{"id":104977,"date":"2021-11-22T11:45:28","date_gmt":"2021-11-22T06:15:28","guid":{"rendered":"https:\/\/legalwindow.in\/?p=104977"},"modified":"2021-11-24T17:11:45","modified_gmt":"2021-11-24T11:41:45","slug":"how-to-draft-a-commercial-agreement-in-india","status":"publish","type":"post","link":"https:\/\/www.legalwindow.in\/blog\/how-to-draft-a-commercial-agreement-in-india\/","title":{"rendered":"How to draft a Commercial Agreement in India?"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-104979 size-full\" src=\"https:\/\/legalwindow.in\/wp-content\/uploads\/How-to-draft-a-Commercial-Agreement-in-India-1.png\" alt=\"How to draft a Commercial Agreement in India\" width=\"1200\" height=\"630\" srcset=\"https:\/\/www.legalwindow.in\/blog\/wp-content\/uploads\/How-to-draft-a-Commercial-Agreement-in-India-1.png 1200w, https:\/\/www.legalwindow.in\/blog\/wp-content\/uploads\/How-to-draft-a-Commercial-Agreement-in-India-1-600x315.png 600w, https:\/\/www.legalwindow.in\/blog\/wp-content\/uploads\/How-to-draft-a-Commercial-Agreement-in-India-1-300x158.png 300w, https:\/\/www.legalwindow.in\/blog\/wp-content\/uploads\/How-to-draft-a-Commercial-Agreement-in-India-1-1024x538.png 1024w, https:\/\/www.legalwindow.in\/blog\/wp-content\/uploads\/How-to-draft-a-Commercial-Agreement-in-India-1-768x403.png 768w\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<p>According to Section 2(h) of Indian Contracts Act, 1872 \u201can agreement enforceable by law is a contact\u201d resultantly an agreement which creates legal obligation is a contract. Further an agreement is a promise or a set of promises forming the consideration for each other and agreement which creates legal obligation is a contract.<\/p>\n<p>Thus, commercial agreements and contracts legally determines the liability of the parties by creating legal obligation(s) and bind(s) the parties who enter into an agreement in the regards of business, selling\/ buying, renting\/ leasing etc.<\/p>\n<table style=\"width: 100%;\">\n<tbody>\n<tr>\n<td style=\"border: 1px solid #555;\"><strong>Table of Content <\/strong><\/p>\n<ul>\n<li><a href=\"#parts\">Parts of commercial agreement<\/a><\/li>\n<li><a href=\"#requirements\">Requirements for a valid agreement<\/a><\/li>\n<li><a href=\"#checklist\">Checklist<\/a><\/li>\n<li><a href=\"#guidelines\">Guidelines<\/a><\/li>\n<li><a href=\"#option\">Judicial option<\/a><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 id=\"parts\"><strong>Parts of Commercial Agreement <\/strong><\/h2>\n<ul>\n<li><strong>First part: <\/strong>Commercial agreements identifies the parties, defines their definite duty. The details of the agreement shall include specifics such as applicable services, tenure of the agreement, pricing etc.<\/li>\n<\/ul>\n<ul>\n<li><strong>Second part: <\/strong>This part of agreement specifies on negotiations, terms and conditions non-performance and includes the details of warranties, indemnification, termination and liquidated damages.<\/li>\n<\/ul>\n<ul>\n<li><strong>Third part: <\/strong>This part of agreement specifies on non-performance and includes the details of warranties, indemnification, termination and liquidated damages.<\/li>\n<\/ul>\n<h2 id=\"requirements\"><strong>Requirements for a Valid agreement <\/strong><\/h2>\n<ul>\n<li><strong>Title<\/strong> \u2013 the title should reflect the subject matter of the transaction that\u2019s appropriated by the parties.<\/li>\n<li><strong>Definitions<\/strong> \u2013 the use of defined terms can simplify a document.<\/li>\n<li><strong>Agreement<\/strong> \u2013 The agreement must include an offer and acceptance where the parties must agreed upon.<\/li>\n<li><strong>Covenants<\/strong> \u2013 the covenants signifies the promises that are being made by the parties.<\/li>\n<li><strong>Consideration<\/strong> \u2013 quid pro quo is essential for an agreement and this consideration is what makes something a contract rather a gift.<\/li>\n<li><strong>Legal capacity<\/strong> \u2013 the parties to the agreement must be legally competent in the eye of law.<\/li>\n<li><strong>Willingness<\/strong> \u2013 the contract must be free of consent (with no coercion, undue influence, fraud, misrepresentation and mistake)<\/li>\n<li><strong>Termination<\/strong> \u2013 while an agreement is drafted a clause relating to termination shall be entered allowing the parties to continue or discontinue the on-processing business. The termination shall happen due to bankruptcy, insolvency, merger, change of control etc.