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: A contracts to sell to B the goodwill of a business. A then sets up a similar business close by B's shop and solicits his customers. This is contrary to the contract.
Issue: Can B obtain an injunction to restrain A from soliciting customers?

• A. B can obtain an injunction.
• B. B cannot obtain an injunction.
• C. Neither (a) nor (b)
• D. Both (a) and (b)
  

Answer 1

The correct option is B B cannot obtain an injunction.

Section 27 talks about Agreement in restraint of trade, void.—"Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. —Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void."

Exception 1.—Saving of agreement not to carry on business of which goodwill is sold.—One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.

Section 57: Notwithstanding section 56, clause (f), where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the Court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement: provided that the applicant has not failed to perform the contract so far as it is binding on him.

A contracts to sell to B the good-will of a business. A then sets up similar business close by B's shop and solicits his old-customers to deal with him. This is contrary to his implied contract, and B may obtain an injunction to restrain A from soliciting the customers, and from doing any act whereby their good-will may be withdrawn from B.