an example out of a working paper on Bonding agreement's and worth reading if you like. but who forced them to sign the agreement? If not at Gunpoint a court wont wear that one. You don't have to sign. Or in Philippines is it different?
2. PENALTY CLAUSE
The "laissez faire" maxim applies as a general rule under English Law i.e., that people are free to agree between each other to do what they want. There are, however, statutory restrictions on this and various common law restrictions. Relevant common law restrictions are that that the courts will not enforce a term of an agreement that has the effect of imposing a penalty on a party and that certain agreements that are in restraint of trade are void if unreasonable and against the public interest.
Where parties to an agreement agree that, in the event of a breach, one shall pay to the other a specified sum of money, that sum may be classified by the courts as either a penalty (which is therefore viewed by the Courts as not recoverable) or as liquidated damages (which are recoverable)
In the context of a bonding arrangement, if the pilot (in breach of his agreement with the airline) leaves the employment of the airline prior to the expiry of the specified period, the agreement fixes a sum payable by the pilot to the airline which is intended to facilitate the recovery of damages by the airline from the pilot resulting from the pilot's breach of contract. The courts will view any such provision as a penalty and therefore as unenforceable if the sum fixed is extravagant or unconscionable when compared with the actual loss suffered by the airline as a result of the pilot's breach . If, however, the sum fixed is viewed by the courts as being a reasonable estimation (made at the time that the contract was entered into) of the airline's expected loss as a result of the pilot's breach of contract then the courts would view the agreement as providing for the payment of liquidated damages and reasonable.
The provisions of a bonding agreement might constitute a penalty clause in a number of ways:-
(a) The sum in respect of which the pilot is bonded might exceed the actual training costs of the pilot;
(b) The period during which the bond is to be effective might be excessive;
(c) There might be no provision for the sum in respect of which the pilot is bonded to reduce during the pilot's employment with the airline. If, therefore the bonding agreement was for, say, £10,000 for a period of three years but made no provision for the reduction of that sum over that period, the pilot on leaving the airline after 2 years 300 days service would under the terms of the bonding agreement be under an obligation to pay the airline £10,000. That could not, in our opinion, be viewed as a reasonable assessment of the actual loss suffered by the airline after such a period.
3. RESTRAINT OF TRADE
Bonding agreements may in our opinion, in some circumstance be in restraint of trade. The effect of some agreements is that the pilot is effectively prevented from seeking alternative employment because of the financial consequences of him so doing. The question, arises, however, as to whether the agreement in restraint of trade is unreasonable or not. X have in the past received Counsel's opinion that there is nothing per se unreasonable in law about an airline seeking to protect their interests by entering into agreements of this type with pilots. However, it seems to clear to us that there will be circumstances when the agreement might be viewed as void as being in restraint of trade
We have seen bonding agreements lasting for two years and would not expect a Court to view that as an unreasonable period.