In the common law, a common sense test is followed. An agreement to restrict trade is valid: Here the applicant owned a fleet of buses that once ran between Pune and Mahabaleshwar. The defendant also had a similar case in the same area. In order to avoid competition, the applicant purchased the defendant`s business together with the goodwill and contractually committed it not to open a similar store in the region for 3 years. The accused did not do so and resumed his belongings. The Tribunal decided that the agreement was valid since it fell within the exception of S.27. On the contrary, a contract that does not limit the period within which the insured has been able to enforce his rights and only limits the time during which the contract remains alive is not contrary to section 28 – Pearl Insurance Co v. Atmaram. It is clear that an agreement providing for the waiver of rights and remedies is not valid, but a contract waiver agreement is valid under Article 28.
Therefore, a clause in an insurance policy that retains an arbitration award from an arbitrator as a condition precedent of the right of recourse against the insurer does not attract section 28 – National Insurance Co. Ltd v. Calcutta Dock Labour Board. In this case, Thorsten Nordenfelt was a weapons manufacturer in Sweden and England. Thorsten sold his business to a company that later transferred the store to Maxim Nordenfelt. At that time, Thorsten made a deal with Maxim not to manufacture weapons for 25 years, except for what he manufactured on behalf of the company. Subsequently, Thorsten broke his vows by saying that the agreement was not applicable because it keeps trade restricted. The court`s decision was made in Thorsten`s favor. Section 27 of the Act refers only to one exception that favours the restriction of trade, that is, the sale of business property or corporations.
Another exception is the Partnership Act. Some agreements are simply detrimental to society. They are against public order. Some of these agreements are agreements aimed at limiting material, commercial or judicial proceedings. These agreements are expressly annulled by the Indian Contracts Act, in sections 26, 27 and 28 respectively. . . .