Contract Drafting is the process of writing down the terms and conditions governing a contractual relationship between the parties to a contract. The process starts with negotiations between the parties on the terms of the contract followed by multiple drafts before the contract is finalized.

What is a Contract?

A contract is a legally binding and enforceable document that forms the foundation of a legal relationship.  Section 2(h) of the Indian Contract Act, 1872 defines a contract as “an agreement enforceable by law”. As per section 2(e), an agreement refers to “every promise and every set of promises forming consideration for each other”.

Agreement = offer + acceptance

Contract = agreement + legal enforceability

Objectives of Contract Drafting

1. Creation of a legally binding document.

2. Capturing the intention of the parties clearly and concisely.

Process of Contract Drafting

1. Negotiation between the parties to a contract.

2. Drafting and reviewing

3. Stamping

4. Registration

Essentials of a Valid Contract

The first aspect to consider while drafting a contract is its validity as per the Indian Contract Act, 1872.

Section 10 of the 1872 Act enumerates that the following must be present to confer validly to a contract:

1. Offer

2. Acceptance

3. Intention of the parties to create a legal relationship

4. Lawful object

5. Lawful consideration that is not forbidden by law (consideration need not be adequate)

6. Capacity to contract

7. The contract shall be capable of being performed

8. Legal Formalities

9. Free Consent

Contract Drafting Checklist

• Communicate with the client to gather all the relevant facts and to understand the intention of the parties.

• Prepare an outline.

• Ensure that the flow of the contract is in a logical sequence.

• Language of the contract

• Shall be simple and clear

• Shall be unambiguous

• Short and meaningful sentences shall be used.

• Active voice shall be preferred over passive voice (it should be used rarely) as it allows the usage of strong verbs and helps in writing short sentences.

• In-depth knowledge of relevant provisions of law.

• Look out for loopholes and attempt to avoid them to prevent the probable risk of future disputes.

• It is always advisable to draft from the reader’s point of view. This helps legal professionals draft in simple language that is easily understandable by the layman.

Basic Structure of any Contract

All kinds of contracts can be broadly divided into the following 3 sections:

1. Preamble: It is the introductory paragraph that gives the birds-eye view of the contract.

2. Terms of Contract: This part enumerates the rights, duties, liabilities, terms and conditions etc.

3. End: It includes the signature of the parties and signifies that they have understood and accepted all the clauses.

Standard Clauses of a Contract

1. Subject Clause

2. Recitals

3. Definitions

4. Terms of Contract

5. Indemnity and Warranty

6. Choice of law

7. Jurisdiction and dispute settlement

8. Liquidated damages

9. Termination of Contract

10. Force majeure

Bottom Line

Although in India both oral and written contracts are valid, it is advisable to have a written contract. This is because written contracts are easy to prove and enforce in a court of law. The Indian Contract Act, 1872 does not require stamping and registration. However, the Registrations Act, 1908 requires compulsory registration for specified contracts. Likewise, the Indian Stamp Act, 1899 requires certain specified documents to be made in stamp paper. Therefore, registration and stamping are considered safer options to avoid vagueness.

We at best legal services can draft a contract based on your specific need and instructions. Contact us by visiting our website bestlegalservices.in.