CS Professional:Draft,Pleads and Appearances [Ch-5 Drafting & Conveyancing relating to Deeds/DOCS-II]

check out ch-5 of ICSI study material at the given link for specimen formats of deeds, agreements and illustrations:

https://www.icsi.edu/media/webmodules/Drafting_Pleadings_Appearances_22112022.pdf

PROMISSORY NOTE

under the Negotiable Instruments act,1881, it is defined under S.4 as "a written instrument (not bank/currency note) containing an unconditional undertaking signed by a maker to pay a certain sum only to, or order of certain person, or to the bearer of instrument.

PARTIES TO A PROMISSORY NOTE

• maker:making/executing the note,promising to pay
• payee:to whom the note is payable
• holder:either payee/another to whom he may have endorsed the note
• endorser/endorsee

ESSENTIALS TO A PROMISSORY NOTE

1. must be written
2. containing express promise/clear undertaking to pay;since promise can't be inferred so, an acknowledgement would be insufficient.
3. promise/undertaking must be unconditional
4. maker to sign in token of undertaking to pay
5. The maker/payee must be a certain/real person
6. sum payable must be certain and amt. must not be capable of contingent alterations.
7. payment must be in legal tender
8. properly stamped per Indian stamp act and each stamp cancelled by the maker's sign/initials.
9. details of place,no date of making (optional)
10. can't be made payable/issued to bearer, no matter payable on demand or after a certain time under S.31 of RBI act.

DEEDS OF POWER OF ATTORNEY (PoA)

PoA DEFINITIONS

specific acts or acts related to 1 judicial transaction call for "special/particular PoA".

can be executed in favor of multiple persons and in such cases, provide whether donees will act jointly/severally. in the absence of such explicit provision,entitled to only act jointly.

governed by Powers of Attorney act,1982,Indian Partnership act,1932 and law of agency/Ch X (Indian contract act) since donee=donor's agent such as:

• who may execute such power
• who may become attorney
• when is power terminated
• whether power+interest is revocable

WHO CAN EXECUTE A PoA?

by anyone able to enter into a contract and can be executed only in favour of a major since donees required to execute certain instruments as agents per S.2,5 of PoA act.

PoA FORM OF DEED

executed as deed polls in 1st person. these are unilateral docs and generally begin with:It begins either as - “KNOW ALL MEN BY THESE PRESENTS THAT I, ETC.” or “BY THIS POWER OF ATTORNEY,I,ETC."

operative words introduced without recitals or added after above sentences.

powers conferred to be specifically stated after appointment and optionally joined by a general powers clause.

PoA AUTHENTICATION

need not be attested but advisable to execute and authenticate by notary public/court judge/magistrate,Indian consul or vice-consul or CG representatives. after this,PoA will be deemed executed under the S.85 of indian evidence act.

1. notary public seals take judicial notice of
2. under S.32(c) of Indian Registration act,1908,PoA granted the agent to present a doc for registration but under S.33(1),only certain PoAs are recognised.
3. but a deed empowering agent to execute a deed conveying property and get deed regstd., need not be executed before an officer.

PoA DURATION

unless limited for a particular period,general PoA remains in force unless expressly revoked/determined by death of either party.

for co. POA executed by directors ceases operation when winding up order is made.[Fowler v. Broode P.N. Light & Co., (1893) 1 Ch. 724]

A special PoA is determined when the specified act is done except when power continues by express provision to that effect in the deed.

REVOCABLE/IRREVOCABLE PoA 

executed in favor of a person can be revoked at donor's discretion.

if donee has interest in subject matter, in absence of express contract,can't be terminated to interest's prejudice.

agency+interest can't be terminated without the other party's consent(S.202 of contract act) making it irrevocable.

such PoAs are executed in favor of FIs for executing security docs by co. offering financial assistance.

such PoA will need registration

PoA BY CO.

Co. Being an artificial person can act through agents/officers through board resolutions or PoAs.for resolutions,a minute book is considered to prove passing resolution.further,under S.22 of co. act,2013,co. may by writing under its common seal/by 2 directors/director+CS empowers its attorney to execute deeds on its behalf.

generally,detailed PoA executed for MD/CEO and a delegate can't further sub-delegate powers, unless expressly/specifically authorised.

