An employment bond is a contract, and therefore would be subject to the provisions of the Indian Contract Act. An employment bond prevents employees from committing certain acts and thus comprises of some negative covenants.
Under contract law, a contract is invalid if it has been made by subjecting the other party to coercion, fraud, misrepresentation, or undue influence. A contract will also be invalid if it has been by mistake. However, an agreement that is entered into with free will; and without any of these invalidating criteria, is valid and legally binding.
The law of contract states that any agreement in restraint of trade or practice can be challenged. Accordingly, the terms and conditions of a contract that prevent an employee from joining another organisation would be invalid.
However, the law allows for reasonable terms and conditions to be laid down in a contract. While an employment bond is being drafted, it is important to ensure that the stipulated terms and conditions are reasonable and valid.
The undermentioned principles would safeguard your interests:
The interests of the employers must be considered, and they must be compensated in case of a breach of contract.
The penalty that may be imposed on an employee or his guarantor cannot be exorbitant and unreasonable.