Question

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?

• A. This agreement is void and unenforceable since it is a restraint on trade.
• B. This agreement is valid and enforceable since Manu is Somu’s teacher.
• C. This agreement is valid but not enforceable after Manu’s death.
• D. This agreement is valid and enforceable since it is to protect Manu’s interest in consideration for teaching Somu to be a blacksmith.

Hint:

In contract law, even partial restrictions on trade are void unless they fall under narrow statutory exceptions. Always check if the restraint is linked to goodwill sale or partnership dissolution before deciding validity.

Answer 1

The Correct Option is A

Step 1: Understanding the principle
- The general rule under contract law (Section 27 of the Indian Contract Act) is that any agreement which restrains a person from carrying on a lawful trade, business, or profession is void.
- This applies whether the restraint is partial or complete, unless it falls under specific statutory exceptions (e.g., sale of goodwill, partnership dissolution).
Step 2: Applying the facts
- Somu agreed not to start a competing blacksmith business in the same village while Manu is alive.
- This restriction directly limits Somu’s freedom to trade and does not fall under any legal exception.
Step 3: Elimination of incorrect options
- Option (2): Incorrect — The teacher-student relationship is irrelevant to the enforceability under restraint of trade law.
- Option (3): Incorrect — The agreement is void from the beginning, so the question of enforceability after death does not arise.
- Option (4): Incorrect — Protecting Manu’s interest is not a recognized exception to the restraint of trade rule unless linked to sale of goodwill or partnership agreements.
Step 4: Conclusion
- Since the agreement is an absolute restraint on Somu’s right to carry on a lawful business, it is void and unenforceable.
\[ \boxed{\text{The agreement is void as it restrains Somu’s right to trade.}} \]