PoA STAMP DUTY

under Indian stamp act,1889 and duty a/c to state in which PoA executed or stamped with differences of duties, otherwise the PoA can be impounded.

foreign PoA must be stamped within 3 months of being received in India or deemed unstamped and can't be acted upon.

proxy lodged with co. under S.105 is also a PoA,although a particular one.

for share registration/transfer/subscription, co. receives poA by NR shareholders/co. for investing and signing transfer deeds.

PoA CONSTRUCTION

construed strictly and light words interpreted as per special powers. following well known "rules of construction borne while interpreting POAs [mulla:contract act]-

• regard to recitals showing scope/object of power as such would control general terms in the operative part.
• where special powers are afforded by general words,general words limited to what is construed as necessary for exercise of special powers only where necessary.

power not expressly delegated should not be implied;delegate authorised to invest in shares doesn't imply power to sell unless power to vary investment also delegated.

similarly,investing power doesn't automatically confer transferring powers.

CONSTRUCTION PRINCIPLES:

• operative part controlled by recitals
• authority for particular acts followed by general words,general words restricted to necessary powers.
• general words don't confer general powers but are limited for a specific purpose and are construed as enlarging special powers only when necessary.
• construed to include all necessary incidental powers
• [A.I.R. 1972 Gauhati 122 (125)]

act purporting to be done challenged as being in excess of authority,necessary to show that on doc's fair construction,the power lies within the instrument expressly or by necessary application.

(Bank of Bengal v. Ramanathan Chetty, 43 I.A. 48, 55).

PoA REGISTRATION

not compulsory,S.4 of the PoA act provides that it may be deposited in HC/district court within local limits of instruments' jurisdiction and copy presented @ office to be stamped as certified copy; therefore, it will be sufficient evidence of the deed contents.

in certain cases,registration becomes compulsory;power authorising the donee to recover rents for his own benefit is assignment and requires registration.similarly,a PoA creating charge also requires registration.

[Indra Bibi v. Jain Sirdar, (1908) I.L.R. 35 Cal. 845, 848]

mere PoA need not be registered(Kochuvareed v. Mariappa, A.I.R. 1954 T.C. 10, 17)

AUTHORITY LETTERS

also POAs,executed on plain paper not on stamp paper;usually for collecting docs/papers,dividend interest,etc. POA law applies.

HIRE-PURCHASE

Contract of hire=contract for bailment and governed by Ch IX of Indian Contract act,1872 along with sale of goods act,1930.

acquiring ownership through agreement helps promote sales and acquire asset without paying full price in lump sum.after paying initial installment(generally 20-25% value), purchaser pays balance in monthly/quarterly installments followed by property being passed to the hirer at his option/right.

The hirer has an option to return during the period of hire;EMI is a form of hire-purchase.

HIRE-PURCHASE DEEDS

drafted as agreements under contract law;all other agreed conditions between seller and hirer should be mentioned.

The hire-purchase transaction is treated as an act of bailment.

distinctions between HP agreements and ordinary contracts are installment payments and options to purchase hired goods on payment of all installments. while drafting this option clause,following should be kept in mind:

1. shouldn't amount to an agreement to buy as only given an option to buy as under purchase agreements,the possessor can then further pass on the title to a buyer not having knowledge of the hire-purchase act [S.30(2) of Indian sale of goods act,1930].
2. express stipulation that property shall not pass to the hirer until all installments are paid. In the absence of this,seizing goods by default of payments might be held to make a contract of sale.
• 2 distinct set of rights on hirer
• each capable of separate assignment
• hirer's legal position=bailee towards seller/goods

MIN. PAYMENT CLAUSE

to provide depreciation of article; in case of determination by hirer/owner,this clause provides 50% liability of price after deducting installments already paid.

HIRE-PURCHASE AGREEMENTS (HPAs)

1. The owner is unwilling to look to the purchaser to recover the balance and the financier who pays balance undertakes the recovery.so,goods purchased by financier/dealer and they obtain an HPA from the customer under which latter becomes owner after paying all installments and exercising option to purchase on a nominal purchase.
2. in other forms,goods purchased by customers,in consideration of executing a HPA and allied docs in,remains in possession; subject to liability to pay amt. paid by the financier.
• financier obtains an HPA which gives him the license to seize goods if the customer doesn't adhere to the HPA.
3. guarantor also signs agreement as a surety

stamp duty as agreement under Article 5 of Indian stamp act,1899 and registration is optional.

