Agreement in restraint of trade

Querist : Anonymous (Querist) 15 January 2010 This query is : Resolved
Dear Experts

My query pertains to a clause in the Distributorship Agreement which reads as follows:

The Company shall not enter into agreement with Sub - Distributor/s on an independant basis during or after termination/ expiration of this Agreement with Distributor.

Please note :
1. Sub- distributors are independant dealers to whom the Distributor sells products purchased from Company.

2. The relation between Company and Distributor is on Principal to Principal basis.

I request answer to my following query:

1. Legallity of such clause in the distributorship Agreement vis a vis Contract Act.

Regards

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R.R. KRISHNAA (Expert) 15 January 2010
The clause is legally valid as per contract laws. It is common in distributorship contracts nowadays. You shall specify a period of time (2 or 3 years) after termination of the contract till which you shall not deal with the sub distributors.

Kumar Thadhani (Expert) 16 January 2010
Such type of Distributorship Agreement normally contains that type of clause of appointment of Sub-Distributors but is safe to mention regarding the period of time of distributors or its termination period which is the essence of contract.

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