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Report No. 13

53. Section 27.-

Pollock and Mulla1 have remarked that this section follows the New York Draft Code and have described that Code as the evil genius of the Contract Act. The Allahabad High Court also observed that "it is unfortunate that section 27 has been moulded upon the New York Civil Code and seriously trenches upon the liberty of the individual in contractual matters affecting trade."2 The present section does not reproduce the English Common Law and invalidates many agreements which are allowed by that law.

The section was enacted at a time when trade was yet undeveloped and the object underlying the section was to protect the trade from restraints. As Kindersley, J. observed in Oakes & Co. v. Jackson. "Trade in India is in its infancy and the legislature may have wished to make the smallest number of exceptions to the rule against contracts whereby trade may be restrained.3"

1. Pollock & Mulla; Op. cit., p. 224.

2. Bholanath v. Lachim Das, 53 All 316 (322).

3. 1 Mad 134 (145).

But today, trade in India does not lag far behind that in England or the United States and there is no reason why a more liberal attitude should not be adopted by acknowledging such restraints as are reasonable not only as between the parties to the agreement but also as regards the general public. We recommend that section 27 be suitably amended to permit such reasonable restraint.

54. The Government of Bihar has suggested that it should be enacted that an agreement in restraint of trade when entered into with the State or the Central Government, should not be void. Consistently with the object underlying the section, we cannot make a recommendation in favour of such an exception.

Indian Contract Act, 1872 Back

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