CS Professional:Draft,Pleads and Appearances [Ch-4 Drafting & Conveyancing relating to Deeds/DOCS-I]

AGREEMENT DRAFTING

agreement enforceable at law=contract and when reduced to writing is called an agreement.

no particular form prescribed but it should fulfill essential requirements of a valid contract under the applicable law and may be as brief/detailed as the parties/ circumstances may deem it necessary.

IMPORTANT POINTS REGARDING CONTRACT DRAFTING

• parties description
• legal nature [sale/purchase/commercial/tech assistance/advisory/building]
• licenses and permits
• taxes,duties and charges
• good's quality,qty.,inspection
• packing/damage responsibility
• shipment
• insurance [which party is responsible/type]
• documentation
• guarantee for defects [removal/replacement]
• passing of property/risks
• payment amount/mode/currency
• Force Majeure [excuses for nonperformance]
• proper law
• dispute settlement & arbitration

ADDITIONAL CONDITIONS REGARDING AGREEMENT TO SELL/PURCHASE

1. contracting parties sufficiently described
• representative capacity clearly disclosed and authority forming part of agreement.
• specific performance enforceable except in personal obligations
• assignability of rights/obligations
2. consideration forms essence unless clearly/precisely disclosed
• always a reasonable price is implied
• might even be void for incompleteness if no price named
• "price" conveys all lawful considerations
3. subject matter
• right to property includes right to transfer
• described in detail
• subject to previous charges, easements,etc
• no material particulars to be concealed
4. performance timeline clearly stated and stipulated if it is of the essence of agreement along with consequences of non-performance.
5. The purpose of agreement is to bind the parties to Terms & Conditions agreed upon:
• drafted as deed and ancient practice of deed pools discouraged
• intentions set forth explicitly
• simple language and definite/precise words
• Indian Contract Act followed but parties consent/court settlement will not invalidate agreement
• Ramchandra v. Chinnubhai, AIR 1945 Mad. 10
• may be split into parts and may assume following terms
• operation w.e.f
• termination by notice
• arbitration clause
• services of communication clause
• attestation/registration and stamp duty ascertained as demanded
• T&C in agreements to sell/purchase
• vendor has marketable title
• if proposed property part of larger property
• prior charges/encumbrances
• time of handing over possession
• mode of payment and liability of rents,taxes,interest and deposits
• cost/expense of execution/registration
• brokerage and related details

check out ch-4 of ICSI study material at the given link for specimen formats of deeds and agreements: https://www.icsi.edu/media/webmodules/Drafting_Pleadings_Appearances_22112022.pdf

BUILDING CONTRACTS

being legal docs has to be drawn according to the Indian Contract act,1872 such as the signatory having capacity to contract,etc. mostly for building/ constructing a structure.

COMMERCIAL AGENCY CONTRACTS

Business conducted by traders and not directly with their counterparts but with independent agents instead which would locate customers and have an implied authority to deal in goods,allow credit terms and receive payment on the principal's behalf.

These kinds of contracts are different from sale/purchase or other trade contracts and should inter alia include commencement/termination clauses,commission basis,etc.

Right and duties of aforementioned agent/principal shall be governed by this contract such as reimbursement,accrual of commission,currency/exchange rate/mode of payment.

• power to make binding contracts on principal's behalf clearly specified
• usually agents guarantee minimum sales turnover over a given period
• not to divulge confidential info and use all reasonable diligence
• nothing repugnant to current legal provisions
• always advisable to seek legal/fiscal advice
• largely depending upon law of the respective defined territory/country
• lack of precision may give rise to disputes
• may be expedient to append a list of existing customers with descriptions as necessary (concerned with the territory).
• suitably worded clause at the end of there being no other agreements in existence and that whole terms are set out herein.

DEL CREDERE AGENCY

combines agency with guarantee.this agent,for extra remuneration (del credere commission presupposing guarantee) undertakes due performance and indemnifies principal against loss.

therefore,provides additional security to the seller yet still within authority as given by the seller.

