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Under the Indian Contract Act, 1872, which of the following is not an agreement in restraint of trade?…

The exception in section 27 protects a restraint on carrying on a similar business only when confined to specified local limits for as long as the buyer carries on that…

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Under the Indian Contract Act, 1872, which of the following is not an agreement in restraint of trade?
I. A sells the goodwill of his business with an agreement not to carry on a similar business within specified local limits, so long as the buyer carries on a similar business.
II. A sells the goodwill of his business with an agreement not to carry on a similar business within India, so long as the buyer carries on a similar business.
III. A sells the goodwill of his business with an agreement not to practice the same trade for 25 years.
IV. A sells the goodwill of his business with an agreement not to engage in any business competing or liable to compete in any way with the business for the time being carried on by the buyer.

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Answer and explanation

Correct answer D

The exception in section 27 protects a restraint on carrying on a similar business only when confined to specified local limits for as long as the buyer carries on that business; a restraint extending across all of India, for a long fixed term, or covering any competing business without local limits goes beyond this exception and is void.

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