Section 24 of the Contract Act 1950: Understanding Its Implications
The Contract Act 1950 is a crucial piece of legislation governing commercial relationships in Malaysia. It lays down the rules and regulations that govern business transactions and agreements, ensuring that parties are bound by legally enforceable contracts. One of the most important sections of the Act is Section 24.
What is Section 24?
Section 24 of the Contract Act 1950 prohibits any agreement that restrains a person from exercising a lawful profession, trade, or business of any kind, except in very specific circumstances. The section reads as follows:
“Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void.”
In other words, any agreement that restricts a person`s ability to engage in a lawful profession, trade, or business is void. The section is aimed at preventing unfair or restrictive clauses in commercial contracts that limit the free movement of labour and the ability of individuals to earn a livelihood.
Why is Section 24 important?
Section 24 is important as it protects the fundamental right of individuals to work and earn a living. It prevents parties from entering into agreements that unfairly restrict the ability of individuals to engage in lawful professions or trades. The section is also essential in ensuring that businesses do not engage in anti-competitive practices that harm the interests of consumers and the general public.
What are the exceptions to Section 24?
While Section 24 prohibits any agreement that restrains a person from exercising a lawful profession, trade, or business, there are several exceptions to this rule. These exceptions include:
1. Agreements that are part of a contract for the sale of goodwill or interest in a business
2. Agreements that prevent a person from carrying on similar business within a specified geographical area and for a limited duration
3. Agreements that prohibit a person from soliciting customers of the business after the termination of the agreement
It is important to note that these exceptions are subject to certain restrictions and conditions, and parties must comply with these requirements to avoid contravening the law.
Conclusion
Section 24 of the Contract Act 1950 is a crucial provision that protects the fundamental right of individuals to work and earn a living. It ensures that businesses cannot engage in anti-competitive practices that harm the interests of consumers and the general public. While there are exceptions to the rule, parties must comply with the requirements to avoid contravening the law. As such, it is important for business owners and individuals to be familiar with the provisions of Section 24 and seek legal advice if necessary.