INGREDIENTS OF AGENCY CONTRACTS

1. CHAPTER X(SECTIONS 182-238) OF CONTRACT ACT
2. express/implied authority to bind principal
• all necessary/collateral acts to main act
3. agent can't be a minor
4. consideration unnecessary
5. principal liable for agent's acts unless agent exceeded authority
6. obligations not assignable unless:
• business necessitates
• customs of usage of trade permit such assignment
• expressly permitted by agency contract

COLLABORATION AGREEMENTS

2 parties joining hands for technical know-how/designs/training of personnel/ continent provision of services. it can also mean "cooperation" and is usually between an indian and foreign party.

To ensure quick processing and uniformity,Central Govt. has issued following guidelines for prospective collaborators to adhere to-

• investment in equity participation
• lump sum payments/installments
• after CG approves agreement
• on transfer of technical docs
• on commencement of commercial production
• royalty on the basis of net ex-factory selling price less excise duties/cost of imported components.
• normal rate=3-5% depending upon tech
• payment of a fixed amount is preferred by the govt. but minimum standards are not provisioned.
• duration
• normally 8-10 years
• 5 years approved by the govt. in first instance/commencement of commercial production but subject to max. cap
• renewal/extension app considered on merit
• remittances on the basis of prevailing exchange rates
• Sub-licensing
• no normal restriction
• but mutually agreed terms and CG's approval required
• exports
• no restrictions unless the collaborator has licensing agreements
• clearly specified
• capital goods procurement: no restrictions by Indian party
• technicians deputed from either side subject to RBI's approval
• adequate facilities for training
• compensation for using indian patents along with manufacturing provisions post-termination of agreement without additional payment.
• consultancy obtained from indian co;if necessary.
• no insistence of using foreign brand names except in exports
• subject to indian laws
• CG approval
• strict adherence to guidelines recommended

ARBITRATION AGREEMENTS

under the Arbitration and Conciliation act,1996,parties agree to submit to arbitration all/certain disputes through arbitration clauses OR separate agreements.

it has to be written to provide a record or where the existence of the agreement is alleged by 1 and not denied by the other.the utmost ingredient is mutual voluntary consent in writing to submit disputes to arbitration and binding nature of award made thereunder unless intended with fraud,coercion etc.

arbitration intends to determine finally any difference/disputes creating obstructions by less expensive,more expeditious and less formal than ordinary court proceedings.

arbitration presupposes that the arbitrator must accept the arbitrator's office to perfect his appointment.

REQUISITES OF ARBITRATION

1. dispute(s) b/w parties
2. submission for settlement by an agreement
3. binding decision of 3rd person
• not bound by the court of law evidence rules
• but presentation/conduct of case follows suit
• party adducing written evidence must be present for cross-examination.
• after hearing parties,parties,the arbitrator makes a binding award being within terms of reference.
• law should be fair and reasonable

REQUISITES OF AWARD

1. consistent with submission
2. certain
3. fair to parties
4. final
5. implementation must not be impossible

GUARANTEE

"guarantee contract"=contract to perform a promise/discharge a liability of 3rd person for his default.may be oral/written.governed by Section 126 of Indian Contract Act. 

Person giving guarantee="surety"

Person for whose default guarantee is given="principal debtor"

To whom guarantee given="creditor"

Extending to series of transactions="continuing guarantee";Section 129 and can be revoked any time as to future transactions by notice to creditor. (Section 130)

Guarantee against employee's misconduct OR answer for faithful discharge on exact terms of debt/default="fidelity guarantee".if employer continues to employ this employee even after a proved dishonest act without notice to guarantor for continued consent,surety is discharged.

Guarantee by principal debtor to surety for indemnity="counter guarantee"

Guarantee ensuring contracted performance of another="performance guarantee"

Given by the bank on behalf of clients to perform some job to pay a guarantee in contingency="bank guarantee"

GUARANTEE PURPOSE/FORMS

undertaking to indemnify creditors in case the principal debtor doesn't fulfill promises and is also called an Indemnity Contract ;central point being the contingency.

law doesn't require it to be in writing so may be expressed/implied or inferred from parties' conduct. but must be satisfactorily proved and must be supported by consideration along with pre-existence of principal debtors.

GUARANTEE CONSTRUCTION

terms must be strictly construed. surety doesn't receive any benefit/consideration as he is bound.

The guarantee will only extend to liabilities precisely answering description in guarantee.

