INTRODUCTION TO CONTRACT
DRAFTING
Saptarshi Das
Assistant Professor of Law
What is contract drafting?
• Contracts are the foundations of the business world and may
range from a simple to a complex contract
• Drafting a contract is the act of writing the details of the
contract in order to outline the obligations of both the parties
to the contract in order to make them understand their legal
rights and responsibilities.
• Goal of Contract Drafting : To make each parties understand
the terms and conditions of the contract. To ensure clarity
and remove any ambiguity, the language used in the drafting
of the contracts must be simple, clear and specific.
Drafting ,Conveyancing vis-à-vis
Contract Drafting
• Drafting in very simple terms is the crystallization of
the law and the fact in the language form. In the
legal sense it means the preparation of legal
documents like contracts, agreements, deeds etc.
• Conveyancing is the art of drafting deeds whereby
land or interest in land i.e. immovable property is
transferred from one person to the other.
• Conveyance is not a contract. Contract remains to
be performed and its specific performance could be
sought while the basic purpose of conveyance is to
transfer the property from one person to another.
Representations, Warranties and
Covenants
• Representations are statements of past or present fact or circumstance.
It’s a contractual statement that a fact or circumstance is presently true,
and/or has been true in the past.
• Warranties are statements or promise of current and future
condition. It’s a contractual statement that a condition is, and/or will be,
true when made and/or for a period of time, often for the term of the
agreement.
• Covenants are promises of future action or inaction. It’s a contractual
statement that a party will do, or will not do, something during a period of
time (often the term of the agreement). Eg. : “Party A shall issue a press
release announcing the relationship within 30 calendar days of the
Effective Date”
Some principles of effective drafting
• Brevity : A contract should be brief, precise
and to the point
• Clarity : It should clearly lay down the terms
and conditions of the contract so as to prevent
any ambiguity
• Simplicity : A contract should be written in
simple language to make it convenient for
both the parties to understand the same.
RULES OF CONSTRUCTION
1) Whatever sense may be adopted, the
construction must be reasonable;
2) The construction shall be liberal;
3) The construction shall be favourable;
4) The popular meaning of words shall be adopted;
5) The whole of the agreement must be carefully
considered;
6) The contract shall be taken most strongly against
the contractor;
CONTRACT NEGOTIATION
• Contract negotiations are a process that
involves discussing and compromising on
contract terms in order to reach a final
agreement between two or more parties
involved in a transaction. In most contract
negotiations, each party tries to negotiate for
the best interest of themselves or their
business. There is a lot of back and forth
communication, but most contract factors boil
down to risks and revenues
Best Approach to Contract
Negotiations?
•
•
•
•
•
•
Identify the objective for entering the contract: Every party to the contract must
have a specific idea of what they want to gain from the transaction. Before
attempting to negotiate a contract, make a lost of things you will compromise and
a list of terms that you will not negotiate or give up.
Research contract laws: Contracts are legally binding agreements, which are
regulated by the courts. Before attempting to negotiate a deal, search online or
get expert advice to determine whether the terms of the contract you are trying to
form is legally allowed.
Prepare for negotiations: Gather all facts, figures, financial statements, and
documents for the negotiation process in case you need to show proof of anything
that you may need to back up your negotiation points.
Prepare a backup plan: Create a plan for the possibility that the contract fails to
form and that both side cannot agree on the terms after negotiation.
List your priorities: It is important to know the difference between what you need
out of the transaction and what you want.
Set a goal: Know your bottom line so you can determine when to accept a deal
and when to walk away.
Some ethical issues of contract
drafting
• Business contracts are legally binding
documents, they are only effective within an
ethical framework that assumes most parties
observe and fulfill their contractual
obligations. Competing for, obtaining and
satisfying contracts ethically is the basis for an
efficiently functioning economy
Some ethical issues of contract
drafting
• Determining Prices Ethically : An ethically
negotiated contract strikes a balance between
the benefits to the supplier and purchaser.
The successful execution of such a contract
delivers advantages to both parties, and both
parties have a stake in avoiding problems. Eg:
Setting the prices for your contracts in this
way is ethical, while basing your prices on
manipulation or hidden factors is not
Some ethical issues of contract
drafting
• Avoiding Conflicts of Interest : Some conflicts of interest are
ethically unacceptable, such as bidding on work for which you
decide who is awarded the contract, but you can avoid other types
of conflict of interest with transparency.
• Competing Fairly : A competitive market gives you feedback on the
value you are offering to customers as compared with your
competitors. When you obtain a contract through fair competition,
you know that you have been successful in presenting exceptional
value. When a competitor receives the contract, you have to work
on reducing prices or increasing quality.
• Observing Laws and Regulations : Laws and regulations protect the
consumer, employees and other market participants. When you
develop an offer and sign a contract, you have to keep legal and
regulatory constraints in mind.
SOME SAMPLE CONTRACTS
• Drafting of Agreements. ( Loan Agreement)
• Drafting of a Sale Agreement for immovable
property.
• Drafting of an Agreement under the Trust Act
• Drafting of Standard form of Contract
• Drafting of an Adoption Agreement.
• Drafting of a sale agreement for movable
property.