenfelt who sold his business to the company, not to carry on any competing business was held to be too wide,both as regards time and space and therefore void.
On the other hand, a covenant by him not to carry on for 25 years, the manufacture of guns, guns carriage and ammunition of the kind he was selling to the company was held valid as being reasonable under the circumstances. A covenant by and employee not to compete with his employer after termination of service is bad according to English Law, though a covenant restraining him from disclosing a trade secret or not.
It has been recently laid down in England that two conditions must been fulfilled if restraint of trade is to be held valid; first it must be reasonable in the interests of the contracting parties i.e. it must afford no more than adequate protection to the parties thereto and secondly, it must be reasonable in the interest of the public i.e. in no way injurious to the public.
In India, however the strict language of the sec. has been followed. Thus in a Calcutta case, where a firm of brazier makers contracted with their rivals in the business not to carry on the trade in that particular quarter, in consideration of the latter agreeing to pay off the arrears of pay to their workmen, it was held, on the plaintiffs suspending their business, that the plaintiffs could not enforce the promise against their rivals, the whole contract being in restraint of trade and therefore void under the section. Similarly, a covenant not to cultivate tea within 40 miles for 5 years after termination of a services agreement was held to be bad.
Notice, however, that a contract of services is not void under the sec. because of an undertaking by the employee not to serve elsewhere during the continuance of employment. Similarly, ordinary business agreements , e.g. to purchase all requirements from a certain firm to sell all produce to a certain party, are not void as being in restraint of trade, because they promote business and do not restraint it. On the same footing a pool agreement between manufactures of a certain article, e.g. ice, to regulate prices and to avoid unnecessary competition between the members has been upheld. Such an agreement does not absolutely prevent anybody for carrying on a business but only provides that the business shall be on in a certain way.
Restraint of Legal Proceedings (sec.28)
Under sec. 28 every agreement by which a party is restrained absolutely (i) from enforcing his rights under or in respect of a contract, by the usual legal proceeding or (ii) which limits the time within which he can enforce his right , is void to that extent. The sec. provides for liberty of legal proceedings as the previous sec. provided for liberty of trade ; the principle being that nobody should be restrained absolutely from enforcing his legal rights in a court of law.
Thus a term in a contract that no legal action shall be brought thereon is void. Similarly, an agreement providing that any dispute between the parties should be settled by arbitration and that neither party should enforce his rights there under in Court of Law was held good as regards the first part but void as regards the second.Notice that the sec. refers to absolute restraint. Thus an agreement not to appeal is not within the sec. An agreement limiting time within which a suit should be brought is void, under the second part of the sec.
Thus where an insurance policy provided that no suit shall be brought against the company in connection with the policy, later than one year after the cause of action accrued, it was held that the clause was void under the sec. where, however, a policy provided that if no suit was commenced within three months of the rejection of the claim there under, all benefits under the policy will been forfeited, it was held that the clause was valid, as nobody was thereby restrained from filing a suit in a Court of law.
Notice that a contract extending the period of limitation is bad, not under this sec. but under the sec.23 as being opposed to the public policy. When two courts have concurrent jurisdiction to decide a dispute, an agreement between parties that the court of one of such places should decide the dispute, is not within the sec.(a1). Where a contract of carriage of goods by an Italian Ship from Italy to Calcutta provided that any suit with respect to such contract must been brought in Italian Courts alone held, the cl. was not bad under the sec. 28.
Two exceptions to the rule laid down by the sec. are however, recognized 🙁 i) an agreement to refer all the future disputes in connection with a contract to arbitration [Exc. (I)] ;(ii) and agreement to refer all present disputes with regard to a contract to arbitration is two fold; (i) and arbitration agreement does not necessarily oust the jurisdiction of the Law Courts. An arbitrator’s award can been set aside the arbitration proceedings can also be superseded for sufficient cause under the arbitration Act of 1940. Secondly, an arbitration clause does not prevent a suit being filed in ordinary Courts with regard to the agreement. It only gives an option to the other party, if he so wishes, to have the suit stayed by and injunction under the Specific Relief Act, an option which that party may or may not exercise.