Agreement & Contract
Contracts form the backbone of business transactions and agreements in our society. However, not all contracts proceed as planned, and sometimes termination becomes necessary. When this happens, understanding the legal remedies available is crucial. In this guide, we'll delve into the various legal remedies for terminating contracts, ensuring you're equipped with the knowledge to navigate such situations effectively.
Understanding Contract Termination: Contracts are legally binding agreements between two or more parties. Termination occurs when one or both parties fail to fulfill their obligations as outlined in the contract. This failure can result from various reasons, such as a breach of contract, impossibility of performance, or mutual agreement.
Breach of Contract: Breach of contract is one of the most common reasons for termination. It occurs when one party fails to perform their duties as specified in the contract. In such cases, the non-breaching party has several legal remedies available:
a. Damages: The non-breaching party may seek monetary compensation for losses incurred as a result of the breach. Damages can be compensatory, covering actual losses, or punitive, intended to punish the breaching party.
b. Specific Performance: In certain situations, monetary compensation may not suffice to remedy the breach. In such cases, the non-breaching party may seek specific performance, wherein the court orders the breaching party to fulfill their contractual obligations as originally agreed.
c. Rescission: Rescission involves canceling the contract altogether and returning both parties to their pre-contractual positions. This remedy is typically sought when the breach is significant and renders the contract unenforceable.
Impossibility of Performance: Sometimes, unforeseen circumstances arise that make it impossible for one or both parties to fulfill their contractual obligations. In such cases, the affected party may seek termination of the contract through legal remedies such as:
a. Force Majeure Clause: Many contracts include a force majeure clause, which excuses parties from performance in the event of unforeseeable circumstances beyond their control, such as natural disasters, war, or government actions.
b. Frustration of Purpose: Frustration of purpose occurs when an unforeseen event undermines the fundamental purpose of the contract, making it impossible to fulfill. In such cases, the contract may be terminated, and parties may seek restitution for any losses incurred.
c. Impracticability: If performance becomes excessively burdensome or costly due to unforeseen circumstances, a party may seek termination based on impracticability. However, this remedy is typically only available if the circumstances were truly unforeseeable and not the result of negligence or bad faith.
Mutual Agreement: In some cases, both parties may agree to terminate the contract voluntarily. This could be due to changed circumstances, a shift in business priorities, or simply a desire to part ways amicably. When parties mutually agree to terminate a contract, they may do so through:
a. Mutual Rescission: Both parties agree to cancel the contract and release each other from any further obligations.
b. Novation: In novation, the original contract is replaced with a new agreement, often involving different terms or parties.
c. Accord and Satisfaction: Parties may reach a new agreement to settle any disputes arising from the termination of the original contract, providing mutual satisfaction and resolution.
Legal Considerations: When seeking to terminate a contract, it's essential to consider the legal implications and potential consequences. Key considerations include:
a. Contractual Terms: Review the terms of the contract carefully, including any termination clauses, notice requirements, and dispute resolution mechanisms.
b. Legal Requirements: Ensure that any actions taken to terminate the contract comply with applicable laws and regulations, including contract law, statutory requirements, and industry-specific regulations.
c. Documentation: Keep thorough records of all communications, agreements, and actions related to the termination process to protect your interests and minimize the risk of future disputes.
Conclusion:
Agreement & Contract
A non-compete clause is a provision in an employment contract whereby the employee agrees to the fact that he would not enter into any competition with the employer during the term of his employment or even after the employment period is over. Typically, a fixed period of time is agreed upon for restrictions that extend beyond the term of employment. Non-compete clauses are common in IT Departments, Media, Financial Industry, Corporate World.
Enforceability of Non-Compete Clauses The non-compete clause in an employment contract is governed by certain provisions of the Indian Contract Act, 1872. Section 27, of the Contracts Act, makes agreements that are in restraint of trade void.
A vast number of judicial decisions have emerged on the question of enforceability of non-compete clauses. These decisions are divergent, and hence, no clear answer to the enforceability of non-competes has emerged till now. We have discussed some of these case laws below:
In Superintendence Company of India (P) Ltd. v. Sh. Krishan Murgai , a question was raised as to whether a non-compete clause in an employment contract is valid. The court held that a contract, with the objective of restraining trade, was void.
A similar case came up in Delhi High Court, wherein, the court observed that any law which restricts an employee from working after the termination of his job is in violation of the Indian Contract Act,
In Arvinder Singh and Anr. v. Lal Pathlabs Pvt. Ltd. & Ors , the court observed that any agreement which restricts the person from carrying any professional activity is contrary to law.
Thus, a non-compete clause in an employment contract is not completely unenforceable and may be enforced in some circumstances. However, it should be drafted carefully and properly.
A non-compete agreement is different from a non-disclosure agreement. In a non-compete clause, an employee promises to not enter into any kind of competition with the employer after leaving the job. Whereas a non-disclosure agreement restricts an employee from revealing any confidential information of his previous employer to the current employer or anyone else in the future. While the enforceability of non-compete clauses is still not a settled issue, non-disclosure agreements may be enforced under the law.
Conclusion
Agreement & Contract
A fixed-term employment contract is a contract wherein a company or an organization hires a person for a specific period on a contractual basis. Generally, such a contract is of one year; however, it depends on the need and discretion of the company or organization. Under this contract, the payment is fixed prior and cannot be changed or altered before the expiry of the term.
The only difference between a fixed-term contract and a permanent contract is the period of time. An employee hired on a fixed-term employment contract is hired for a fixed period of time and cannot be removed except on account of some misconduct. Some of the key elements that need to be included in an employment contract are-:
Job Title and Job Description: This includes a brief but specific description of the work one is expected to do.
Duration or term of employment: Duration or term of employment becomes very important in a fixed-term contract. This lays down the term for which the employee has been engaged.
Hours of work: This clause lays down the work timings of the employee.
Place of work: The place of work or the location where the employee is stationed is required to be mentioned.
Leave and holidays: Typically, leaves and holidays, legally mandated, should be provided to the employee.
Wages: The amount of wages, the mode of payment, etc., should be included in the contract.
Termination: Provisions that entitle both the employer and the employee to terminate the contract should be included in the contract. Termination upon expiry of the contract should also be provided.
Renewal: A provision for the renewal of the contract based on mutual consent of the parties should also be included in the contract.
Boilerplate Clauses: Standard clauses such as jurisdiction, waiver, severability, etc., should also be included in a fixed-term contract.
Advantages of Fixed-term Employment Contract
Although a person is hired for a specific period of time, he/she is entitled to equivalent benefits that a permanent employee enjoys, such as safe and secure working conditions, similar pay, or sometimes more considering the skills of the concerned person.
A person hired under a fixed-term contract may be made permanent depending upon their performance.
It is affordable for the employer when he needs an employee for a short term.
It helps get more specialized resources.
Disadvantages of Fixed-term Employment Contract
There is no stability, as the employment contract is time-bound and once the contract expires, the employee loses his job.
Typically, benefits such as promotion, good professional growth etc. are not available to fixed-term employees.
It is not an assurance of permanent employment.
For an employer, it may be more beneficial to have a talented pool of permanent resources. This will save the efforts of looking for an employee, every time the contract expires.
Conclusion A fixed-term employment contract should be drafted in such a way so as to avoid any liabilities after its expiration. There should be no words that convey that the contract will be automatically renewed or that a more permanent role would be given to the employee. It is advisable to engage a lawyer while drawing up such a contract.
Download Now 
