Understanding the Drafting Process of Contracts with Indian Companies
Contracts hold businesses together. No matter what type of business or trade you are into, the basic knowledge of the validation of contracts and agreements is an absolute requirement. Every investment and collaboration of a company is bound by a contract, directly or indirectly. Making contracts with Indian companies helps in securing transactions and reducing any risk. This is why it is important that all the company owners learn about how contracts with Indian companies work and what a contract should include.
Indian law has set a template for contracts with Indian companies. These are the points that you need to include in contracts and agreements under Indian law:
Usually, at the beginning of the document, you should maintain the date on which you will sign the contract. You can keep it blank and fill it at last when all the parties have signed the contract. Sometimes, the work under the contract starts even before the deal finalizes. Whereas in most cases, it will begin after the agreement.
Ensure that you fill accurate details of all the concerned parties in the contract. The details depend on the type of party making the contract such as company, sole proprietorship, partnership. It is also important that you mention if the company is Indian or foreign.
Text of the Contract
The main text of the contract contains all the details of the parties involved. It also consists of the terms and conditions of the agreement. The entire content of the contract needs to be carefully read and modified as per the requirements. The templates are generally available at the notary office, you should review before filling it. Additionally, refer the contract to an attorney or adviser before signing it.
Signing Authority for Drafting Contracts with Indian Companies
Make sure that the one signing the contract has the authority to do so on behalf of the party. Given below is a list of types of companies and their signing authority:
Limited Company: The Article of Association specifies who has the authority to sign on behalf of a Limited company or a corporation. As per the Indian law, it is generally a director whose signature is considered reliable by other parties.
Partnership: Getting all the partners to sign the contract is the safest bet. However, that is not always possible. In that case, check to know which partner has the authority to sign.
Sole Proprietor: The owner of the business should sign the contract.
Public/ Statutory Body/ Statutory Corporation/ Government Entity: When a government entity is one of the parties concerned in the contract, you should confirm who has the authority before getting a sign.
Individual: Obviously, in the case of the individual, it is he or she who holds the authority.
The presence of witnesses is a must for evidential purposes. The witness is required to write his/ her name in block capitals and their home address.
This is so that in case of any dispute, the court will turn to the witness in order to confirm if the signature on the contract is of the person whose name is on the contract. Every jurisdiction has its own rules regarding witnesses. In some countries, the contract is not valid if there is no witness present. However, in India, an agreement is considered valid even if it was signed without any third-party witness.
It is natural that both parties will want to acquire the original copy of the contract. Therefore, when there are two parties, you have to sign two original copies so that each party can retain an original document.
A contract is a sensitive legal issue, and thus it should be taken care of very carefully. A contract is useful only when all the necessary requirements are fulfilled. To avoid any confusion and dispute in the future, obtain legal advice from professionals. 3E Accounting provides several business services such as accounting, taxes, etc. We lead a team of experts, making us one of the best company secretarial service provider in India. You can contact us for contract drafting, reviewing, and any other contract-related concern.