Module 2

COMMERCIAL
CONTRACTS

CERTIFICATE COURSE

DEVELOPED BY
Corp Comm Legal

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MODULE - 2

FOCUS AREA WHILE DRAFTING AN
AGREEMENT

2.1 Introduction toDrafting parties operate their business from two different
countries. Accelerated globalization has almost
Drafting may be defined as the synthesis of law and removed the disparity of required terms between the
fact in a language form. Perfection cannot be domestic and international contracts, and thus, most
achieved in drafting unless the nexus between law, of the corporates follow the same principles while
facts and language is fully understood. In fact drafting drafting and/or reviewing the domestic and
can be described as the practice, technique or skill international contracts.
involved in preparing legal documents that set forth
the rights of the parties. A legal document is basically Even then, sloppy and careless drafting and/or review
an enumeration of the transaction and all terms and of contracts have hurt the corporates all over. A
conditions agreed to between the parties involved. contract is not a compilation of standard terms, but a
considerate replication of the understanding of the
An effective contract is not only a reflection of the parties with regard to the purpose of the agreement,
parties' intention to get into a legal relationship, but nature of services, form of performance, kind of
clearly lays out the respective obligations of the consideration, and type of industry. So, the structure
parties with necessary safeguards and efficacious of the contract in general, the hierarchy and the
remedies. Today's world is economized by trade, construction of the terms will differ and depend on
domestic and international, and this trade is parties, purpose, services, industry, location, and law.
facilitated through contracts (domestic or
international) entered into by the parties. A domestic The technical writing engaged in by members of the
contract is one where both the parties operate their legal profession falls into two classes, referred to for
business from the one and the same country, whereas convenience as legal writing and legal drafting. Legal
an international contract is one where both the writing embraces all kinds of expository writing

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including that encountered in correspondence, legal prohibition, rights and immunities. Rather than
opinions and text books on legal subjects, as well as describe something, they prescribe or proscribe
reports of decided cases in which judges set forth something.
their reasons for decision. Legal drafting is the
composition of legal instruments such as contracts, The way legal provisions are expressed, whether in a
deeds, wills and legislation. contract between two individuals or in a statute that
applies to everybody, can have serious
In their roles as advocates, lawyers often use consequences. Small differences in wording or
language as a tool of persuasion-whether their words grammatical arrangement can produce large changes
are meant to be beard in oral argument or to be read- in meaning and therefore in the impact on people
and this factor introduces a subjectivity and a collectively and individually. Once a contract is
rhetorical element not found in non-legal writing. signed or a statute is enacted, its terms become
This distinction aside, legal writing shares the definitive and binding. It is then too late to say, 'That's
characteristics of other varieties of technical writing, not what I meant." The drafting process involves
including a specialized terminology and a finding out what is meant, and matching that to what
preoccupation with precision and clarity. The is said.
function of legal writing, as distinct from drafting, is
descriptive. It is writing about law and legal matters, The drafting of legislation presents special
much as medical writing is writing about medicine. challenges because of the large number of persons
potentially affected and the difficulty of visualizing all
The subject matter of law, however, itself takes the the possible or likely permutations and combinations
form of writing. Legal rules and legal transactions are of circumstances, events and transactions to be
created, recorded and communicated through the provided for. The quest for fairness, treating like
agency of language. Written laws and written cases alike and different cases differently, adds to the
documents are to the barrister or solicitor what drugs importance of avoiding gaps in the law or, conversely,
and clinical instruments are to the physician or of inadvertently overextending the law's reach.
surgeon. The function of written legal instruments is When difficulties of interpretation arise, they cannot
different from that of other technical writing. It is to be resolved by calling up the Minister who sponsored
create and to give effect to legal obligations, the Bill, the civil servants who formulated the policy

