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Under the general rule in section 27 of the Indian Contract Act, 1872, what is the effect of a clause…

Section 27 makes an agreement void to the extent that it restrains someone from exercising a lawful profession, trade or business. The section permits a seller of goodwill…

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Under the general rule in section 27 of the Indian Contract Act, 1872, what is the effect of a clause that restrains someone from carrying on a lawful trade?

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Answer and explanation

Correct answer C

Section 27 makes an agreement void to the extent that it restrains someone from exercising a lawful profession, trade or business.

The section permits a seller of goodwill to accept a restriction on similar business within specified local limits while the buyer or successor carries on a like business there, if the court finds those limits reasonable.

Option feedback

Option A

Consent alone does not make a restraint valid under section 27.

Option B

Section 27 makes the restraint void to that extent. Voidability would instead mean one party could elect to enforce the agreement.

Option C

Section 27 makes an agreement void to the extent that it restrains a lawful profession, trade or business, subject to the statutory exception.

Option D

Putting the restraint in writing does not by itself establish enforceability.

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