Drafting an Effective Contract - a Vendor/Supplier's Perspective

What is a contract ?

Proposal/Offer – Intent/willingness to do or abstain from doing something and to obtain assent from the other party.

Proposal in words, written or spoken are considered as implied proposals/offer.

IBP Co. Vs. Ramashish Prasad Singh (2006) Offer vs. Invitation to Treat [McPherson vs. Appana, SC 1951] Promise – When the other party accepts the proposal it becomes a promise. Bharat Petroleum Corpn. Ltd. Vs. Great Eastern Shipping Co. Ltd. (2008) Consideration – Monetary / Non-Monetary. Keshab Chandra Nayak vs. Laxmidhar Nayak , AIR 1993

A simple, fast and inexpensive compliance management tool designed for small and medium business

OfferLegal

Capacity Acceptance Consideration Agreement

Agreement Enforceable by Law Contract

Some important concepts:

Essentials of a valid Contract


Free consentCompetencies of parties to contract – [Signatories

in the contract have the authority/competency

to sign on behalf of the company.]Consideration must be lawful

Object must be lawful object

Not expressly declared to be void – [Contract to provide 20 child labours in a factory for 3 months]

Basic clauses to draft a contract

Identifies the parties to the agreement. The date of the agreement The place of formation and the addresses of place of business of the

contracting parties. All parties intended to be bound, their legal status, place of business, and

third party beneficiary. Title of the contract.


Recitals are declarative statements but not binding provisions of the contract.Provide the basic text, structure, and context of the transaction.

Basic clauses to draft a contract

Provides structure of the transaction broadly

defining the scope and the method of payment, time of completion, the

main matter of the contract.


It defines terms that appears in different parts

of the agreement.

Key commercial clauses

Confidentiality terms


Termination –

For Cause – Cure Period, Notice PeriodFor Convenience – To be avoided by a vendor/supplierMutual

Intellectual Property Rights

Limitation of Liability

Indemnity and risk allocation

[State of Orissa vs. United India Insurance Co. Ltd,

SC 2002]

Key legal clauses

Governing Law and Jurisdiction


Conciliation

Arbitration

An Arbitration clause in a contract is very crucial for dispute resolution.

Litigation

Dispute Resolution Mechanism –

Restrictive Covenants

Non-Hire


Non- Compete

Non-Solicit

Commercial terms of a contract

Service Level Agreements (SLA) and SLA credits


Price and Payment terms –

Invoice requirements, Billing schedule,

Payment schedule, Currency

Tax terms

Productivity terms

Technical clauses

Data protection


Delivery of goods or services

Disaster Recovery Plan

Technology Updation

Business Continuity Plan (BCP)

Other significant terms


Developing contract exit strategy

Insurance related terms

Audit terms Negotiation

Conclusion

• Critical to have a consensus ad idem to avoid future confusion and potential disputes.

• Identify your organizations risks and the appetite.

• List down the areas which are non-negotiable.

• Educate the key stakeholders about organizations strategy on contracts.


Drafting an Effective Contract - a Vendor/Supplier's Perspective

Law

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