Drafting of Commercial, Contractual and Business Documents
Drafting of Commercial, Contractual and Business Documents tests whether you can build an enforceable commercial bargain. The Indian Contract Act 1872 supplies the framework: offer, acceptance, lawful consideration, capacity, free consent and lawful object under Section 10, with void agreements in Sections 24 to 30.
Standard architecture
- Date, parties and recitals: identify the parties and the commercial purpose.
- Definitions and interpretation: control the meaning of key terms.
- Operative provisions: scope, price, delivery, acceptance and payment.
- Risk allocation: representations, warranties, indemnities, limitation of liability and insurance.
- Term and termination: default, insolvency, force majeure, consequences of termination.
- Dispute resolution: arbitration agreement under Section 7 of the Arbitration and Conciliation Act 1996, seat, number of arbitrators, language and governing law.
Contract types
Indemnity under Section 124 is a promise to save another from loss. Guarantee under Section 126 is a promise to perform the promise or discharge the liability of a third person in case of default. Partnership is governed by the Indian Partnership Act 1932 and LLPs by the LLP Act 2008.
Worked example
A supply agreement says: ‘Any dispute shall be referred to arbitration in Mumbai.’ It is enforceable in principle because an arbitration agreement may be in writing and need not use the word ‘arbitration’, but it is incomplete. A better clause states: ‘Disputes arising out of or in connection with this Agreement shall be referred to a sole arbitrator appointed jointly by the parties. The seat and venue shall be Mumbai, the language English, and the governing law Indian law.’ The reasoning is that the revised clause fixes the tribunal, seat, language and law, reducing later applications on appointment and jurisdiction.
Traps
Using ‘subject to contract’ and then acting as if a binding contract exists; drafting a penalty rather than a genuine pre-estimate of loss under Section 74; failing to distinguish indemnity from guarantee; omitting a notices clause; and leaving termination consequences unstated.