Section 27 in The Indian Contract Act, 1872
Title: 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.
Exception 1.Saving of agreement not to carry on business of which good-will is sold.One who sells the good-will 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 good-will 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.
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1. Exceptions 2 and 3 rep. by Act 9 of 1932, s. 73 and the Second Schedule.
Title: Agreements in restraint of legal proceeding void.
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to the extent.
Exception 1.—Saving of contract to refer to arbitration dispute that may arise.—This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.
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Exception 2.—Saving of contract to refer questions that have already arisen.—Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration3.
4Exception 3.—Saving of a guarantee agreement of a bank or a financial institution.—This section shall not render illegal a contract in writing by which any bank or financial institution stipulate a term in a guarantee or any agreement making a provision for guarantee for extinguishment of the rights or discharge of any party thereto from any liability under or in respect of such guarantee or agreement on the expiry of a specified period which is not less than one year from the date of occurring or non-occurring of a specified event for extinguishment or discharge of such party from the said liability.
Explanation.—(i) In Exception 3, the expression "bank" means—
(a) a "banking company" as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(b) "a corresponding new bank" as defined in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(c) "State Bank of India" constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);
(d) "a subsidiary bank" as defined in clause (k) of section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);
(e) "a Regional Rural Bank" established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976);
(f) "a Co-operative Bank" as defrined in clause (cci) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(g) "a multi-State co-operative bank" as defined in clause (cciiia) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); and
(ii) In Exception 3, the expression "a financial institution" means any public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956).
1. Subs. by Act 1 of 1997, s. 2, for certain words (w.e.f. 8-1-1997).
2. The second clause of Exception 1 to section 28 rep. by Act 1 of 1877, s. 2 and Sch.
3. Cf. the Arbitration Act, 1940 (10 of 1940) and the Companies Act, 1956 (1 of 1956), s. 389.
4. Ins. by Act 4 of 2013, s. 17 and the Sch. (w.e.f. 18-1-2013).
Title: Agreements void for uncertainty.
Agreements, the meaning of which is not certain, or capable of being made certain, are void.
(a) A agrees to sell to B "a hundred tons of oil". There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.
(b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.
(c) A, who is a dealer in cocoanut-oil only, agrees to sell to B "one hundred tons of oil. The nature of A"s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil.
(d) A agrees to sell to B "all the grain in my granary at Ramnagar". There is no uncertainty here to make the agreement void.
(e) A agrees to sell B "one thousand maunds of rice at a price to be fixed by C". As the price is capable of being made certain, there is no uncertainty here to make the agreement void.
(f) A agrees to sell to B "my white horse for rupees five hundred or rupees one thousand". There is nothing to show which of the two prices was to be given. The agreement is void.
Title: Agreements by way of wager, void.
Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.
Exception in favour of certain prizes for horse-racing.—This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of any horse-race.
Section 294A of the Indian Penal Code not affected.—Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code (45 of 1860) apply.
Title: "Contingent contract" defined.
A "contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
A contracts to pay B Rs. 10,000 if Bs house is burnt. This is a contingent contract.