Question

Legal Principle: Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, to that extent is void.

Factual Situation: Miss Rita agreed to sing at the theater of Balram for a period of 6 months beginning from 1 January 1972. She further agrees not to sing at any other theater during this period.
Issue: Is the contract valid?

• A. The agreement is valid.
• B. The agreement is voidable.
• C. The agreement is the agreement is unreasonable,
• D. None of these.

Answer 1

Answer: (A)

The agreement is valid.

Sometimes an employee, by the terms of a service agreement is prevented from accepting-

Any other engagement during his employment, such agreements do not amount to restraint of trade and hence are enforceable
For example, doctors employed in government service cannot do private practice.

Negative stipulations in service agreements relating to an agreement of service by which one person binds himself during the term of the agreement, not to take service with anyone else, is not in restraint of lawful profession and is valid.

For example chartered accountant employed in a company may be debarred from doing private practice or from serving somewhere else during the term of the agreement. But an agreement of service which seeks to restrict the freedom of occupation after the termination of service is void. So here the contract entered into by Miss Rita is valid and not in restraint of trade.