Had signed a letter of appointment and want to withdra from it due to being uncomfortable with a clause. I have only signed and no medical check ups or other work has been done. 5k as a liquidated damage is too much. Is that legal

Answer :

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    answered on 19/09/2017

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    It depends on whether the liquidated damage is reasonable amount. If the liquidated damage is considered reasonable, it would be enforceable, and thus you are required to pay the amount upon the request. If it is company's genuine attempt to pre-estimate the loss which would be suffered by the breach, the clause is valid. However, if the amount is considered excessive after taking into account all the considerations, e.g cost for recruitment activities and any other costs that have been incurred, the clause may be unenforceable as it would be deemed a penalty. If it is not a genuine pre-estimate of the loss suffered in the event of breach but is designed as threat to compel the other to perform by penalising that other for non-performance, the clause stipulating liquidated damage may not be enforceable.

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