Question Description
An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer? for CLAT 2025 is part of CLAT preparation. The Question and answers have been prepared according to the CLAT exam syllabus. Information about An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CLAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer?.

Solutions for An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for CLAT. Download more important topics, notes, lectures and mock test series for CLAT Exam by signing up for free.

Here you can find the meaning of An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer?, a detailed solution for An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer? has been provided alongside types of An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice An agreement in restraint of trade has been defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons who are not parties to the contract in such a manner as he chooses”.Restrictive covenants are those which restrain one of the parties from doing an otherwise lawful activity, say a job, business and are therefore in restraint of trade. Such covenants are incorporated in situations when the employer desires to place certain restrictions on his employees. These are generally known as Negative Covenants and can be of two types one which operate during the subsistence of contract and even after its cessation, on the basis of their operation.As an exception to this general rule, agreements under which one party sells his goodwill to another, while agreeing not to carry on a similar business within specified local limits, are valid, provided such an agreement appears to be reasonable to the Court. Article 19 (g) of the Constitution of India clearly provides every citizen the right to practice any profession, trade or business. This is not an absolute right, and reasonable restrictions can be placed on this right in the interest of the public. The courts have always been weary of upholding such restrictions and have kept the interpretation of this provision flexible to ensure that the principles of justice, morality and fairness are aptly applied, depending upon the facts and circumstances of each case.Employers often tend to incorporate restrictive covenants in the agreement to protect their confidential information and trade secrets as well as their growing businesses as well.Section 27 of the Indian Contract Act 1872 makes every agreement by which anyone is restrained from carrying on a lawful avocation, trade or business of any kind, to that extent void.As far as negative covenants which operate during the course of employment or during the subsistence of a contract are concerned, they are generally not regarded as in restraint of trade as held by the Supreme Court in the case of Niranjan Shanker Golikari v. Century Spg. & Mfg. Co.Ltd. However, the position in respect of negative covenants which operate even after the cessation of contract of employment are illegal and void as per section 27 of the Contract Act.Q. What is the rationale for employers placing restrictive covenants in agreements with employees?a)To attract them to their employment.b)To ensure confidential information and trade secrets are not leaked.c)To ensure employees do not leave their organization.d)So that they do not become a threat to the company.Correct answer is option 'B'. Can you explain this answer? tests, examples and also practice CLAT tests.