58 Corporate And Commercial Agreements

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58 Corporate And Commercial Agreements

  1. 1. Corporate and Commercial Agreements Drafting Guidelines,Forms and Precedents
  2. 2. Corporate andCommercialAgreements Drafting Guidelines,Forms and Precedents RODNEY D. RYDER
  3. 3. 2005 EditionISBN : 81-7534-444-X© PublishersNo part of this publication can be reproduced or transmitted in any form or by anymeans, without prior permission of the Publishers.Published byUNIVERSAL LAW PUBLISHING CO. PVT. LTD.C-FF-1A, Ansal’s Dilkhush Industrial Estate,G.T. Karnal Road, Delhi-110 033Tel : 27438103, 27215334Fax : 91-11-27458529E-mail (For sales inquiries) : sales@unilawbooks.comE-mail (For editorial inquiries) : edit@unilawbooks.comWebsite : www.unilawbooks.comRecommended citation: Corporate and Commercial Agreements, Rodney D. Ryder,(New Delhi: Universal Law Publishing Co. Pvt. Ltd., 2005)This publication is being sold on the condition and understanding that theinformation, comments, and views it contains are merely for guidance and referenceand must not be taken as having the authority of, or being binding in any way on, theauthor, editors, publishers, and sellers, who do not owe any responsibility whatsoeverfor any loss, damage, or distress to any person, whether or not a purchaser of thispublication, on account of any action taken or not taken on the basis of thispublication. Despite all the care taken, errors or omissions may have creptinadvertently into this publication. The publishers shall be obliged if any such error oromission is brought to their notice for possible correction in a future edition. In thecase of binding defect, misprint, missing pages, etc., the publishers’ liability is limitedto replacement of the defective copy within one month of its purchase by a copy of thesame edition or reprint. All disputes are subject to the jurisdiction of competent courtsin Delhi.Computer Typeset at Aesthetic & Printed at Taj Press, New Delhi.
  4. 4. PREFACE The text is aimed at assisting lawyers, legal counsel and managers in draftingand structuring commercial agreements. The forms and precedents used in thistext are examples of drafting and should be used as a guide. Counsels are advised to structure their agreements based on the drafts, butit is also important to create drafts afresh using the forms and structure providedin the text. This prefatory note also contains acknowledgements to persons, institutions,governments and companies who have contributed in making the text richer inmeaning and experience. My family and friends, I can never thank enough! I amdeeply indebted to them. My eternal gratitude to the three ‘forces’ in my life,Mummy, Gunjan and Podgie. This text is dedicated to them. A book, especially areference text, can never be the work of a single individual. I would like to thankall who made this effort possible. My gratitude to my family, my parents who havebeen the most solid rock on which our life’s foundations have been built. Myparents-in-law for believing in me and supporting me at each step of the way.Gaurav for his support and encouragement. Gunjan, without whom there would beno purpose and perhaps no light in my life. My brother, for always thinking thatthe effort was worth it and for believing in me. K.J., for walking with me all theseyears and never stopping. To ‘College’ [St. Stephen’s College, Delhi] I owe a great debt. To those whotaught me the art of the essay, Dr. David Baker, Dr. Upinder Singh, Dr. S. Menon,Ms. T. Suhrawardy, Ms. S. Sharma-Luthra, Dr. R. Wanchoo and Prof. P.S. Dwivedi.My special thanks to Dr. Anil Wilson, who conceived of and has mentored theSchool for Legal Studies and always has the time for new ideas. My dear friends and colleagues at National Law School of India University(NLSIU) and the National Academy of Legal Science And Research (NALSAR).Special thanks to Prof. (Dr.) Ranbir Singh, Prof. A. Jayagovind, Prof. V.C.Vivekanandan, Prof. T. Ramakrishna, Prof. Ghanshyam Singh and Prof. V. Nagraj,all the institutions who have invited me and been a part of the ‘process’ over theyears, The International Bar Association (IBA), The Inter Pacific Bar Association(IPBA), The All India Management Association (AIMA), The Institute of CompanySecretaries of India (ICSI) and Institute of Chartered Accountants of India (ICAI).Special thanks due, to educational institutions such as The Amity Law School, v
