Problems based on Contract and the solution -5

Indian Contract Act, 1872

TANMOY MUKHERJEE INSTITUTE OF JURIDICAL SCIENCE

Dr. Tanmoy Mukherjee

Advocate

Problems based on Contract and the solution -5

 

Tanmoy Mukherjee

Advocate

 

Question-

Miss. Jarina, a film actress agreed to work exclusively for a period of two years, for a film production company. However, during the said period she enters into a contract to work for another film producer. Discuss the rights of the aggrieved film production Company under the Indian Contract Act, 1872.

Fact-

-Miss Jarina, a film actress agreed to work EXCLUSIVELY for two years for a film production company.

-During this period, she entered into a contract with another production producer.

Relevant provisions and principles of law-

Exclusive service contracts-

When a performer agrees to work exclusively, it contains-

→A positive covenant- to work for the employer.

→A negative covenant- not to work for anyone during the contract period.

Such negative covenants are valid and enforceable.

Section- 27 of the Indian Contract Act, 1872-

-Restraint of trade is void.

-But restraint during the period of a subsisting contract of service is valid.

(Covenant applies only during two years, not after).

Specific Relief Act, 1963-

-A court cannot enforce specific performance of a personal service contract.

-But the court can enforce the negative covenant by granting an injunction.

Sec. 38 - Injunction for breach of obligation.

Sec. 42 - Injunction to enforce negative covenants.

Reference cases-

1. Lumley v. Wagner (1852)-

-A singer promised to perform only at one theatre and not at any other.

-Court refused to force her to sing, but restrained her from singing elsewhere.

-The case lays down the basis for enforcing negative covenants.

2. Niranjan Shankar Gotikari v. Century Spinning (1967)-

-Negative covenants during the term of employment are valid.

-Courts can restrain an employee from joining a competitor.

Application-

→Jarina agreed to work exclusively for two years.

→By entering into another contract during this period, she breached the negative covenant.

→The production company cannot compel her to act (No specific performance) but can restrain her from working for another producer.

→The negative covenant is valid because - It operates only during the subsistence of contract and does not amount to an unlawful restraint of trade u/s 27.

Conclusion-

-Miss Jarina's act amounts to a breach of contract. The film company is entitled to a negative injunction restraining her from working for another film producer during the two-year period.

-However, the court cannot force her to act for the company.

-Thus, the contract is enforceable only through injunction, not specific performance.