Corporate Contracts plays a vital role in the functionalities of business entities and various corporate bodies, it enables to captivate with other corporate bodies. Knowing the legal entanglements and complying with the provisions of Company law is crucial when entering into agreements. it is legally binding agreement between two or more individuals, entities or groups. This article enlightens the key considerations which should be considered while forming the corporate contracts to ensure the fulfilment of all regulations related to the Company Law.
The following points are the key considerations to form corporate contracts with complying the Provisions:
1. The Authority and Capacity to enter into contracts:
As mentioned in the provision of The Indian Contract Act,1872, to enter into contract there must be two or more individual or body corporate or entities. To complying such provision before entering into contracts, it is important to ensuring that the company is in legal capacity to enter into contracts. The Articles of Association and Memorandum of Association gives such authority to company to enter into contracts according to its provisions and also has to ensure that person acting in concern has authority to act on such contracts.
2. Company Objects and its Compliance:
Any company can enter into activities which is authorized by its Memorandum Of Association. If Company acts or violates such provision mention in the MOA will considered as ultra vires act which will result into void contract.
3. Clarity and terms:
The contract should drafted properly station all the conditions, rules, provisions and terms in appropriate language which not be ambiguous. All content should be in such manner that does not conflict with the meaning of contract. The Objective of contract must be fulfilled and both parties shall verify it carefully. The content and conditions in contract must be competent with the law and does not violate any provision of the law otherwise it will be void.
4. Legality and Consideration:
The Indian Contract Act,1872, elaborates that the consideration is must in the framing of contract which means both parties should get something in return or some value for the contract. The contract should abide the law and all provisions of law should be followed accordingly. It should not harmful to the public policy and morality. There are various conditions which must have to be followed by both parties while framing contract such as, ‘there should be legal consent of the parties, Both parties must be major, Having sound mind, Legally competent to enter into contracts, should not declare as insolvent or bankrupt by the court or authority’. By complying with all provisions of the law the contract becomes valid.
5. Confidentiality in Contract and Disclosure:
While making or drafting the contract both the parties shall ensure to protect the price sensitive information mentioned in the contract, they should ensure not to disclose any internal sensitive information. The information only related or necessary to the contract and required has to be disclosed.
6. Breach and Termination of contract:
While drafting the contract there must be mentioned the procedure which has to be followed by both the parties to terminate the contract after breaching. Contract should be terminated as stated procedure in the contract or by the legal procedure mention in the statutes. Meanwhile the conditions mentioned in the contract can be terminated by any party or by residue of breach.
7. Jurisdiction and Review of Governing Law:
The Governing law and jurisdiction which shall be applied to resolve any dispute arised in the parties shall be specifically mentioned in the draft of the contract. It ensures the right interpretation and enforcement of contract and specially while entering into international contracts.
8. Indemnification and Limitation of Liability:
The indemnification clause will help to contradict with the third-party claims arised from the contracts. The liability should be decided by the parties before making the contract and should be liable to the extent of their claimed liabilities as to be mentioned in the contract.
By considering the above points, individuals, body corporates, entities can draft their contracts which will be legally binding and complying with all the provisions of the law. The Corporate Contracts are crucial part of business operations, and it is critical to enforceable and validate by the company law. Such contract will protect the interest of parties entered into contract and others. It will be considered as forecasting action by the parties for running the smooth relationship which is based on the morality and by taking legal advice by the professional will make it well complied and trustworthy. Overall it will lead company towards Corporate Governance and success.