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Suppose that I am the owner of a fully-owned private company in the USA. I am providing a full scholarship to a student from country X to go to the USA to do a 4-year PhD.

Can I add a clause to the scholarship contract that says that the student must go back to country X after finishing the PhD and will have to take a full-time job and work there for at least two years before re-entering the USA?

Is this clause enforceable from my position?

N.B. If they breach the clause by getting a job in the USA, they have to repay the scholarship amount.

user366312
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1 Answers1

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Such a clause is probably unenforceable

First, it’s borderline unconscionable, “extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience.” If such an argument can be made out, the clause is void.

Notwithstanding, it’s a restraint of trade clause and these are only valid to the extent that they legitimately protect the company’s interest. They are subject to strict time, geographic, and industry constraints - a blanket ban for 2 years over the entire US in all industries (as written, the guy can’t work as a barista) is clearly too broad. The clause would have to be narrowed to a much shorter time (say 6 months), only cover geographic areas where the company operated, and only restrict work that directly competes with the company.

Finally, it’s a penalty clause - the amount of damages required to be paid (the entire scholarship) is not a genuine pre-estimate of the damage the company will suffer if the term is breached. Such clauses are unenforceable as only governments are allowed punitive sanctions.

Dale M
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