  5. 5. vi Corporate and Commercial AgreementsNew Delhi, National Law University, Jodhpur, Indian Institute of Management,Lucknow, Integrated Academy of Management Technology, Ghaziabad. My special thanks to my good friends in the Legal Publishing fraternity,academics, lawyers and others. It is impossible to name everyone. For their encouragement, support and personal enthusiasm, my publishersUniversal Law Publishing Co. Pvt. Ltd. For Manish who made the end product apossibility. I do hope this text is useful to all readers. I need to record my gratitude andappreciation to all who made this possible. Finally I would say that although I have had a great deal of assistance fromvarious quarters, the mistakes and omissions in this text are entirely my own.Organisations are advised to treat this text as merely a starting point fordiscussion and study and not as a blue print for establishing their organisation’spolicy. Organisations should always remember that their brands are individual andunique. A careful and determined policy has to be sculpted using perhapsavailable literature and other materials. RODNEY D. RYDER rodney@preconcept.org
  6. 6. Detailed Contents vi i GENERAL CONTENTS• Preface v• Detailed Contents ix• Table of Cases xvii1. DRAFTS, FORMS, PRECEDENTS—A PRELIMINARY NOTE 22. COMPANY LAW: FORMS AND PRECEDENTS 413. GENERAL COMMERCIAL AGREEMENTS 1014. INTELLECTUAL PROPERTY 3695. FRANCHISE AGREEMENTS 5156. PROJECT FINANCE 5397. DEEDS 6608. BONDS 6799. PLEDGES 70410. ARBITRATION 71511. LEASE 72712. TRUST 76413. SOCIETY 79414. POWER OF ATTORNEY 808• Subject Index 812 vi i
  7. 7. DETAILED CONTENTS• Preface v• General Contents vii• Table of Cases xvii CHAPTER 1 DRAFTS, FORMS, PRECEDENTS— A PRELIMINARY NOTEDEED DRAFTING AND CONVEYANCING IN INDIA 2FORMS OF CONVEYANCE 3 Deeds poll 3 Indentures bilateral 3 Simple words 3PARAGRAPHS, PUNCTUATION AND CAPITALS 4FIGURES AND WORDS 4General requirements of deed of transfer 4DIVISION OF DEED 5 (a) Description of the deed 5 (b) Date 5 (c) Parties to the deed 6 (d) Recitals 13 Caution 14ORDER OF RECITALS 14FORM OF RECITALS 15 (e) Testatum 15 (f) Consideration 15 (g) Receipt 15 (h) Operative words 16 (i) Parcels 16 (j) Exceptions and reservations 19 (k) Habendum 19 (l) Covenants and undertakings 19 (m) Testimonium 20 (n) Signatures and attestation 20 Sign 21FORMS OF ATTESTATION 22 Illiterate persons 22 Delivery 22ERRORS AND OMISSIONS 23POSTSCRIPT 23ENDORSEMENT AND SUPPLEMENTAL DEEDS 23FORM OF ENDORSEMENT 23FORM OF SUPPLEMENTAL DEED 24 i x
  8. 8. x Corporate and Commercial AgreementsSTAMP DUTY BY WHOM PAYABLE 24STAMP DUTY ON ENDORSEMENTS AND SUPPLEMENTAL DEEDS 24REGISTRATION 25PRECAUTIONS 25 Rules of Construction Deeds 26NOTES ON THE INDIAN LAW OF CONTRACT 27 Introduction 27 General Concepts 28 Breach 29 Excuses for non-performance 30 Indemnity and Guarantee 30 Bailments and Pledges 30 Bona fide Purchases 31 Interpretation of Contracts and Applicable Law 31 Capacity to Contract 32 Formal Requirements 32 Written Agreements 32 Commencement 34CONTRACT DRAFTING AND CONTRACT MANAGEMENT 34 Engagement Phase 35 Analytical Phase 35 Drafting Phase 35 Execution Phase 36 Contract Administration Phase 36TYPES OF CONTRACTS 36CONTRACTS 36DATA COLLECTION DURING THE ENGAGEMENT PHASE 36 Check-list 36STANDARD CLAUSES CHECKLIST 37 CHAPTER 2 COMPANY LAW: FORMS AND PRECEDENTSTYPES OF COMPANIES 41 Public and Private Companies 41 Formation procedure (private limited company) 41PRECEDENTS • Application Form for availability of names 44 • Memorandum of Association 45 • Articles of Association 59 • Legal Due Diligence 70 • Due Diligence Report 74 CHAPTER 3 GENERAL COMMERCIAL AGREEMENTSPRECEDENTS • Contract of Employment—(For A Junior Level Employee) 101 • Contract of Employment—(For A Senior Level Employee) 104
