Indore (Madhya Pradesh): The common belief is that contracts are used for sophisticated business transactions and that ordinary people have no use for them. Shattering this myth, lawyer and legal counsel Preena Salgia Sethi said that an average man concludes an average of 10 contracts per day.
Speaking to a meeting of the Indore Management Association’s HR forum, Sethi said buying vegetables, hiring helpers, using social media, eating out are all contracts that people conclude daily and that they can be written or express. She was speaking on the subject “Negotiating and drafting contracts: common mistakes and how to avoid themes”.
In her address, Preena covered various areas of contracts and she suggested how to be smart while performing them. She said parties often find later, when disputes arise, that some of the clauses included in the agreements they were based on are in fact not enforceable under the law. For example, certain non-competition and limitation of liability provisions. Thus, it is important to take correct legal advice before executing such contracts. The different components of a contract and their purpose were also discussed in detail during the session. Such as indemnities, declarations and guarantees, conditions precedent, etc.
Preena said that many clauses in the contracts, which do not seem important, are simply copied and pasted from previous contracts. Such clauses are often called “master clauses”. But such a cut and paste approach has the potential to undermine the interests of the parties. Their lawyers should also pay attention to these clauses. They include dispute settlement, force majeure, waiver, etc. clauses.
In executing the documents the correct manner is also essential in determining their enforceability. Many documents must be registered by law. If these documents are not registered, the courts cannot help
part to enforce them.
Likewise, payment of an adequate stamp duty on agreements is also necessary to make them enforceable, although this is a curable defect. An important clause in any contract is that of dispute resolution, which is often overlooked. The parties blindly choose arbitration as a method of settling disputes.
While arbitration has its advantages, it is not necessarily an appropriate remedy in all business relationships. Its adequacy would depend on the nature of each contract, taking into account factors of cost, time, convenience and efficiency.
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Posted: Saturday September 25, 2021 11:18 PM IST