DRAFTING OF
BUSINESS AGREEMENTS
INTRODUCTION
Importance
of drafting and conveyancing for a company could be well imagined as the
company has to enter into various types of agreements with different parties
and have to execute various types of documents in favour of its clients, banks,
financial institutions, employees and other constituents.
Various
Business Agreements like;
|
Term Sheet/Letter of Intent
|
Gift Deed
|
|
Memorandum of Understanding
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Exchange Deed
|
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Agreement to Sell
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Mortgage Deed
|
|
Sale Deed
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Development Agreement
|
|
Deed of Transfer
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Joint Development Agreement
|
|
Deed of Assignment
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Power of Attorney
|
|
Deed of Declaration
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Built to Suit Agreement
|
|
Conveyance Deed
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Property Management Agreement
|
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Deed of Apartment
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Due diligence / Title Report
|
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Lease Deed
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Inspection Note
|
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Leave and License Agreement
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Public Notice
|
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Release Deed
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Letters / Notices
|
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Non-Disclosure Agreement
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Fit out Agreement
|
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Confidentiality Agreement
|
Employment Agreement
|
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Indemnity Bond
|
Consultant / Retainership
Agreement
|
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Brokerage Agreement
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Facility Management Agreement
|
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Service Agreement
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LLP Deed
|
|
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Partnership Deed
|
WHY
KNOWLEGDE OF DRAFTING IS IMPORTANT?
(i)
For obtaining legal consultations;
(ii) For carrying out documentation
departmentally;
(iii)
For interpretation of the documents.
With
the knowledge of drafting and conveyancing, better interaction could be had by
the corporates while seeking legal advice from the legal experts in regard to
the matters to be incorporated in the documents, to decide upon the coverage
and laying down rights and obligations of the parties therein.
Knowledge
in advance on the subject matter facilitates better communication, extraction
of more information, arriving on workable solutions, and facilitates settlement
of the draft documents, engrossment and execution thereof. Knowledge of
drafting and conveyancing for the corporates is also essential for doing
documentation departmentally. Only a Business man/ Entreprenuer can find out
the purpose behind such drafting with all facts known and judging the relevance
and importance of all aspects to be covered therein.
A
BRIEF VIEW OF WHAT IS DRAFTING?
Drafting
may be defined as the synthesis of law and fact in a language form
The
process of drafting operates in two planes: the conceptual and the verbal.
Besides seeking the right words, the draftsman seeks the right concepts.
Drafting,
therefore, is first thinking and second composing.
Drafting,
in legal sense, means an act of preparing the legal documents like agreements,
contracts, deeds etc.
Drafting of legal documents is
a skilled job. A draftsman, in the first instance, must ascertain the names,
description and addresses of the parties to the instrument. He must obtain
particulars about all necessary matters which are required to form part of the
instrument. He must also note down with provision any particular directions or
stipulations which are to be kept in view and to be incorporated in the
instrument. The duty of a draftsman is to express the intention of the parties
clearly and concisely in technical language. With this end in view, he should first
form a clear idea of what these intentions are.
When
the draftsman has digested the facts, he should next consider as to whether
those intentions can be given effect to without offending against any provision
of law. He must, therefore, read the introductory note, or, if time permits,
the literature on the subject of the instrument. A corporate executive,
therefore, must note down the most important requirements of law which must be
fulfilled while drafting complete instrument on the subject. Validity of
document in the eye of law cannot be ignored and at the same time the facts
which should be disclosed in the document cannot be suppressed. Nothing is to
be omitted or admitted at random. Therefore, knowledge of law of the land in
general and knowledge of the special enactments applicable in a particular
situation is an essential requirement for a draftsman to ensure that the
provisions of the applicable law are not violated or avoided. For example, in
cases where a deed to be executed by a limited company, it is necessary to go
into the question as to whether the company has got power or authority under
its memorandum to enter into the transaction. A limited company can do only
that much which it is authorized by its memorandum. Further, a company being a
legal entity, must necessarily acts through its authorized agents. A deed,
therefore, should be executed by a person duly authorized by the directors by
their resolution or by their power of attorney
DRAFTING OF BUSINESS
AGGREMENTS:
Business
agreements include:
1. Share Purchase Agreement
2. LLP agreements like
registration of LLP or conversion of an entity into LLP, and many more
Going
step wise, we need to first understand that what the meaning of business
agreement is;
“A
negotiated and usually legally enforceable understanding between two or more
legally competent parties”
In
other words Business Agreements is a legal contract binding two or more
parties.
