Restraint of Trade: Emerging Trends
(2015) 7 Madras Law Journal 49, Volume 294 Part-5
12 Pages Posted: 1 Nov 2015
Date Written: October 29, 2015
In the modern era, the concept of practicing one’s trade, profession or business has evolved a long way compared to how it was perceived in the yester years. The law has also as a matter of public policy opposed any interference with respect to an individual’s freedom of entering into contracts and on imposing restraints on one’s personal liberties. When the principle of restraint of trade was incorporated in the Indian Contract Act in the year 1872, most individuals were either employed in the manufacture or sale of goods and other commodities. But with the advent of various technological advancements coupled with the huge impact of globalization in our economy with companies investing millions of dollars in R&D, information technology, patents and the like, the logical question is shouldn’t it be reasonable to impose certain restrictions against employees from pursing their trade, profession or business if it impinges and affects the business or relationship of the employer with its customers or if it means using to their advantage confidential information or secrets? Employees willingly sign Non-disclosure or Non-confidentiality agreements at the time of joining any employment, but they mean nothing if the same cannot be imposed post an employee’s term with the company has ended, especially considering the fact that s/he might have been privy to certain confidential or sensitive information during his/her tenure. This piece, therefore, emphasizes the need to bring in a change and do away with the theory of absolute restraint as discussed in Section 27 of the Contract Act, and bring out a common ground to protect equally both the employers’ and employees’ rights.
Keywords: Restraint of Trade, Section 27 Indian Contract Act 1872, Non-Disclosure, Non-Solicitation, Non-Confidentiality Agreements, Exceptions to Restraint of Trade
JEL Classification: K12, K41
Suggested Citation: Suggested Citation