CONSIDERATION: Section 127 of contract act="anything done,promise made for principal debtor's benefit";past benefit or consideration between principal debtor and credit is good consideration.

SURETY'S LIABILITY: Section 128 co-extensive with principal debtor unless otherwise contracted. surety's liability isn't discharged until the creditor exhausts all his remedies and the creditor may have relief against surety/principal debtor at his own option.

surety's liability is joint and several.

SURETY'S SUBROGATION TO CREDITOR'S RIGHT ON PAYMENT:Section 140 if guaranteed debt becomes due,upon payment/performance, surety invested with creditor's rights against principal debtor.

HYPOTHECATION AGREEMENT

form of legal property transfer in goods without transferring possession. not regulated in India by any statute. the rights and remedies are regulated by court principles of equity & justice and according to general contract law.

• HYPOTHECATION=2(n) of SARFAESI,2002 says it's a charge in/upon movable property in favor of secured creditors and includes floating charge/crystallization.
• there must be an intention to create security and give effect to equity.
• oral/written permitted under indian law and can also be called a pledge's extended form which is codified under Sections 172-176 of indian contract act.
• pledge can't exist without bailment/possession
• as against the pledge,the legal title transfers and rights/duties of both parties are governed by the hypothecation agreement.
• mostly resorted to by banks and FIs
• usually cover moveable machinery,equipment,stocks,raw materials,book debts,present & futures available in factories and godowns.

OUTSOURCING AGREEMENTS

contracting out co's non-core,non-revenue producing activities to specialists.

BPO includes outsourcing related to accounting, human resources, benefits, payroll, and finance functions and activities. Knowledge Process outsourcing (KPO) includes outsourcing related to legal, paralegal, and other highly skilled activities.

should provide a comprehensive roadmap of duties/obligations of outsourcer/service providers along with minimizing complications. terms should be thoroughly discussed and negotiated. such as:

1. security/confidentiality
2. legal compliance
3. fee/payment structure
4. proprietary/auditing rights
5. time limits
6. dispute redressal
7. non-compete
8. local peculiarities
9. survival terms after termination

SERVICE AGREEMENTS

terms of employment should be fixed/clearly expressed and nothing left to presumptions. both affirmative/negative acts stated. must be as explicit as possible and being easily intelligible unlike other agreements which don't contain legal clauses. should resemble a complete code governing rights and duties of both parties.

Statutory corporations issue an appointment order to govern terms of service instead of service agreements.

• service period terminable by reasonable notice on either side
• remuneration
• leaves and allowance payable @ leaves
• employment determination grounds=misconduct,negligence,etc.
• employee entitled to damages for wrongful dismissal
• restrictive covenants relating to trade restraint,confidentiality,etc. within legal bounds.
• contrary to labor laws will be null and void

ELECTRONIC CONTRACTS (E-CONTRACTS)

digital environments due to onset of tech and a contract formed in the course of e-commerce. traditional contract principles and remedies also apply. for speed,convenience & efficiency. some sections such as 4,11,12,13,15,etc. of IT act,2000/85A,B,88A,85C of Indian Evidence Act governs the e-contracts. the formation,breach,execution and acceptance a/c to contract act but it isn't sufficient to address all issues..

E-CONTRACT ESSENTIALS

1. offer/proposal by 1 and acceptance by another
2. intention to create legal relations
3. Lawful consideration/object
4. parties capable of contracting
5. genuine consent
6. certain terms

E-CONTRACT TYPES

1. click-wrap/web-wrap agreements
• "I AGREE/DISAGREE" to above conditions
• mostly part of installation of software packages
• also called "click through" agreements
• TAKE-IT-OR-LEAVE-IT contract lacking bargaining power
• can be of the following types:
• Type and click "i accept" or specified words
• Icon clicking on "OK/AGREE"
2. shrink-wrap agreements
• license agreements read and accepted after opening product
• additional terms may appear post-purchase and users may return if such additional terms are unacceptable.
3. Electronic Data Interchange (EDI)
• used in trade transactions enabling data transfer
• each transaction processes virtually with no framework
• exchange of info and contract b/w 2 computers
4. Online shopping agreement
• offers through website and tie-up with manufacturers
• additionally visitors can post reviews,comments,photos,etc. and so the website would contract with potential customers "before" an order is placed serving following:-
• outline services scope
• restrict website's liability in case of default
• customer duties and obligations
• license to customer to use website