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or the drafters who produced a legislative text. A final An oral or written agreement
resolution requires resort to the courts with all the
costs that that entails for litigants and for society. Probably the most important attribute of contract is
that it is a voluntary, consensual relationship. A
The end products of legal drafting may be categorized contract is created only because the parties, acting
in a number of ways. A basic distinction is that with free will and intending to be bound, reach
between rules and commands. Some examples will agreement on the essential terms of their
illustrate: relationship. It is the element of agreement that
distinguishes contractual obligations from many
a. A contract for the sale of land shall be in writing. other kinds of legal duty that arise by operation of law
(Statute) from some act or event, without the need for assent.
b. The party of the first part will keep the premises in Determining whether the parties actually agreed to a
good repair.(Contract) contract is not always easy. The law generally gauges
c. I devise and bequeath all my property to my wife. intent objectively in deciding whether a person
(Will) agreed to a contract. That is, the person’s overt acts
d. This Court sentences the accused to imprisonment (i.e., words and conduct) are evaluated to decide
for fifty years. (Court order) whether they reasonably signified intent to enter the
transaction. Although oral contracts may be
Contract Principles: enforceable under some situations, in other
situations certain types of contracts must be
Basic Attributes of the Contractual Relationship recorded in writing and signed in order to be
enforceable. The legal doctrine known as the statute
A contract may be defined as an exchange of frauds specifies the types of contracts that must be
relationship created by oral or written agreement written in order to be enforceable. The statute of
before two or more persons, containing at least one frauds developed in English common law, but similar
promise and recognized in law as enforceable. The rules have been codified in other jurisdictions,
essential elements of a contract thus include: an oral including the United States. Statutes requiring
or written agreement; the involvement of two or written contracts generally include situations
more persons; an exchange relationship; at least one
promise; andenforceability.

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involving contracts for the sale of land, contracts that Promise
cannot be performed within a year, and contracts for
the sale of goods. For a contract to exist, there must be promise. A
promise is an undertaking to act or refrain from
Involvement of Two or More Persons acting in a specified way at some future time. This
promise may be made in express words or implied
While it requires two parties to create a contract, it (i.e., inferred from conduct or from the circumstances
should be noted that a contract is not confined to two of the transaction). Bilateral contracts are formed
participants. There can be as many parties to a when promises remain outstanding on both sides at
contract as the needs of the transaction dictate. In the instant of contracting. Unilateral contracts are
fact, multiparty contracts are common. formed when one party has fully performed but a
promise by the other party remains to be performed
An Exchange Relationship at the time of contracting. Instantaneous exchanges,
even though consensual, do not constitute contracts
By entering into an agreement, parties bind because they do not involve promises.
themselves to each other for the common purpose of
the contract. Thus, the essence of a contract is the Legal Recognition of Enforceability
relationship. Some contractual relationships last only
a short time and require only a minimal interaction. It is a hallmark of contracting that it creates rules
Other contractual relationships, however, can span binding on the parties and confers on them rights and
many years and 23 require constant dealings obligations cognizable in law. The fundamental role of
between the parties, regulated by detailed provisions contract law is to ensure that promises are upheld.
in the agreement. The essential purpose of the Without legal enforceability of promises, only
contract relationship is exchange. Simply stated, the instantaneous exchanges could ultimately occur—
very essence of contract is a reciprocal relationship in with devastating effects on society. Where promises
which each party gives up something to get are broken, the power of legal enforcement enables
something. Exchange continues to be the principal the disappointed party to sue. Once it is established
motivation for contracting and the guiding rationale that a contract was entered into and breached, courts
for the rules of contract law. can enforce the contract by providing a remedy for

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the breach. Such remedies can include monetary Definitions
compensatory damages, specific enforcement of the
promise, and other types of damages. Legal The use of defined terms can simplify a document
enforceability thus serves to deter breaches of immeasurably. While the number and extent of the
contract because a reluctant party knows that failure definition section depend upon the nature of the
to perform can result in litigation with costly results agreement, virtually all contracts will include some
defined terms.
Overview of Contract Standard Provisions
Introduction Consideration

The components of a contract will vary depending on Although it need not be complicated, the
the nature and complexity of the transaction it consideration should be explicitly stated since
reflects. There are, however, some terms that may be agreements must be supported by consideration.
considered standard that usually appear in This may be expressed as an exchange of dollars or of
documents in contracts in some form or another. goods, or perhaps an exchange of mutual promises.

