This presentation captures the Legal & practical aspects of contract management. It primarily captures the Indian legal provisions about formulating a contract by touching upon the various essential elements of a contract. Further it goes on to explain the efficient contract management process by explaining the (A) Structure of the contracts; (B) Categorization of contracts; and finally (C) Standardization of contracts. The Presentation was delivered at one of the professional development program organized by Institute of Company Secretaries of India.

1. Som Bathla
FCS, LLB
Company Secretary & GM-Legal- ADM (India)
Contracts-
Legal & Practical
Aspects

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3. 3
Do we need a Contract?
Yes!
But, what are the key objective of
having a Contract?

4. Key Objectives:
•Contract is at the heart of most business
dealings-because:
•Records business/commercial understanding
•Stipulates scope and obligation of Parties
•Dispute Resolution:
• Court cannot read minds- written agreement is judged
objectively.
•Indemnification obligations- if default.
•Claim damages or seek specific performance.
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5. 5
What is
Contract?

6. Contract-meaning?
As per Dictionary :
“An agreement with specific terms between two
or more persons or entities in which there is a
promise to do something in return for a valuable
benefit known as consideration”
As per Indian Contract Act, 1872:
Sec. 2(h)- "An agreement enforceable by law is a
Contract.”
Sec.2(e)- “every promise or set of promises forming
consideration for each other, is an Agreement”
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7. *
Agreement Legal Obligation
Contract
“All contracts are agreements but all
agreements are not contracts.”
CONTRACT = AGREEMENT +
ENFORCIBILITY BEFORE LAW

8. Let’s understand the essentials of a
Contract!!!8

9. Essentials of a valid contract:
• Offer and Acceptance
• Intention to create legal relationship
• Lawful consideration
• Capacity of the parties- should be major, of sound mind, not
disqualified by law otherwise.
• Free consent – i.e. not caused by Coercion; Undue influence; Fraud;
Misrepresentation; Mistake
• Lawful object i.e. should not be illegal, immoral, against public policy,
wager
• Certainty of terms- not vague
• Possibility of performance- shouldn’t be impossible9

10. 10
Which one is better?
Oral Contract
or
Written Contract

11. Always prefer written Contract over oral agreements
As it is difficult to prove existence of Oral contract.11

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So Here it is….
The professor of a contract law class asked one of his better
students, "If you were to give someone an orange, how would
you go about it?"
The student replied, "Here's an orange."
The professor was outraged. "No! No! Think like a lawyer!"
The student then replied, "Okay. I'd tell him
`I hereby give and convey to you all and singular, my estate and
interests, rights, claim, title, claim and advantages of and in,
said orange, together with all its rind, juice, pulp, and seeds,
and all rights and advantages with full power to bite, cut, freeze
and otherwise eat, the same, or give the same away with and
without the pulp, juice, rind and seeds, anything herein before
or hereinafter or in any deed, or deeds, instruments of whatever
nature or kind whatsoever to the contrary in anywise
notwithstanding...'"

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15. Okay! let’s discuss- How to
Efficiently manage our contracts
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16. 16
Efficient
Contract Management

17. CONTRACT MANAGEMENT- Actions Points:
I. Structuring of Contract-scheme/flow of
contract
II. Categorization of Contracts- based on
certain criteria
III.Standardization of Contracts.
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18. I. STRUCTURING/SCHEME OF CONTRACT:
Parties to Contract
Preamble
Scope of the Contract
Default/Termination
Boiler plate Clauses
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19. Structuring/Scheme- FLOW OF CONTRACT:
PARTIES TO CONTRACT
PREAMBLE
SCOPE- BUSINESS ARRANGMENT/UNDERSTANDING.
Obligation of Both Parties-Product/service delivery.
Consideration/Invoicing/payment
Representation and Warranties
DEFAULT:
Termination- by notice/on default.
Indemnification.
Liquidated damages
BOILERPLATE CLAUSES:
(refers to standardized language in contracts)
SCHEDULES TO THE AGREEMENT, IF ANY
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20. Few Examples of Boilerplate Clauses
• Waiver
• Severability
• Notice
• Relationships between the Parties
• Assignment
• Force majeure
• Confidentiality
• Announcements.
• Counterparts.
• Arbitration
• Choice of law
• Jurisdiction 20

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Payment of proper Stamp duty.
Ensure stamp duty is affixed as per Indian stamp
act on agreements- based on place of execution.
Instruments not duly stamped-inadmissible in
evidence in Courts.
Not duly stamped instrument may be impounded
by the authorities under Stamp Act.

22. II. CATAGORIZATION OF AGREEMENTS:
A. Key Business Contracts
B. Business-support routine contracts
C. Transaction Documents (Inorganic growth
phase)
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23. II-A KEY BUSINESS/COMMERCIAL AGREEMENTS:
• Distributors/Dealer Agreement
• Sale/Purchase Contracts
• Business- Job-work Agreements.
• Service Level Contracts – in case of service companies
i.e. Software/IT companies.
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24. Key precautions in business contracts:
• Most important organic mode business growth
document.
• Commercial/business involvement is must to make
you understand the real objective.
• Meticulously understand the whole transaction
process and capture minute details.
• Make indemnification very strong- as stakes could be
very high.
• Choose better recourse in case of default- liquid
security (Guarantee) vs. litigation?
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25. •II-B- SUPPORT RELATED ROUTINE CONTRACTS:
• Lease Agreements for residential/warehousing
purposes.
• Contracts for hiring manpower/labour
• Third Party services contracts
• Consultant’s appointment
• Broker/Agent appointment
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26. •Key precautions in support contracts:
• Don’t pay advance or pay bare minimum (lease
contracts)
• Keep your stake minimum- Pay after work.
• Cost-benefit analysis: Don’t think of litigation as
preferred strategy here, as stakes might be low.
• Ensue the continuity of benefits, even if the service
provider moves away/sells out (like lease contracts)
• Registration requirements..
• Obligations to be completed after termination, which
arose during validity of agreement.
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27. •II-C TRANSACTIONAL CONTRACTS:
• Asset Purchase (Itemized sale)
• Asset Purchase (Slump sale)
• Joint venture Agreement
• Share Purchase Deal
• Private Equity deal/Strategic investment
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28. Key precautions in transactional contracts
• Most important –inorganic growth oriented transaction.
• Stakes really very high- engage professional lawyers/tax
advisors.
• Structuring most important- else you may end up in a
pandora box of liabilities –i.e. asset purchase/equity/JV
• Lots of uncertainties- as target is outside party- Rely on
put covenants based on due diligence findings.- i.e.
conditions precendent
• Ensure change of control provisions are duly addressed.
• Look at the license/permissions validity and
continuance…
• JV-Ensure that you get enough management rights-
directors/reserved matters.
• FDI policies compliances- depending upon sector.
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29. III. STANDARDIZATION OF CONTRACTS:
Pick the best clauses from different sources and keep at one
place.
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30. Analyse the number and frequency of various contracts
running around.
Prioritize the standardization project i.e. maximum the
number & frequency- do it first.
Contracts standardized well in time, will free you up for
other important activities.
Periodically update the standard contract- based on new
business arrangement/legal update.
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31. Practical approach:
*Divide the contracts in few categories depending upon
the industry.
*Don’t prefer vetting of other persons contract, rather
give them your formats.
*Standardize your contracts, as much as possible.
*Always consider the legal recourse/remedy in mind, if
default, while drafting.
*Be mindful of the enforceability of provisions, as per
extent laws.
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“Practice does not make perfect…..
To be continued….

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… only perfect practice makes
perfect”- Vince Lombardi

34. Questions?
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35. Thank you
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