A grants B a normal commercial franchise to manufacture and sell goods under A's trademark. The…
A normal negative covenant against competing brands during a subsisting franchise promotes the commercial arrangement and is not on that account void under section 27.…
Choose your answer
A grants B a normal commercial franchise to manufacture and sell goods under A's trademark. The agreement is not oppressive or wholly one-sided, and requires B not to deal in competing brands only while the agreement subsists. Which statement is correct under the principle in Gujarat Bottling Co. Ltd. v. Coca Cola Co.?
Answer and explanation
Correct answer B
A normal negative covenant against competing brands during a subsisting franchise promotes the commercial arrangement and is not on that account void under section 27. Gujarat Bottling distinguishes subsisting restrictions from post-termination restraints; it does not validate every oppressive or wholly one-sided covenant.
See section 27 of the Indian Contract Act, 1872.
Option feedback
Option A
A normal subsisting-franchise exclusivity covenant is not void merely as a restraint of trade.
Option B
On the stated normal franchise facts, this covenant is not an unlawful restraint of trade.
Option C
No fact establishing voidability at B's option is stated.
Option D
Exclusivity during the subsisting normal franchise does not itself make the consideration unlawful.
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