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sweetu (director)     22 March 2011

termination of contract clause

I had entered into a contract with a company that i would do business for them and sell their products ,but the contract with them was terminated in the month of february and i moved on and signed a contract with a new company who deal with similar products.

i have now been sent a notice stating that i have to terminte the contract with my new company because my previous contract states that i cannot work with their competetors for a period of two years in the specified region.

can someone please help me out and advice me if they can exercise such legal action against me and do i have a chance to win at all because this is my livelihood.





 8 Replies

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     22 March 2011

When you voluntarily accepted the terms of contract and now are arbitrarily violating for your own benefit so who can help you in such situation? Company is right at its place and you are now only loser if company starts any litigation against you. I

Karl Jacob (Partner/Advocate)     22 March 2011

It would be apt if you provide information regarding the termination of the 1st contract. 

On whose fault did the contract get terminated?

Abhishek Marvi (ADVOCATE)     23 March 2011

i agree with mr.raju

sanjay kumar (BE/ LLM in Corporate Laws)     23 March 2011

I beg to differ from my learned friends. Its a boundary case.

The term in the contract that the person will not deal withe the competitors for a period of two years is an unreasonable term in contravention to Article 19(G) of the Constituion which confers the right to freedom to practice any profession, or to carry on any occupation, trade or business.

To enforce the clause of  restricting business with the competetors, the company will have to prove that during the contract period, important trade-secrets, technical know-how or othe proprietory information was passed on to the person and his now dealing with the competetors may lead to financial/ market loss to the company.

In case the company is not able to prove that conclusively and as the person says that its the only source of his livelihood, the courts will strike down the condition, I feel.

1 Like

sweetu (director)     23 March 2011

Mr Raju,

thank you for ur advice,i understand that i signed the contract .but i have read somewhere that they cant enforce it because it is my livelihhod,and that the contract would stay void.and secondly the initial contract was drafted but was not signed by both parties and when the contract was terminated the pricipal made a final settlement and took it in writing that i would not do business in that region for the next 2 yrs and i signed it bcoz he had to settle my account and without which i would have lost out on my commission.i wasa told that i wuld not be given my settlement if i dont sign that letter stating that i would not do business in that region

Kirti Kar Tripathi (lawyer)     24 March 2011

I do not agree with Mr. Makkad as it is an established law that contract of personal service can not be enforced specifically. thus an employee violate any condition of contract of personal service, the employer has no right to restrain him from entering into newr contract with another employer. however, the previous employer can claim damages and compensation for breach of contract under the law.

1 Like

sanjay kumar (BE/ LLM in Corporate Laws)     24 March 2011

I agree with Mr.Tripathi. But the company will have to prove that it has suffered losses because of the person's so-called breach of contract .

girish shringi (advocate)     21 May 2011

Basic terms of any contract is bialateral and not unilateral.

Where in this case company is is enforcing a person unilaterally against his right to livelihood,what  the comapny gives benefit vice versa if the person is  not dealing with any other company.

In MRTP Act also the same conditions were challenged otherwise the companies could have worked like monarchy and exploited the public at large.

Furthermore as stated by the agent that at the time of settlement of the account company had taken binding for not doing any business means company had blackmailed the person to settle the  score or co. might not have given commission to the agent,henceit is proved that company had done this contract with coersion thatswhy it is also challangeble.

Dear Sweetu we are in India an democratic country,hence you need not to worry about any illegal contract as I have given the reasons and in any case company goes into the court yolu are having solid ground to fight.

Girish Shringi


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