Is a Rs. 500 Stamp Paper and Notarization Enough for a Legal Employer-Contractor Agreement?

Employer and Contractor Agreement on Stamp Paper

Employer and contractor agreement on stamp paper of Rs. 500 and notarized. Is this the procedure? Or are there any other steps to be followed to become legal? Please advise.

Hi, even without a notary sign, it is valid as long as the terms and conditions are mutually agreed upon by both parties.

The work awarded to a contractor via a Work Order is a valid document. The agreement signed on stamp paper is also valid, provided the wording and text remain the same; otherwise, it could create problems in the future.

Further, the document under which a license is issued or obtained by the contractor shall be treated as paramount.

Importance of Agreement on Stamp Paper

Having the agreement on stamp paper is an important compliance requirement, though it is not mandated under the Contract Act or Contract Labour Act. Notarizing, on the other hand, has no visible impact.

Court Considerations in Contract Disputes

The problem stems from the fact that in a court case where workers claim that the contract is a sham, the courts examine how an agreement is executed and whether there is a principal-to-principal agreement made with an agency that is an independent business. It is crucial to demonstrate that it is a normal business following all standard business processes.

Issues with Unstamped Agreements

In the case of unstamped agreements, it is alleged by the workers that the agreement never existed and was created just to present to the court after the complaint. Another issue is that courts will refuse to enforce an unstamped agreement, rendering it invalid as evidence. The new Supreme Court judgment on the refusal to enforce an arbitration order on an unstamped agreement reinforces this rule.