Title Covenants

The title should reflect the subject matter of the The covenants memorialize the promises that are
transaction and, if appropriate, the parties. Preamble being made by the parties. Examples include
(Recitals) promises to deliver certain goods or to refrain from
particular activities.
Most transaction agreements begin with some form
of a preamble that identifies the purpose of the Representations and Warranties
document and describes the transaction, the intent of
the parties and any assumed facts underlying the Representations and warranties identify the
transaction. The preamble identifies the parties and assumed facts underlying the agreement. These
the date of the transaction as well as the nature of the sections represent the real heart of the deal and tend
transaction. In many contracts, this appear as the to be heavily negotiated. An example would be a
“whereas” section, in which all of the statements representation and warranty that the goods to be
begin with that term. sold are in working order. Indemnification

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The indemnification portion of the contract deals • Assignment
with the allocation of liability in the event that all
does not go as planned. Questions to be addressed in • Choice ofLaw
this portion of the contract include who will be liable
for what, and to what extent. • Amendment andWaiver

Breach and Cure • Arbitration

Although promises are not necessarily made to be • Integration and Severability
broken, that possibility must be considered when
drafting a contract. What will constitute a breach of • Notice
the agreement? What opportunity will the parties
have to “cure” the breach? • Authority toSign

Termination 2.2 Purpose ofContract

This section should identify under what The purpose or the object of the contract is
circumstances the parties can terminate the instrumental in the construction of the contract. The
agreement and the procedures for termination. purpose defines the scope, design, and requirement
of the terms to be included in the contract. For
Remedies example: a franchise agreement shall have the terms
related to duration of franchise, area restriction of
The remedies section addresses the consequences in franchise, royalty, and intellectual property etc.; a
the event of termination. This section should specify supplier agreement shall have the terms related to
what the parties are entitled to in the event of breach delivery of goods and services, price payment
or termination. It may identify a dollar amount, a schedule, quality standards, indemnity, rejection and
formula, or simply a mechanism for determining the re-delivery of goods, and dispute resolution
appropriate remedy (such as arbitration). mechanism etc.; a confidentiality agreement shall
have the terms related to definition of confidential
Additional Important Contract Provisions information, duration of confidentiality, exceptions
to confidentiality, and breach of confidentiality etc.;
A number of other standard provisions are important an arbitration agreement shall have the terms related
to include in drafting contracts. These include: to reference to arbitration, appointment of
arbitrator(s), choice of arbitration law, and fees of
arbitrator(s) etc.

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2.2.1- The purpose, if illegal or opposed to public e. An agreement to commit a crime is void. For
policy will render the contract void. The purpose of a example: A enters into an agreement with B to kill C
contract is said to be illegal if it is against any law for for a consideration of Rs. X. Such an agreement is
the time being in force, or it is fraudulent in nature. illegal andvoid.
For example:
2.2.2 Thus, it is imperative that before drafting
a. An agreement in restraint of marriage is void. and/or review of a contract the purpose of such
contract isexamined.
b. An agreement by which any one is restrained from
exercising lawful profession, trade or business of any 2.3 Domestic or International Contract
kind is void. Though this has exceptions, but such
exceptions have to be exercised judiciously and Although, with each passing day the terms of the
reasonably. domestic and international contracts are finding
common ground, nonetheless, the geographical
c. A proper agreement for transfer of immovable nature of the contract may attract some different
property (sale deed etc.) is a valid contract, but if construction of both. Where a domestic contract
such contract is made with intent to defeat the attracts certain fixed language for boilerplate
creditors of the transferor then it is voidable at the clauses, an international contract attracts some
option of such creditor. ground work which may include serious negotiations.
While drafting and/or review of an international
d. In an agreement for formation of a company, the contract, specific attention/modification shall be
name of the proposed company is very important. given to the following clauses:
Such name shall not be unlawful or immoral or
against public policy. For example: The company a. Language: The parties shall decide upon the
name cannot be "Prostitutes Ltd." or "The Rape, Inc." language that controls the contract. For example: A, a
so, where A and B enter into an agreement to form a Chinese entity enters into a contract with B, an
company C, the name of which itself is immoral or American company will both want to control the
barred by law – such an agreement cannot take transactions arising out of the contract in their own
effect. native languages, and so, it will be important to arrive