IMPORTANT POINTS FOR AN E-CONTRACT

1. customer relationship with website
2. terms acceptance
3. copyright of website
4. customer duties and obligations
5. customer provided with ltd.,revocable and nonexclusive right to create hyperlinks to the website's home page.
• link does not portray a website or its products or services in a false, misleading, derogatory, or otherwise offensive manner.
• The contract must also specify that Kerry is giving the customer a personal, worldwide, royalty-free, non-assignable and non-exclusive licence to use the software provided as part of the website.
• forbidding from illegal activities
6. reviews/comments within public policy
7. Loss risk:once products handed over to courier co./website's liability ends.
8. pricing computation
9. prohibitions toward cyber attacks or as prescribed by law
10. applicable law
11. Liability limitations (of the website to customers)
12. warranty exclusions
13. ending the relationship by customers through closing their accounts except in certain cases where the website retains the right to terminate the contract.

LEAVE AND LICENSE AGREEMENTS (LLAs)

to get out of the rigours of landlord-tenant relationships since tenancy has been declining nowadays fearing a scenario where the tenant decides not to vacate and possesses the space.

"leave"="permission" in which essence occupancy is acquired.

first adopted in Mumbai in pursuance of the bombay rent act which was favourable to tenants. tenancy/lease agreements had to be stamped/regstd. and eviction became time consuming/tough.

with the amendment of 1973,occupants under LLAs became statutory tenants.

LICENSE IS NOT LEASE

"license" under Section 52 of easement act is granted by one for a legal right to do something in/upon immovable property and it doesn't amount to easement/interest in property.

"lease" per Section 105 of transfer of property act is a transfer of right/interest to enjoy for pecied period which can be expressed/implied.

• Khalil Ahmed Bashir Ahmed v. Tufelhussein Samasbhai Sarangpurwala,1988 SCC 155, the Supreme Court
• Rajbir Kaur & Anr. v. M/s S Chokesiri & Co., 1988 (2) SCJ 316]

From the judgments of various Courts, it appears that the main factors of distinction are the intention of parties & agreement creating interest in property.

in LLAs, juridical possession is deemed to remain with a licensor and licensee said to be in constructive possession making termination of agreement easy.

a rental agreement sets down terms which are commonly rent paid on a month-to-month basis for an indefinite period.

FACTORS TO CONSIDER WHILE DRAFTING LLAs

POSSESSION: licensee deemed to be in constructive possession

INCOME TAX: usually paid by owner since he attains ownership

MUNICIPAL TAX: may vary in case of a security deposit

WILL

Legal declaration of the testator's intention carried into effect by making a property's disposition after his death.Section 2(h) of the Indian Succession Act,1925.

"will" as per general clause act,1897 shall include a codicil and writing making a voluntary posthumous disposition-Section 3(64).

"codicil"=instrument relating to will and explaining,altering or adding and deemed part of will-Section 2(d) of the Indian Succession Act,1925.

WILL - ESSENTIAL CHARACTERISTICS

• accordance with Section 63 of the Indian Succession Act,1925 executed by competent persons.
• declaration should relate to testator's properties
• operates after the testator's death
• revocable during the testator's lifetime (Section 62).any clause in the will that the testator can't revoke makes the will void.
• ambulatory nature which can be modified/altered by testator
• wills to be made in writing but not mohammedan made wills

WHO CAN MAKE A WILL?

Section 59,every person of sound mind,capable of understanding & not being minor may dispose of property by will.the disposition is personal and can't be delegated to another.

WILL TYPES

PRIVILEGED WILL

Section 65 provides any soldier employed in an expedition engaged in actual warfare/airman/mariner may dispose of property as under Section 66.

