Reasonableness
of Non- Compete Clause under Section 27
Contracts which impose an unreasonable
restraint upon the exercise of a business, trade or profession are void, but
contracts in reasonable restraint are therefore valid. Whether the limits
prescribed in the contracts are reasonable or not, depends upon the kind of
business to protect which the contract is made, and the reasonableness of the
restraint imposed must be ascertained in every case by reference to the nature
of the business in question and to the situation of the parties.
Certain tests may be noted here:
(a) The generality of the covenant,
whether as to time and space may render it unreasonable, i.e., a covenant is
not necessarily valid because restricted as to time, but may be void because it
is not so restricted:
(b) Different degrees of protection are
reasonable in different cases;
(c) The reasonableness of the
restriction must be judged by the character and nature of the business or of
its customers. That is to say, the question is whether the restraint is such
only as to afford a fair protection to the interest of party in favour of whom
it is given and not so large as to interfere with the interests of the public;
whatever restraint is larger than the necessary protection of the party can be
of no benefit to either; it can only be oppressive, and if oppressive, it is in
eye of law, unreasonable.[1]
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