We
encounter various agreements in our daily business; the business environment is
full of agreements between businesses and individuals. While oral agreements
can be used, most businesses use formal written contracts when engaging in
operations. Written contracts provide individuals and businesses with a legal
document stating the expectations of both parties and how negative situations
will be resolved. Contracts also are legally enforceable in a court of law.
Contracts often represent a tool that companies use to safeguard their
resources.
The
content of an agreement may be Mandatory or Discretionary,
Agreements can be classified
as; A level, B level and C level,
Comment: This Pyramid represents the
Quantity of agreements formed, which is inversely proportion to the Quality of
such agreements.
A
Level Agreement: They are entered into the least and thus in terms of quality
they should be “THE BEST”
B
Level Agreement: They are entered into more that A Level and thus their quality
should be “BEST”
C
Level Agreement: They are entered into the maximum of rest and their quality
should be “MODERATE”
Examples of:
A
Level Agreement: Share Purchase Agreement, Joint Venture Agreement, Etc.
B
Level Agreement: Letter of Appointment, Service agreements, Rent Agreements,
Etc.
C
Level Agreement: Invoice (GST invoice), Etc.
WHY WE MAKE THIS ABC ANALYSIS?
ABC
classification is required to structure the agreement in standard manner, so
that execution becomes simple, moreover, internal control can be framed and
utilized. This also helps to observe the Monitoring in an effective manner.
PROCESS OF DRAFTING
This
tree depicts the procedure to followed while to start drafting,
Beginning
with the roots first check whether you have the authority to sign agreements or
not
This
involves:-
1. Objective of agreement
2. Process/ flow/ major work
involved
3. Major operative steps
4. Flow chart timeline wise
Branches
have risks like “What is the delivered work be not be compensated?”
NOTE THAT: Often, people interchange the
words Contract with Agreements or Vice-versa, but they both differ in following
manner:-
|
S.No.
|
Basis
|
Contract
|
Agreement
|
|
1.
|
Enforceable by
law
|
Yes
|
No
|
|
2.
|
Legal
requirements
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Mandatory
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Not mandatory
|
|
3.
|
Issues involved
|
Important
issues where a promise cannot suffice
|
Generally made over
small things
|
Further
all Contracts are Agreements but all agreements are not contract.
SOME DO’S
1.
Reduce the group of words to single word;
2. Use simple verb for a group
of words;
3.
Avoid round-about construction;
4.
Avoid unnecessary repetition;
5.
Write shorter sentences;
6.
Express the ideas in fewer words;
7.
Prefer the active to the passive voice sentences;
8.
Choose the right word;
9.
Know exactly the meaning of the words and sentences you are writing; and
10.
Put yourself in the place of reader, read the document and satisfy yourself
about the content, interpretation and the sense it carries.
THE UTMOST IMPORTANT RULE OF
DRAFTING
“CLEAR WRITING BEGINS WITH
CLEAR THINKING”
For
that:
1. Know the subject matter
2. Indulge in bundle of research
3. Understand the objective of
parties
4. Analyze the implication of each
contractual term
5. Use simple and clear language
And never forget
to review your work,
The types of review are
1. Colleagues and supervisors
review
2. Management review
3. Opposing counsel review
CRUX:
1. Listen to your management
2. Understand the deal
3. Use your knowledge wisely
4. Draft the best document that
you can
5. Read it once or twice and then
get it review by your seniors
6. Openly welcome the feedbacks
and improve your work
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