HIRE-PURCHASE act,1972

received president's assent on 06/1972 and was to come in force on 01/09/1973 but operation postponed sine die by a notification.

provisions still provide guidance and areas to cover legally such as:

• every agreement to be in writing and signed by all parties thereto
• an HPA shall be void if above not complied
• if hire-purchase is associated with a contract of guarantee,it shall be signed by surety also, if not so, voidable at the owner's option.
• important points for contacts:
• stating the following-
• price of goods
• cash price/purchase price
• date of agreement commencement
• number/amt./date of installments and person to whom payable
• goods to identify them
• any part to be paid in other than cash/cheque,HPA to contain price description.
• above not complied,the hirer may institute a suit for getting the HPA rescinded by the court as it thinks fit.
• if 2 single contracts don't constitute HPAs then they can be construed as 1 HPA made @ time of last agreement.

• warranties/conditions to be implied in HPAs:
• notwithstanding contract,implied warranty-
• hirer shall have/enjoy goods' quiet possession
• goods free from charges/encumbrances in favor of a 3rd party @ passing of property.
• implied conditions
• on the owner's part of him having the right  to sell when property passes.
• goods to be of merchantable quality,but no such condition implied by virtue of this clause-
1. defects which the owner couldn't have been aware of @ agreement
2. defects specified in agreement
3. where the hirer examined goods/sample/defects which must have been revealed by examining.
4. second hand goods and agreements contain statement-
• The hirer made known to owner purpose of goods
• for antecedent negotiations,purposes known to negotiators and goods are reasonably fit per the implied condition.
• goods let by reference to sample
• owner's implied condition that bulk will correspond with sample
• The hirer will have a reasonable opportunity of comparing
• goods let by description,implied condition of goods corresponding with it; insufficient if bulk corresponds with sample, it shall also correspond with description.
• The owner is not entitled to rely on any provision excluding/modifying any implied condition,unless he proves before agreement was made, provision brought to the hirer's notice and effects explained.
• nothing to prejudice another enactment operation whereby any condition/warranty implied.

• hirer to purchase anytime with rebate:
• during agreement continues and after giving the owner not less than 14 days written notice,complete purchase by paying owner price/balance reduced by rebate calculated per agreement.
• rebate is normally 2/3rds of hire-purchase charges proportionate to price not due to HP charges.
• HP charges=difference in price and cash price
• ensured that provisions shall have effect notwithstanding contrary in agreement but where term entitled the hirer to a rebate hirer than mentioned above,then agreement prevails.

• hirer's right to terminate agreement
• normally per agreement,the hirer may terminate before final payment is due and after giving the owner written notice of not less than 14 days along with re-delivering/tendering goods/tendering payment to the owner.
• if the hirer terminates as above and agreement provides for payment on such termination,liability be normally made subject to-
• amt. paid+amt. due before termination exceeds 1/2 of HP price,the hirer is not liable to pay.
• if paid+due is less than,the hirer liable for difference between total and 1/2 or sum in agreement,whichever is LESS.
• nothing above to relieve the hirer from liability of hire accrued before termination.
• any provision which confers termination right on the hirer before full payment is excluded/restricted,liability in addition to imposed by agreement is imposed on hirer because of termination shall be void.
• nothing shall prejudice the hirer's right to terminate otherwise than by early termination clause.

• hirer's right to appropriate payment w.r.t 2/more agreements:notwithstanding contrary agreements,entitled for payments not sufficient to discharge total amt. to appropriate sums towards satisfaction of sums due under any 1 agreement. if he fails to appropriate, assumed towards agreements in the order they were entered into.

• assignment/transmission of hirer's rights/interest-
• The hirer may assign his right,title and interest with the owner's consent or without consent if consent is unreasonably held.
• except otherwise provided,no payment/consideration required by the owner for consent and if such required, deemed unreasonably withheld.
• On the hirer's request,the owner fails to give/refuses consent,the hirer may apply to court (having jurisdiction to entertain such a relief suit) for order declaring owner's consent has been withheld.
• condition of granting consent,the owner may stipulate that all defaults be made good and require hirer/assignee to execute,deliver an assignment agreement,in owner approved form without affecting hirer's personal liability.
• assignee agrees with the owner to be personally liable for remaining installments and to perform/observe all stipulations/conditions during term residue along with indemnifying hirers for such liabilities.
• above passed by law to the hirer's legal representatives for complying with the agreement.

