Can a Company Claim Damages for Contractor's Failure to Supply Enough Manpower?

Can the company availing services from a contractor for the supply of manpower claim damages from the contractor for the supply of less manpower? I want to understand the law on this so that an appropriate clause can be inserted in the agreement for manpower supply. Does the below clause help?

Clause for Manpower Supply Agreement

Under this agreement, "time is of the essence" for providing the services as specified by the company from time to time. The contractor hereby agrees and acknowledges that if the contractor fails to supply the requisite number of workmen competent to provide the services within 24 hours, then the company will suffer immeasurable inconvenience which may or may not lead to substantial financial damages, irreparable injury, and loss of reputation due to non-completion of business transactions in hand. The contractor hereby undertakes to indemnify and compensate the company for any such losses, damages, and injuries to the extent and equivalent to financial damages suffered by the company.

Genuine Torts in Manpower Agreements

The torts under any agreement should be genuine. The manpower agency is liable to supply manpower, but for a short supply of manpower, when you impose a punishment like damages, it should be genuine. The agency will be able to supply manpower provided that you are ready to pay the cost as per the market.

If the terms and conditions also state that the employer will take any manpower that the manpower supplier is supplying, and the employer is ready to hire or take them at any cost/wages that the worker is demanding, then there is a sense in demanding damages.

In other forms of contracts, the nature/attribute/color/quality is uniform from the manufacturer's side itself, but in manpower supply, it will change according to the nature or habits of people. Therefore, it is difficult to enforce the provision relating to damages.

I think the agreement is unreasonable, and the contractor would be unwise (or desperate) to accept it.

Unrealistic Manpower Requirements

First, insisting that increased manpower must be available within 24 hours is unrealistic unless the work is very generic and there is a lot of unemployment in the locality. Even then, getting people so quickly and vetting them is impossible in most cases.

Liability for Non-Compliance

To be liable to pay for not providing the manpower, especially covering the company's losses, is also unreasonable. Manpower probably accounts for 10% of the cost, and therefore the contractor would be liable for ten times the wages (or more) if he can't provide the manpower in time.

Potential Challenges

What happens if people leave or refuse to join due to lower salary, bad behavior of managers, overwork, lack of safety, etc.?

If the contractor is signing it, either he didn't understand it (not being a legal expert) or he doesn't care, as he knows the company has no way to enforce it (no assets, no way to enforce a court decree, etc).

Dear Member,

The senior member of this forum, Mr. Madhu TK, has provided a logical reply and raised several valid points. My additional observations are as follows:

a) All contracts in India fall within the purview of the Indian Contract Act. Once the contract is signed by the buyer and the contractor, the terms and conditions mentioned in the contract are binding on both parties.

b) The condition to provide manpower within 24 hours of the requisition being placed is too harsh. Whether the manpower contractor agrees to it remains to be seen.

c) The penultimate line from the bottom of the post mentions: "The Contractor hereby undertakes to be indemnified and to compensate the Company for any such..." Instead of "The Contractor hereby undertakes to be indemnified and compensate the Company for," you can simplify and write "The Contractor hereby agrees to compensate the Company for..."

d) The last two lines of the second paragraph mention: "However, how the losses, damages, or injuries will be calculated, and what percentage of it will be recovered from the contractor has not been mentioned. Even the contractor's workers have designations. You can specify what recovery will be made if a worker of a particular designation is not supplied."

e) The second paragraph mentions: "The words and phrases imply that the nature of the job done by the contract workers is sensitive. If the non-availability of manpower could cause substantial damages, irreparable injury, and loss of reputation, then why has the company approached the manpower contractor? Should they not keep the employees on their roll?"

Thanks,

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