<\/li>\n<li><strong>Legal<\/strong> \u2013 the contract must legally bind the parties under the law of land (state and federal). The agreement loses its enforcement if it\u2019s performed illegally.<\/li>\n<li><strong>Other important provisions<\/strong> \u2013\n<ul>\n<li>Choice of law<\/li>\n<li>Amendments and waiver<\/li>\n<li>Notice<\/li>\n<li>Signatory or receiving authority of issues notices by either parties.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 id=\"checklist\"><strong>Checklist<\/strong><\/h2>\n<ul>\n<li><strong>Relationship between the parties<\/strong> \u2013 the relationship between the parties shall be contractual and not personal. Further it should legally bind as well protect the parties from exploitation.<\/li>\n<li><strong>Financial transaction<\/strong> \u2013 the release of payment along with the clauses mentioning non-performance from either of the parties and the transaction shall be mentioned in the agreement.<\/li>\n<li><strong>Terms and conditions<\/strong> \u2013 it is a set of rules and regulations which users must agree to follow the orders to use the services.<\/li>\n<li><strong>Confidentiality<\/strong> \u2013 the principle of confidentiality is keeping sensitive information of the business between the parties.<\/li>\n<li><strong>Dispute resolution<\/strong> &#8211; when dispute arises the parties the has to decide on resolving those issues either via arbitration or court proceedings.<\/li>\n<\/ul>\n<h2 id=\"guidelines\"><strong>Guidelines <\/strong><\/h2>\n<ul>\n<li><strong>Accuracy<\/strong> \u2013 the names of the parties and particulars such as address\/ aadhar number\/ <a href=\"https:\/\/legalwindow.in\/how-to-link-pan-with-aadhaar-in-new-e-filing-portal\/\" target=\"_blank\" rel=\"noopener\">PAN<\/a> etc. and to check the accuracy of the draft without misunderstanding due to ambiguity. The agreement must have relevant and exclude other irrelevant information.<\/li>\n<li><strong>Organisation<\/strong> \u2013 the agreement should be logically arranged with free flow and precise transition between paragraphs and sentences.<\/li>\n<li><strong>Language\/ style <\/strong>\u2013 the language of the agreement must be understandable and should be clearly structured with proper grammar.<\/li>\n<\/ul>\n<h2 id=\"option\"><strong>Judicial option<\/strong><\/h2>\n<p>It has become mandatory to include arbitration clause in any agreement before the parties opt for court hearing.<\/p>\n<h3><strong>Commercial contract shall be entered among \u2013 <\/strong><\/h3>\n<ul>\n<li>Franchisor and franchisee<\/li>\n<li>Shareholder and joint ventures<\/li>\n<li>Loan and financial agreement<\/li>\n<\/ul>\n<p><strong>Note<\/strong> \u2013 include appendix if necessary (examples)<\/p>\n<ul>\n<li>Conditions of contract<\/li>\n<li>Letter of acceptance<\/li>\n<li>Effect of the contract<\/li>\n<li>Scope of work<\/li>\n<li>Geographical location<\/li>\n<li>Risk management<\/li>\n<li><a href=\"https:\/\/en.wikipedia.org\/wiki\/Insurance\" target=\"_blank\" rel=\"noopener\">Insurance<\/a><\/li>\n<li>Certificates (if any)<\/li>\n<\/ul>\n<h3><strong>Conclusion<\/strong><\/h3>\n<p>Regardless of the size of your company or the sector in which it works, a commercial contract must be carefully drafted and checked before signing and regularly. It is abundantly clear that when assessing the rights and obligations of the parties to a contract, the terms and clauses of the agreement from the contracts or agreements foundation must be considered.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to Section 2(h) of Indian Contracts Act, 1872 \u201can agreement enforceable by law is a contact\u201d resultantly an agreement which creates legal obligation is a contract. Further&hellip;<\/p>\n","protected":false},"author":5,"featured_media":104980,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-104977","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-agreement-drafting"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How to draft a Commercial Agreement in India? &#187; Legal Window<\/title>\n<meta name=\"description\" content=\"Guide about How to draft a Commercial Agreement in India, Parts of Commercial Agreement, Requirements, Checklist, Guidelines.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalwindow.in\/blog\/how-to-draft-a-commercial-agreement-in-india\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to draft a Commercial Agreement in India? 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