  9. 9. Detailed Contents x i • Employee Innovation And Proprietary Information Agreement 109 • Consultancy Agreement 111 • Consulting Services Agreement 115 • Termination Clause 154 • Consultant’s Non-disclosure & Non-compete Agreement 159 • Agency Agreement 163 • Supply Contract 165 • Software Services Supply Agreement 171 • ERC Facilities Agreement 181 • Facilities Sharing Agreement 191 • Financial Collaboration Agreement 196 • Marketing Assistance Agreement 206 • Office Refurbishment Agreement 218 • Research And Development Agreement 239 • Agreement for sale made by a vendor in favour of purchaser, the purchaser to execute a mortgage deed for balance of purchase money 251 • Agreement extending the time for completion of a purchase and otherwise modifying terms of the contract supplemental to the original contract 252 • Agreement for sale of property with usual provisions 253 • Exclusive Reseller Agreement 254A GUIDE TO DRAFTING JOINT VENTURE DOCUMENTATION 271 • Joint Venture Agreement 275 • Company, Management and Project 285 • Shareholders’ Agreement 295 • Shareholders’ Agreements and the Articles of Association 316 • Share Transfer Agreement 319 • Transfer of Shares (Specimen Clause) 331 • Share Acquisition and Reconstruction Agreement 337 • Transfer of Undertaking Agreement 347 • Subscription Agreement 354 CHAPTER 4 INTELLECTUAL PROPERTYASSIGNMENT OF COPYRIGHT 369 Disputes as to Assignment 371 Infringement 371“PASSING OFF” ACTIONS UNDER INDIAN LAW 374 The history of passing off actions under English Common Law 374 Modern formulation of the law of passing off 375 Remedies 376 Proof of damage 376 Means adopted for passing off 377 Passing off in professional practice 377 “Passing off” in Indian Courts: Remedies available 378 Mareva Injunctions in India 379PRECEDENTS 380On Trademark and Brand Protection • Trademark License Agreement 380
  10. 10. xi i Corporate and Commercial Agreements • Trade Name License Agreement 386 • Deed of Assignment 392On Copyright (Media Entertainment) • Writer Employment Agreement 394 • Sound Recording and Distribution License Agreement 398 • Co-production Agreement 405 • Deed of Assignment of Copyright 409 • Dialogue and Vocal Replacement Agreement 411 • Actor Employment Agreement 425 • Memorandum of understanding between two Media Companies 430 • Patent Agreement for Employees 442 • Patents, Patent Licensing and Protection in India 443 • Technology Transfer and License Agreement 446 • Technology and Marketing Collaboration Agreement 460 • Assignment of Rights in Invention 483 • Technology Assignment Agreement 484On Confidentiality and non-disclosure • Know-How Assignment Agreement 487 • Confidentiality Agreement (Between A Company and an individual) 492 • Confidentiality Agreement - Both party obligations 496 • Consultancy Agreement 499 • Confidentiality and Non-discloser Agreement 503 • Employees non-disclosure and non-compete agreeement 506 • Non-disclosure and non-compete agreeement 509 CHAPTER 5 FRANCHISE AGREEMENTSOUTLINING THE SPHERE OF LAW RELATING TO FRANCHISE 515 Direct Franchising 515 Franchising through Subsidiary or Branch Office 516 Area Development Agreement 516 Master Franchising Agreement 516 Franchising through Joint Venture 516PRECEDENTS • Franchise Agreement 517 • Draft Version of Franchise Agreement 521 • Franchising Agreement 526 CHAPTER 6 PROJECT FINANCETHE RISK MATRIX 539DUE DIGILENCE 542SECURITY 542FORCE MAJEURE 543WHEN THINGS GO WRONG 544 Contract Damages 544 Liquidated Damages 544
  11. 11. Detailed Contents xi iiCONCLUSION 545POWER PURCHASE AGREEMENTS - PITFALLS AND REMEDIES 545 Definitions 546 Tariff 546 Counter Guarantee 547 Financing 547 Price Mechanism 548 Pricing Risk 548 Payment Risk 548 Third Party Sale 549 Tax Holidays 549 Judicial Inquiry 549 Force Majeure 549 Conclusion 550FUEL SUPPLY AGREEMENT - BANKABLE OFFTAKES 550 Infrastructure 551 Pricing 551 Payment 551 Force Majeure 551 Dispute Resolution 551 Transportation 552 Scheduling; Metering and Weighing 552 Quality and Rejection 552 Default 552 Remedies for Breach 553DUE DILIGENCE 553TYPICAL DUE DILIGENCE DELIBERATIONS IN A PROJECTFINANCING STRUCTURE 554 The Project Sponsor 554 The Site of The Project 554 Political, Economical & Legal Considerations 554 Financial Parameters 554 Construction Commitments 554 Input Agreements 555 Off-take Agreements 555 General Contract Review 555 Environmental Considerations 555 Critique 555PRECEDENTS 556 CHAPTER 7 DEEDSPRECEDENTS • Assignment of Business with Goodwill and Tenancy Rights 660 • Assignment of Simple Contract Debts 663 • General Power of Attorney 664 • Special Power of Attorney in respect of entering into and concluding one Transaction 670
