Page 44 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes maintenance. It tends to encourage speculative litigation. Champerty is a bargain whereby
one party is to assist another in recovering property, and in turn, is to share in the proceeds
of the action. Champerty and maintenance are not illegal but courts refuse to enforce such
agreements when they are found to be extortionate and unconscionable and not made
with the bona fide object of assisting the claims of the person unable to carry on litigation

himself
(iv) Agreement for the sale of public offices and titles are void. Thus, where A promises to pay

B ` 5,000 if B secures him an employment in the public service the agreement is void.
(v) Agreements in restraint of parental rights are void.

(vi) Agreements in restraint of marriage of any person other than a minor is void.
(vii) Marriage brokerage (such as dowry) or brokage contracts are unlawful and void.
(viii) Agreements in restraint of legal proceedings are void.
(ix) Agreements interfering with the course of justice are void. Any agreement for the purpose

of using improper influence of any kind with judges or officers of justice is void.
(x) Agreements in restraint of trade are void. Thus, every agreement by which one is restrained
from exercising a lawful profession, trade or business of any kind, is to that extent void.

Examples:
(i) A promises to render services for the conduct of litigation in consideration of payment of
50 percent of the amount recovered through court. The agreement is legally enforceable.
(ii) A, a financier, promises to spend ` 30,000 for the consideration that a part of the estate

recovered through litigation will be conveyed to him, the value of which amounted to
` 90,000. Though the agreement bona fide, it would not be enforced, the reward being

extortionate and unconscionable.
3.5.2 Agreement in Restraint of Trade

Section 27 provides that “every agreement by which any one is restrained from exercising a lawful
profession, trade or business of any kind is, to that extent, void”. All agreements in restraint of
trade, whether general or partial, qualifi ed or unqualifi ed, are void. It is, therefore, not open to
the courts to enter into any question of reasonableness or otherwise of the restraint [Khemchand
v. Dayaldas, (1942) Sind, 114].

Examples:
(i) 29 out of 30 manufacturers of combs in the city of Patna agreed with R to supply him with
combs and not to any one else. Under the agreement, R was free to reject the goods if he
found there was no market for them. Held, agreement amounted to restraint of trade and
was thus void [Shaikh Kalu v. Ram Saran Bhagat (1909) 13 C.W.N.388].
(ii) J, an employee of a company, agreed not to employ himself in a similar concern within a
distance of 800 miles from Chennai after leaving the company’s service. Held, the agreement
was void [Oakes & Co. v. Jackson (1876) 1 Mad.134].

(iii) A and B carried on business of readymade garments in a certain locality in Calcutta.
A promised to stop business in that locality if B paid him ` 900 which he had paid to his
workmen as advances. A stopped his business but B did not pay him the promised money.
Held, the agreement was void and, therefore, nothing could be recovered on it (Madhab
Chander v. Raj Coomar (1874) 14 Beng L.R. 76].

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