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at a mutually decided language and inserted into the define the consideration of the contract in American
contract. Dollars ($), it is also important to agree and insert in
the contract the exchange price per $ in Indian
b. Location of Performance: Parties belonging to Rupees i.e. it shall be clearly written in the contract
different countries shall clearly word out the terms that 1$ = Rs. X for payment purposes. This is because
with regard to performance of the contract and the the rate of rupee per dollar changes every day, and a
services contained therein. Certain other clauses too party may stand to lose due to this uncertainty. For
may be inserted or modified depending upon the example: If the consideration of the contract is
location of performance of a contract. For example: A, $3000, and the parties agree that 1$ = Rs. 45 for
an American company enters into a contract with B, a payment purposes, then the payment to be made
Pakistani entity and the location of performance of under the contract shall be Rs. 135000 irrespective of
contract is Pakistan. In such a case, certain other the exchange price of dollar per rupee at the relevant
clauses like security and confidentiality of time.
information, force majeure, and governing law etc.
shall be suitably constructed. d. Governing Law: Each party will try to impose its
country's law into the contract. This could be
c. Payment Currency: Different countries have challenging for both the parties, but a consensus has
different currency and so it is advisable to insert in to be drawn in arriving at the governing law of the
the contract the currency in which payment shall be contract. In most cases, preference is given to the law
made. In other words, regard has to be given to the of the country where the contract is to be performed.
current exchange price and it is best to mention in the This is also the reason why some corporates prefer to
contract itself the exchange price, desired payment do business only in those countries where they
and the applicable currency – to avoid any future already have an office branch or a sister concern. In
differences or disputes. For example: A, an American other cases, a small fish simply gives in to the
entity enters into a contract with B, another demands of the large fish. Here, it is required of the
American company. A has its office branch in India person drafting and/or reviewing the contract to
and the performance of the contract has to be shell out the pros and cons of accepting the other
achieved by A's Indian office in India. B has a country's law as the governing law. For example:
subsidiary in India, which has to make payment to A's Where the contract refers any dispute to arbitration,
Indian office. In such a case, where A and B agree to

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it is important to confirm whether the countries of some other country to govern the arbitral
both the parties to the contract are reciprocating proceedings.
countries for the purposes of the enforcement of the
arbitral award. Where they are not reciprocating Thus, domestic and international contracts may
countries, an enforceable award in one country will influence the drafting and/or review of the contract
just have evidentiary value in the other without any to a great deal.
direct enforceabilityrights.
Clauses that Address the Possibility of Future
Contracts that are silent on the governing law, any Litigation
dispute is then guided by the accepted principles
which are: Too often, a situation that might have been quickly
and easily resolved by simply referring to well-
a. The place where the contract is made; drafted contract language turns into costly and time-
consuming litigation. Whether the contract is simple
b. The object of the contract; or complex, clauses that address the possibility of
future litigation should never be overlooked.
c. The place where the contract is to be performed
substantially; and Forum Selection Clause

d. The place of business of the parties Forum selection clauses specify the place where
lawsuits will be filed in the event a dispute arises
e. Court Jurisdiction:Usually thecountry who'slaw between the parties to a contract. Specifically, the
is the agreed governing law; its courts only have the parties utilize such clauses to expressly agree to
jurisdiction to entertain the disputes arising out of litigate all disputes arising from the contract in a 35
the contract. Nonetheless, it is important for the specific jurisdiction and venue. Such clauses offer
parties of two different countries to know which obvious practical value, as selecting the forum in
appropriate court to approach in case of a dispute. which a contract dispute is to be heard can help keep
Reference to arbitration is an exception where the the litigation in a nearby forum, reduce future costs,
parties can decide a particular country as location of and eliminate the need for challenges to jurisdiction
the arbitral tribunal but chose the arbitration law of in the event suit arises.