  12. 12. xv i Corporate and Commercial Agreements • Special Power of Attorney for Admitting Execution before Sub Registrar of Document already executed 672 • Release and Indemnities 673 • Guarantees 673 • Guarantee, Deposit and Charge as Security for Advances to a Third Person 674 • Agreement of Reference – To Arbitration 676 CHAPTER 8 BONDSFORM 679USE OF BONDS 679HEIRS AND REPRESENTATIVES 680TWO RATES OF INTEREST 680STAMP DUTY 681REGISTRATION 681PRECEDENTS • Simple Money Bond for money borrowed 681 • Simple Money Bond, for Money due with Recitals 681 • Instalment Bond 682 • Equated Instalments Bond 682 • Bond by a Debtor and his Surety for a Loan 683 • Bond by a Debtor and his Surety for an Existing Liability 683 • Instalment Bond, with Surety, for an Existing Liability (in the form of a deed) 683 • Bond with Sureties for a Loan Repayable in Equated Instalment with Hypothecation of Property (in the form of a deed) 684 • Bond with Sureties for Loan (in the form of a deed) with Provision for lower Rate of Interest in case of Punctual Payments 685 • Administration Bond by a Person Obtaining Letters of Administration (section 291, Succession Act) 686 • Security Bond given for the Grant of a Succession Certificate (section 375, Succession Act) 687 • Administration Bond by Guardian Appointed under the Guardians and Wards Act 687 • Security Bond by a Debtor (under section 21, Provincial Insolvency Act) 688 • Security Bond by a Receiver Appointed in a Suit: Order 40, Rule 3(a), C.P.C. 688 • Cash Security Bond by an Employee of Government (in the Form of Agreement) 689 • Personal Security Bond by an Employee, with Sureties, Pending the Execution of a Hypothecation Bond 690 • Security Bond by Sureties on behalf of a Claimant to Money due from Government to his Deceased Ancestor 691 • Security Bond by Surety of the Manager of an Estate (Hypothecating Property) 692 • Security given by a Legatee under a Lost Will to a Purchaser of Bequeathed Property (with Hypothecation) 693 • Security Bond with two Sureties, the Principal Agreeing to Deposit Cash Security by Monthly Deduction from Pay 694 • Bond by Sureties of a Student Admitted to a College to Secure the Performance of an Agreement 695 • Bond by Surety for Due Observance by Another of Terms of Partnership Deed 696 • Bond by a Trainee (if minor, by his Guardian) with Sureties 697
  13. 13. Detailed Contents xv • Performance Guarantee Bond 697 • Deed of Indemnity 699 • Indemnity Bond 700 CHAPTER 9 PLEDGES“PLEDGE”, “PAWNOR AND “PAWNEE” DEFINED 704DOCUMENTS AND SECURITIES 704PRECEDENTS • Pledge Deed 705 • Pledge of Term Deposit as Additional Security for NCDs subscribed by Beta Bank 713 CHAPTER 10 ARBITRATIONDISPUTE SETTLEMENT: ALTERNATE DISPUTE RESOLUTION 715DRAFTING AN ARBITRATION AGREEMENT/CLAUSE 715 Arbitration Agreement 716 Judicial Analysis 717 Halsbury’s Laws 719 A brief epilogue 719INTERNATIONAL COMMERCIAL ARBITRATION 719 Advantages of alternative dispute resolution 720 Disadvantages of alternative dispute resolution 720ENFORCEMENT OF ARBITRAL AWARDS 721 Detrimental Reliance 721ARBITRATION CLAUSE 722DAMAGES IN ARBITRATION 725 CHAPTER 11 LEASEPARTIES 727CONSIDERATION 727COVENANTS ENTERED INTO BY THE LESSEE 727COVENANTS BY THE LESSOR 728PROVISO FOR RE-ENTRY 728AGREEMENT OF LEASE 728PRECEDENTS • Agreement of Lease 731 CHAPTER 12 TRUSTTHE GOVERNING LEGISLATION 764 The Nature of an Indian Trust 764 Requirements of a Trust 765
  14. 14. xi v Corporate and Commercial Agreements Trust deed 766 Complete constitution of a trust 766 Legislation relating to trusts 766 Trustees 767 Trustees’ Duties 768REGULATORY ENVIRONMENT AND LIMITATION ON TRUSTS 770 Courts 770 Breach of Trust 772 Limitation on trusts 773 Perpetuities and accumulations 773 Remuneration 773 Exoneration clauses 774 Public policy 774 Who can act as a trustee? 775REASONS FOR THE CREATION OF TRUSTS AND THEIR USES 775 Personal or Private Trusts 775 Pension and employee benefits 776 Collective investment schemes 776 Charities 776 Non-Charitable Purpose Trusts 777CONCLUSION 777PRECEDENTS • Agenda of meeting of Board of Trustees 777 • Appointment of additional members to Board of Trustees 778 • Deed of Family Trust Settlement