UNPRIVILEGED WILL

other than privileged wills are unprivileged.required to be written,signed by a testator and attested by 2 witnesses. Section 63

other elements

• no specific legal language required along with any writing/printing type but language should be simple and devoid of technical words.
• clear/unambiguous dispositive words
• technical/legal terms applicable as far as applicable
• [Lalit Mohan Singh Roy v. Chikkun Lai Roy, ILR 24 Cal 834].
• registration=optional (Section 18(c) of registration act,1908).
• any testator/person claiming executor may present it to registrar/sub-registrar for registration under Section 40.
• 2 witnesses
• each must have seen the testator sign/affix mark
• each witness received a personal acknowledgement
• each witness to sign in testator's presence
• not necessary that witnesses present at same time
• CARDINAL MAXIM
• ascertaining testator's intention
• will read as whole without conjecture/speculation
• [Gnambal Ammal v. T. Raju Iyer, AIR 1951 SC 103, 105].
• RELEVANT CONSIDERATION
• court entitled to put himself in the testator's arm chair
• [Venkatanarasimha v. Parthasarthy, 41 IA 51, 70 (PC) ; Gnambal Ammal v. T. Raju Iyer, AIR 1951 SC 103,106]
• preferring construction by which intestacy avoided
•  [Kasturi v. Ponnammal, AIR 1961 SC 1302]
•  [Guruswami Pillai v. Sivakami Ammal, AIR 1962 Mad 236]
• by a harmonious interpretation,effect should be given to every disposition
• [Rampali v. Chando, AIR 1966 All 584,586]
• Later parts/last words to prevail in case of irreconciliation/repugnancy (Section 88)
• Somasundera Mudaliar v. Ganga Bissen Soni, 28 Mad 386]
• In case of repugnancy, the last word in the Will shall prevail. [CIT v. Indian Sugar Mills Association, (1974) 97 ITR 486 SC)]

BROAD OUTLINES

PROBATE:certificate granted by competent court certifying will to be that of testator and granting estate's administration according to will.

ADMINISTRATION LETTERS:where the testator failed to appoint an executor/an appointed executor refuses. these are always necessary where a person dies intestate.

most solemn/sacred doc where a dead man entrusts the living to carry out their wishes/desires. so the doc should be a/c to Part VI,Sections 57-120 of Indian Succession along with the following:

• testator's details
• testator's state of mind/consent
• exclusions
• enumeration of relatives entitled to properties
• bequest procedures
• avoid conflicts with the rule of laws (Sections 112-118)
• executor appointed
• attestation
• clearly defined interest/intention

RELINQUISHMENT DEED

Renouncing claim upon another/against specified property which he is entitled to enforce. it may be a deed poll/deed to which all persons in whose favor property is being released are parties.

"release" is relinquishment since it absolves him/property from obligation/liability.

must be written,signed by all releasers.

If under an instrument,It may require attestation. if subject=immovable property of value>₹100;compulsory registrable.

release deed should contain recitals regarding claims origin, releasers intention to discharge claim/acknowledgement.

under Article 55 Schedule I of Indian stamp act,simple release deed is chargeable to stamp duty as agreement/memo and is the same as a bond.

GIFT

1. defined under Section 122 of Transfer of Property act,1882
• transfer of certain property made voluntarily without consideration by donors to donee.
• donee's acceptance during donor's lifetime
• immovable property gift=regstd. instrument otherwise  instrument/delivery. (Section 123/17(i)(a) of Registrations act,1908)
• only for existing property and not future properties (Section 124)
2. under Section 125,
• gift to 2/more donees, all should accept and one can't accept whole.
3. under Section 126,
• gift suspension/revocation on specified events not depending upon the donor's will.
• in cases if it were a contract,might have been rescinded
4. also regulated by personal laws,usages and customs in India.
• [Ganga Baksh v. Jagat Bahadure (1896) 23 Cal - 15]
5. revocation can't be applied to muslims.
6. under Section 127,ONEROUS GIFT
• single transfer of several things and should be accepted absolutely
• donee incompetent to contract not bound after becoming competent except when he retains the property given.
7. co. can make gifts provided it is vested with requisite power and shareholders sanction.
8. made as a deed of recitals if necessary
• no consideration
• "natural love and affection/consideration of esteem and regard" generally expressed.
9. STAMP DUTY/REGISTRATION
• value set forth in the deed
• stamp duty payable on amt. conveyance
• Article 23
• value omitted/undervalued to defraud,prosecution invited
• Section 64
• Section 64 of Indian Stamp Act (Muhamad Muzaffar Ali ILR 44 Allahabad 339 FB) 
• penalty under gift tax attracted