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Choice of Law Clause arbitration provision is to be triggered; where the
arbitration would take place; which rules will govern
Parties may also negotiate which laws will govern the arbitration proceedings; and the selection of the
their contract. Specifically, choice of law clauses arbitrators. Thus, properly drafted dispute resolution
specify the legal jurisdiction under which the clauses can provide assurance to the parties that
agreement shall be governed and construed. While their disputes will be resolved through the less
there are clear advantages to the parties for inserting expensive and speedier processes of arbitration or
such clauses into their contract, there must also be a mediation rather than by litigation. Moreover,
rational reason for the specified choice of law. Such alternative dispute resolution clauses are of
clauses require careful research and negotiation, particular value in international agreements, in light
because the laws of different jurisdictions may affect of the availability of established arbitration institutes
the parties differently. A choice of law clause may not to serve as a forum for disputes involving contracting
completely shelter a party from having the laws of parties from different countries.
other countries imposed upon it (for instance, by
claims of third parties), but the clause may at least Other Important Clauses; Assembling Contracts
define the laws that govern the immediate
relationship between the contracting parties. Contracts typically include a general section
containing a number of business matters relating to
Alternative Dispute Resolution Clause the agreement. These clauses are usually located at
the end of the agreement. Some general matters to be
Many types of agreements contain alternative considered for inclusion in contracts are described
dispute resolution clauses that obligate the parties to below.
submit their disputes to arbitration or mediation
rather than litigation. Alternative dispute resolution Integration Clause (Entire Agreement Clause)
procedures are often cost-effective and enable
disputing parties to pursue their claims more quickly It is customary to provide that the agreement
than traditional litigation. Through the use of constitutes the entire agreement between the
alternative dispute resolution clauses, the parties can parties. The purpose of this clause is to state for the
agree to such specific matters as: whether the record that there are no representations, warranties,
arbitration will be binding or non-binding; how the terms or conditions between the parties other than

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those set out in the agreement. Such clauses are other form of business organization or relationship).
intended to prevent related dealings or agreements Neither party has the authority to create obligations
between the parties entered into before or after the on behalf of the other party except as provided in the
execution of the agreement, from being used to vary agreement. 37 Survival Clause It is customary to
or interpret its provisions. specifically provide for the survival of an obligation
after the termination of the contract. For example, if
Waiver Clause the parties intend for warranties to survive the
termination of the agreement, then they would
There may be times when the parties want to waive a specifically so state in a survival clause. Severability
breach or default of a provision of the agreement. A Clause If the contract is ever litigated, it is possible
clause dealing with this circumstance usually that a court could rule that only a part of the
provides that a waiver of a breach or default will not agreement is invalid, illegal or unenforceable. To
constitute a waiver of a succeeding breach or default provide for this possibility, an agreement can provide
of the same provision. Another typical waiver clause that the invalid, illegal, or unenforceable part can be
provides that any delay or omission in exercising any severed from the agreement and that the remainder
right under the agreement does not constitute a of the agreement can continue in full force and effect.
waiver of that right. Time is of the Essence Clause A Remedies Clause An agreement often provides a
clause can also be inserted to provide that, in relation statement of remedies that are available in case of a
to certain events, time is of the essence. This means breach. However, there are also general remedies
that time periods and limitations must be strictly available under the law. This legal situation is often
observed or else the contract is terminated. addressed by including a provision that states that
Amendments Clause Sometimes the parties want to the remedies expressly stated in the contract shall be
change the agreement. A typical amendments clause in addition to, and not in substitution for, those
providing for this possibility would state that the generally available under the law. Further
agreement may be amended only in writing and must Assurances Clause Including this clause obligates
be agreed to by an authorized representative of both parties to perform further actions or execute further
parties. Independent Parties Clause This clause documents after closing or execution, either
typically provides that the agreement will not create indefinitely or for a specified period of time. Currency
a legal relationship between the contracting parties Clause When negotiating international agreements,
(such as a partnership, joint venture, franchise or any

