What is a Contract?
A
contract is an agreement between two or more parties, involving the exchange of
something of value, and creating some obligations and corresponding rights on
both the parties as against each other. A valid legal contract is enforceable
in Court, meaning that if one party refuses to abide by the terms, or defaults
on his duty, then the other party can approach the Court to enforce his rights
against the defaulting party. But for this, the contract between the parties
must be legally valid, and it must be carefully drafted to ensure that the
terms and conditions are favourable to you.
POINTS
TO WRITE A FAVOURABLE AND SECURE CONTRACT
Ø Include
all necessary information, and detail the purpose of the contract, and the clear identity of all
the contracting parties.
Eg; If you are entering into a contract to
purchase a car, then specify the car’s details (year, model, make, etc.) and
the name and addresses of the seller and buyer (yourself), the amount you have
agreed on, etc.
Ø The
specifications and descriptions required to be entered into the contract will
vary depending on the nature of the contract: whether it is a contract of
employment, a contract of sale, a contract of insurance, etc. the details must be
entered accordingly, and must properly describe the subject matter, the terms
and conditions, the amount to be paid (specify if the contract is for some
other non-monetary consideration), and the mode of payment.
Ø Before
bringing the contract into writing, ensure that you have discussed the terms
and conditions with the other party and are in agreement, and there is clarity
on both sides as to the nature and extent of obligations. This will help to
prevent later disputes and disagreements, and will help both the parties to do
their parts of the contract well.
Ø Include
clauses regarding the conditions that are to be fulfilled, in the execution of
the contract, and warranties in relation to the subject matter. Eg: If you are buying
a car from a person, try to negotiate and include a warranty regarding the good
working condition of the car. On the other hand, if you are selling your used
car, it is favourable for you to not include any personal warranty, and state
that it is “sold as is”.
Ø Ensure
maximum level of clarity and specifications in the language, to explicitly state
your intent and the limit of obligations you agree to, and try to leave no room
for broad interpretations.
IMPORTANT STATUTORY PROVISIONS (INDIAN KANOON)
Ø The Indian Contract Act
Ø Sale
of Goods Act
Ø Specific
Relief Act
Ø Transfer
of Property Act
DO (s) AND DON’T (s)
Ø Maximum
Clarity; no vague statements, conditions, or terms
Ø Ensure
that the other party is a major, of sound mind, and is legally capable of
entering into the contract
Ø Include
an arbitration clause, if possible
Ø Agree
on a jurisdiction where claims can be brought in case of disputes
Ø Ensure
that all parties enter into the contract in good faith, understanding the
rights and obligations
Ø Avoid
mistakes to the best possible level
Ø Read
the document carefully before signing
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