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Service contracts are drafted in the same way as other agreements. The terms of employment should be definitely fixed and clearly expressed and nothing should be left to presumptions. They are required to be both affirmative (describing the acts and duties to be performed) as well as negative (putting restrictions on the acts of the employee during and/or after the term of employment).
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**CONTENTS OF SERVICE CONTRACT**
Service contracts are drafted in the same way as other agreements.
The terms of employment should be
definitely fixed and clearly expressed and nothing should be left to presumptions. They are required to be both
affirmative (describing the acts and duties to be performed) as well as negative (putting restrictions on the acts
of the employee during and/or after the term of employment).
It is therefore necessary to make provision for (1)
the time or period of employment; (2) the remuneration and other perquisites, if any, including pay, allowances,
commission, rent-free house, conveyance, etc.; (3) duties of employment; (4) powers of the employee; (5) leave
and the terms on which it will be granted; (6) modes and grounds of determining the employment during the
term; and (7) restrictive covenants, if any.
As the employer and the employee may not be conversant with law, the terms of a service contract should be as
explicit as possible and should be easily intelligible to a lay man, Unlike other agreements and legal documents
which need not contain matters presumed or implied by law, it is better in such an agreement
to specify even such
matters and all other matters so as to make it a complete code, embodying the rights and duties of each party.
In respect of Government service, normally no formal contract
is executed and only an appointment order is
issued and the terms of service are thereafter governed by statutory rules and Government order. The same is
the position of statutory corporations
as employers.
Period of Service: This may be definite or indefinite. If no period is fixed or an indefinite period is stated, e.g., โso
long as the parties respectively pleaseโ, the contract is terminable by a reasonable notice on either side. What
is a reasonable notice varies in different cases, according to the characters of the employment
and the general
custom, from 15 days to six months. When no term is fixed, it is always proper to provide for determination by
notice. In such a case, and also in case option of determination is reserved during the term, the period of notice
should be settled and expressed in the agreement.
Remuneration: Remuneration may be fixed monthly salary, or fees or commission,
or salary as well as fees or
commission. Sometimes in business firms, employees are allowed a share in the profits in addition to a fixed
salary. All these should be clearly provided.
Leave: Conditions and grounds on which, and the period for which leave may be granted as well as allowance
payable during leave should be stated. In the case of Government servants
engaged on contract, the leave
rules applicable to permanent
Government Servants in general may be applied but as there are different rules
for different classes of Government Servants those applicable should be clearly referred to, or if they are not
lengthy, they may be embodied in the agreement in the form of a covenant.
Determination of Employment: The grounds for determination of employment should be clearly expressed in the
agreement. The grounds on which the employment may be determined during the term are generally misconduct,
negligence, or want of medical fitness. Subject to what has been stated earlier, it may also be determined at
pleasure by notice, without giving any ground. In the case of misconduct or neglect, no notice is required,
but provision may be made for framing charges and taking
defence as in the case of Government Servants. Since
an employee
is entitled to damages for wrongful dismissal if the termination
of the service is not properly
made, provision in this respect should be carefully worded.
Restrictive Covenants: It is usual to include restrictive covenants in the agreement such as that the employer will
not undertake any other work or service or that he will not divulge the employerโs secrets or make improper use
of his trade secrets or information about the employerโs affairs.
While drafting restrictive covenants, it is necessary to see that they are not illegal. Agreements in restraint of
trade are void under Section 27 of the Indian Contract Act, and should not be inserted in an agreement.
Effect of Labour Laws: Many Acts have been passed by the Central or State legislatures relating to the conditions
of employment of teachers and other employees of aided schools and colleges and of universities, and of
workers in factories and commercial establishments, for e.g. the Factories Act, the Industrial Employment (Standing
Orders) Act, the Payment of Wages Act, the Workmenโs Compensation Act etc. In drawing up a service contract
for such an employee, the provisions of the relevant Acts must be kept in view. Any term of contract contrary to
the statutory provisions will be null and void, as it is not open to an employee to contract out of the safeguards
provided by the legislature for his protection.
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