quesAre employment bonds enforceable legally? I have already signed it.

Are employment bonds enforceable legally? I signed a bond on 14th jan with my company as a trainee wherein if I leave the company before the training period of 2.5 years, I will have to pay them unto 2.5 Lacs and I also paid them a cheque of Rs. 70,000 as security.

 

Now I want to leave this company due to health issues, time issues and travel related issues. Now I have given them my resignation and they are asking for the entire Rs. 2.5 Lacs whereas the bond signed says that they can recover only the training amount.

 

Now since I have been trained only for a month, why should I pay them the entire amount? Kindly advise.

 

  • ans 

    It is a little unclear from your question whether the training period is for 1 month which has been completed by you or is the training in itself going to continue for 2.5 years? While such long training periods are rare and unlikely, going by your question we will base our advice considering the training period to be 2.5 years.

     

    A bond signed by you while joining your company constitutes a contract between your company and you, and is or is not enforceable based on a number of factors. In order for a contract to be enforceable, it must satisfy certain requirements.

     

    There are a number of reasons why a contract might not be enforceable. These are called defenses to the contract. Contract defenses are designed to protect people from unfairness in the bargaining process, or in the substance of the contract itself. If there is a valid defense to a contract, the contract may be voidable, meaning the party to the contract who was the victim of the unfairness may be able to cancel or revoke the contract.

     

    In some instances, the unfairness is so extreme that the contract is considered void, in other words, a court will declare that no contract was ever formed.

     

    Common Contract Defenses include Undue Influence, Duress & Misrepresentation. As per the facts mentioned by you, the most likely defense that may be applied is Duress. To claim the defense of duress, a party must show that assent or agreement to the contract was induced by a serious threat of unlawful or wrongful action, and that he had no reasonable alternative but to agree to the contract. 

     

    While these are generic defenses and options, we would be in a position to guide you once we review the detailed contract (bond) signed by you. What are the terms mentioned therein in case of non fulfillment of the tenure? Is there a notice period mentioned post which the contract can be terminated? Can the company terminate the contract mid term citing any reason whatsoever? Is the contract binding only on the employees or does it bind the company for 2.5 years as well?

     

    Generally contracts termed as 'bonds' are one sided, i.e. unilateral whereas an agreement to be termed a valid contract needs to be bilateral and should equally bind both the parties. The contract should in no way put unreasonable restriction on any person's right to trade and profession whereby your bond apparently violates Section 27 of the Contract Act putting unreasonable conditions of employment and hence is challengeable in the court of law.

     

    Kindly contact us with your detailed employment terms and the bond signed by you to enable better assistance.

     

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