Contract law and labour law in Nepal

Contract law

Contract law governs agreements between parties that are legally enforceable. In Nepal it is contained in the Muluki Civil Code 2074 (the Contract Act 2056 was earlier the main law and is now replaced by the Code), and in public works it is supported by the Public Procurement Act 2063 and Regulations 2064.

Main provisions:

• Valid contract needs offer and acceptance, competent parties (age 18, sound mind), free consent, lawful object and consideration.
• Written form is needed where the law requires; signed and, if required, registered.
• Void and voidable contracts: illegal or uncertain agreements are void; consent obtained by fraud, threat or undue influence is voidable.
• Performance and breach: parties must perform; on breach the injured party can claim compensation, specific performance or cancellation.
• Damages and remedies: only actual and reasonably foreseeable loss; a time limit applies to claims.
• Special contracts: sale of goods, lease, agency, guarantee, partnership and construction contracts.
• Dispute settlement: negotiation, mediation, arbitration under the Arbitration Act 2055, or court.

Labour law

Labour law protects workers and regulates employer-employee relations. The main law is the Labour Act 2074 with the Labour Rules 2075, the Contribution-Based Social Security Act 2074 and the Trade Union Act 2049.

Main provisions:

• Appointment: written appointment letter; types: regular, work-based, time-based, casual, part-time; probation up to 6 months.
• Working hours: 8 hours a day and 48 hours a week; rest after 5 hours of work; overtime allowed within the limit and paid at 1.5 times the normal rate.
• Remuneration: minimum wage fixed by the government; bonus (as per Bonus Act) and equal pay for equal work.
• Leave: weekly day off, public holidays, home leave, sick leave, maternity and other leaves.
• Social security and benefits: provident/contribution fund, gratuity, insurance, accident compensation.
• Safety and welfare: safe workplace, protective equipment, child labour prohibited.
• Discipline and termination: by proper procedure with notice and reason.
• Trade unions and collective bargaining, and settlement of labour disputes through the Labour Office and Labour Court.

Example linking both laws

A construction company in Nepal hires a site engineer by an appointment letter (labour law: working hours, overtime, leave, contribution fund), and signs a works contract with a municipality (contract law: offer, acceptance, consideration, time, penalty for delay). If the company delays, the municipality may claim liquidated damages under the contract; if the company does not pay overtime, the engineer may complain to the Labour Office.