(a) "Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that extent void." Discuss the statement along with the circumstances in which such agreements have been considered valid by t

Question

(a) "Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that extent void." Discuss the statement along with the circumstances in which such agreements have been considered valid by the courts. (20 marks)

(b) "Any departure from the terms of the offer or the addition of any qualification while accepting the offer vitiates the acceptance unless it is agreed to by the offeror." Elucidate the statement in the light of the provisions of the Indian Contract Act, 1872 and established principles. (15 marks)

(c) "The law draws a distinction between coercion and undue influence. Coercion in the execution of a contract occurs when there is a physical compulsion of the person. In contrast, undue influence may exist without violence or threats of violence against the victim." In the light of this statement, distinguish between coercion and undue influence referring to relevant provisions and presumptions raised under the Indian Contract Act, 1872. (15 marks)

UPSC Answer Check · Accepted Answer

Restraint of trade
Section 27 voids agreements restraining lawful profession, trade or business, to that extent, on public policy: free competition and livelihood. It is not absolute. Statutory exceptions are sale of goodwill, partnership restraints under Sections 54 and 55 of the Partnership Act, 1932, and trade combinations. Courts also permit reasonable, partial restraints incidental to employment or sale of business, protecting legitimate interests such as goodwill or trade secrets. Nordenfelt held a restraint need not be void merely because wide; it must be reasonable between parties and not injurious to public. Brahmo Samaj v. Keshub Chunder Sen tested a restraint on preaching by necessity and public interest. Madhub Chander v. Raj Coomar shows total restraints are more suspect than partial ones limited in time, area and scope. Niranjan Shankar Golikari v. Century Spinning Mills confirms post-employment restraints are valid if reasonable and not oppressive. The tests are reasonableness and public policy: total, indefinite or excessive restraints fail; fair, limited partial restraints may be upheld.

Acceptance and variation
Section 2(b) makes acceptance the assent of the person to whom the proposal is made. Section 7 requires it to be absolute and unqualified; the second rule in Section 7 makes a qualified acceptance a counter-proposal. This is the mirror-image rule, adopted from English law: acceptance must match the offer. A material variation—price, quantity, time, place or subject matter—vitiates acceptance and creates a new offer; an immaterial or clerical variation may not prevent formation if the offeror does not object. Union of India v. Bhim Sen Walaiti Ram and Tarsem Singh v. Sukhminder Singh show that conditional or modified assent does not bind the offeror. In the battle of forms, the last shot rule treats the last set of terms before performance as decisive, while the knock-out rule cancels conflicting terms and leaves common terms. Section 4 governs communication: acceptance is complete against the offeror when it reaches his knowledge, and against the acceptor when it is in course of transmission.

Coercion and undue influence
Section 15 defines coercion as committing or threatening an act forbidden by the IPC, or unlawfully detaining property, to induce consent. It is overt, physical or quasi-physical compulsion. Ranganayakamma v. Alwar Setti and Chikham Amiraju v. Seshamma treat threats of suicide or harm as coercion when used to obtain agreement. Section 16 defines undue influence: a person in a position to dominate another’s will uses it to obtain unfair advantage. It is mental pressure through confidence, dependence or vulnerability, without violence. In fiduciary or authority relations—guardian-ward, parent-child, doctor-patient, spiritual adviser—the court may presume undue influence under Section 16(2), shifting the burden to the dominant party to prove fairness. Mannu Singh v. Umadat Pandey, Subhas Chandra v. Ganga Prasad and Allcard v. Skinner examine whether the weaker party had independent advice and whether the bargain was fair. Both make contracts voidable, not void, under Section 19; the aggrieved party may affirm or avoid. Section 19A reinforces the equitable approach to impaired consent, even where the defect is not fraud. The distinction is proof: coercion requires the complainant to prove threat; undue influence in specified relationships shifts the burden, and independent advice can rebut it.

Way forward
The law should balance freedom of contract with protection of the weaker party. Restraints must be reasonable and limited; acceptance must be clear and unqualified; consent must be free from overt compulsion or hidden domination. Courts should apply proportionality, public policy and equitable safeguards, ensuring contracts reflect genuine, informed and voluntary assent while preserving legitimate commercial and personal interests. This preserves competition, commercial certainty and fairness, and prevents abuse of bargaining power in both employment and fiduciary settings.

(a) "Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that…

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