Any person who thinks to expand its business, needs to have very good business relation. Business relations grows when there are clear terms and conditions finalised between the two and both of two parties agree to adhere to such terms.

So for any business deal, the parties to such business must be clear and that can only be possible when there is having a written agreement between them. Such an agreement between the two is known as: Business Agreement/ Commercial Agreement/ Trade Agreement.

These Commercial Agreements/ Trade agreement are any contractual arrangement between the parties concerning their trade relationships. Trade agreements may be bilateral or multilateral—that is, between two or more than two.

In any agreement there a no. of litiguities and terminologies, which needs to be taken care of while drafting of an agreement. And drafting comes with an experience. So any new business should adhere to the advice of legal consultants before drafting any business or trade agreements. Since, agreements carry the terms for a longer period hence these are the agreements only which lead a company/ business to heights.

Entering into a contractual business relationship with another party is a serious task and should only be entered into after giving real thought about the relationship we want with other party. Hence, one must not fall into the trap of entering into agreements haphazardly or with complete trust of the other party. Even if it’s a family member, the business contract should protect our own business interests first. Therefore, one must familiarize with some of the guiding points on how to write a business contract.

Things to be kept in mind while drafting an agreement:

1. Agreements must be in Writing: Avoid Oral Agreement and always have it on papers which should be duly stamped and signed.

2. Language to be used: Since, Most of the time the language used is “English” as people thinks that having English Language in agreement is necessity. Should use the language which is best comfortable.

3. Detailed Agreements: Every term and conditions should be in detail and there must not be any room for ambiguity so that in case any dispute arise, the things must be clear to the parties. As disputes often arise over unclear terms or provisions.

4. To keep Confidentiality: Often when entering a business contract, the other party will gain access and insight into your business practices and possible trade secrets. If you do not want the other party sharing this information, you should include a clause that binds the other party from disclosing your business information or information included in the contract to other parties.

5. To include the clear terms of Termination

6. State Laws Governing the Contract: Contracts can stipulate which state’s laws will govern in the event there’s a dispute. If the other party is located in another state, you should include a clause that states which state laws will govern. If you don’t, and there’s a dispute, there may be a whole other legal argument (which costs more money) about which state’s laws should be applied to the contract. Avoid this headache and agree to it at the inception of the contract, when both parties are agreeable.

For any agreement, following principle have to be kept in mind:

1. Simplicity

2. clarity,

3. futuristic,

4. Options

5. Definitions

6. Straight & small sentences

Besides the stated above, there are certain OTHER PROVISIONS which need to be complied with while entering into any Business/ Contract agreement. These are:

  • Use of Stamp Papers (Stamping): All agreements need to be made on a stamp paper. Stamp Duty applicable on different types of agreement vary from state to state.
  • Attestation or Witnesses: Certain agreements must be attested by two witnesses under Indian law.
  • Notarization: In India, notarization of an agreement refers to attestation by an officer called a Notary Public.
  • Registration of Agreements: Although registration of the agreements is not mandatory under the law, it is advisable to register the agreement to give it legal validity and enforceability in a court of law.
  • Apostille by Indian Embassy: All Foreign Agreements are executed in a country other than India needs to be legalized by a process known as apostille where the agreement is attested and verified by the Indian Embassy/consulate in that country.

CONCLUSION: Once you’ve signed a contract you may not be able to get out of it. So we can conclude with the words that So while entering into any contract/ or business deal, there must always be a clear picture about the contract goal in minds of the both of the parties so that there should not be any business loss to any person and if any dispute arises, the person must be in a position to handle it gently.

Disclaimer: The information contained in this write up is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Authors recommend that professional advice is sought before taking any action on specific issues. The author can be however contacted for further clarification at 99145-58709 or via mail at [email protected]

Author Bio

Qualification: CS
Company: Mohit Saluja & Associates
Location: JALANDHAR, Punjab, IN
Member Since: 13 May 2017 | Total Posts: 63
Hi, This is CS Mohit Saluja, Graduate in Law and Post Graduate in Commerce & a Fellow member of the Institute of Company Secretaries of India, New Delhi, having more than 10 years of stringent experience in the field of Secretarial and RBI Matters, Company Law Board (CLB), Regional Director (RD) View Full Profile

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March 2021