• hirer's obligation to comply with agreement
• pay hire
• comply with agreement terms
• care for goods
• in the absence of a contrary contract:
1. as a man of ordinary prudence would under similar circumstances
2. not responsible for loss,destruction,deterioration if cared for as above
• liable for compensation for damage caused by failure to take care
• goods' use not a/c to agreement,liable for compensation for damage during such use.
• to give info of goods' whereabouts
• by virtue of agreement,the hirer has to keep goods in his possession/control,on the owner's written request, inform the owner of the goods' location.
• Hirer fails to give info without reasonable cause within 14 days of notice receipt, fined <₹200.

• HIRER' RIGHTS in case goods seized by owner
• The hirer may recover from the owner, amt. by which HP price falls short of aggregate of the following:
• HP price paid upto seizure
• value of goods @ seizure date which is best price reasonably obtained by owner less aggregate of following:
1. reasonable expenses by the owner for seizing
2. amt. expanded on storage,repair and maintenance
3. expenses of further selling/disposing
4. for payment of arrear taxes/dues for which the hirer was liable
• The owner fails to pay within 30 days from notice service, interest @12% p.a. from expiry of 30 days.
• The owner sold goods seized,the onus of proving price as best price lies upon him.

• owner's right to terminate agreement for default in payments/unauthorised act/breach of express condition-
• hirer makes 2/more defaults,subject to S.21 of act and after giving written notice of not less than:
• 1 week if hirer payable @weekly/lesser intervals
• 2 weeks in other cases
• if hirer pays/tenders hire in arrears+int. Before the expiry of time above,the owner is not entitled to terminate.
• The hirer acts inconsistent with agreement/breaks express conditions clearly triggering termination subject to S.22.
• OWNER'S RIGHTS ON TERMINATION
• retain already paid hire and recover due arrears subject to S.17
• forfeit initial deposit subject to S.10 and agreement
• subject to S.17/20 and contrary contracts,enter the hirer's premises and seize goods.
• subject to S.21/22,recover possession by app under S.20 by suit
• without prejudice to S.14(2)/15 to recover damages for non-delivery,from termination to delivery/seizure.

FAMILY SETTLEMENT

per halsbury's laws of England:

family arrangement is agreement amongst family members,generally/reasonably for family's benefit by compromising doubtful/disputed rights or by preserving family property/peace/security by avoiding litigation and saving honor.

(usually embodied in a deed)

court considers family interest;matters potentially fatal to transaction between strangers are not objections to such arrangements.conversely,legally enforceable contracts may be negatived if parties are family members.

accepted by indian courts and the supreme court has leaned on upholding such a concept for equal wealth distribution.social justice will be administered and strife/hatred/bad blood may be avoided.

FAMILY SETTLEMENT ESSENTIALS

special equity applicable and proceeded from error of all parties in mistake/fact w.r.t their rights.

In Kale v. Dy. Director of Consolidation, AIR 1976 SC 807 the Supreme Court has laid down the following propositions having a binding effect:

1. bona fide-fair/equitable division or allotment
2. voluntary and not induced by fraud,coercion or undue influence
3. may be oral so no registration necessary
4. regstd. if written terms and not a mere memorandum for record/info post-arrangement.
5. members/parties must have some antecedent title,claim or interest or possible claim acknowledged by parties.
• if 1 has no claim but another relinquishes all claims/titles in favor of the former then an antecedent title must be assumed and arrangement upheld.
• [CIT v. R. Ponnammal, (1987) 164 ITR 706 (Mad)]
6. even in bona fide disputes not involving legal claims,settled by fair/equitable arrangement will be binding on the parties.

FAMILY SETTLEMENT ENFORCEABILITY

for family benefit can be enforced in a court of law. but before court does so,it must be shown an occasion for effecting a family arrangement and that it was acted upon.

[Lakshmi Perumallu v. Krishnavenarnma, AIR 1965 SC 825 : 1965 (1) SCR 261.}

check out ch-5 of ICSI study material at the given link for specimen formats of deeds, agreements and illustrations:

https://www.icsi.edu/media/webmodules/Drafting_Pleadings_Appearances_22112022.pdf

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