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it is wise to insert a clause specifying the currency in termination form an essential part of the termination
which money owing under the agreement is to be clause.
paid. This can also come into play in the event a court
awards damages under the agreement. When negotiating a contract, special attention
Consideration should also be given to specifying a should be given to “exit provisions”. Well-drafted
conversion date in this clause. termination provisions are among the most valuable
contractual protections.
2.4 Are all boilerplate terms effectively injected in
the contract ? Termination for Cause provisions

Boilerplate clauses are the standard terms and Termination “for cause” refers to a material breach
conditions which a party inserts in almost all its that is not cured within a specified period.
contracts. These clauses could be assignment,
governing law, arbitration, force majeure, Opportunity to Cure provisions
severability, counterparts, entire agreement,
termination, indemnity etc. Though standard, these Termination sections often grant the damaged party
clauses cannot be used mutatis mutandis in all the right to terminate the agreement in the event of a
contracts, and so, while drafting and/or review of a material breach of the agreement by the other party.
contract it is necessary to understand the usage of With respect to curable breaches, such provisions
these clauses in the context of the contract. For typically provide that the damaged party shall have
example: the right to terminate the contract if the breach is not
cured within a specified time period.
2.4.1 Termination could be contingent, without any
reason or at convenience, with or without any Events Triggering Termination
limitation. Also, if the contract has a renewal clause
then the wording of the termination clause will Contracts also often grant the parties the right to
depend on it. A contract can be for a fixed tenure, terminate upon the occurrence of certain specified
evergreen, or renewable – all these have a bearing on events. These can include (but are not limited to):
the construction of the termination clause. Effects of
• Insolvency, bankruptcy or liquidation

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• Merger of the other party compensation from A only if there is an "indemnity
clause" in the contract between A and B. Smart
• Change of control of the other party drafting or reviewing will ensure that the indemnity
clause includes attorney fees and expenses apart
• Changes in governmental regulations from losses and damages – this will entitle B to claim
not only the amount of compensation but also the
• Failure to meet certain specified performance expenses of litigation, if any, B had with C.
levels
Thus, even if the boilerplate clauses form a standard
2.4.2 Indemnity clause could be an essential part of part of the contract, their careful drafting and/or
the contract or may be just included as boilerplate, review is of utmost importance to safeguard the
but it has an important objective. In an indemnity interest of the parties.
clause, either or all parties agree to indemnify and
hold harmless each other from all claims, losses, 2.5 Are all the terms carefully inserted in the draft ?
damage etc. arising out of the contract. The extent of
indemnity may be limited or unlimited as the Apart from the boilerplate clauses, there are various
language of the clause suggests. Further, the other terms which require deep introspection and
indemnifier may cap its liability to a pre-determined interpretation. It is already discussed above how
maximum amount. Most contracts include this clause international contracts require certain additional
to indemnify the party from third party claims. An terms. The purpose and the nature of the contract
erroneous construction or a miss may take away the determine the terms essentials for that contract.
safeguard of the party to seek indemnity in case of
losses or claims arising without fault. For example: A, 2.5.1 The terms of the contract shall be clear with
a music director enters into a contract with B, a film regard to:
producer to give music for a particular film. Once the
music of the film is released, a pop-singer C files a suit a. Parties: Name and complete address of the parties.
for copyright infringement against B alleging that the
music of a particular song in B's film is lifted from C's b. Duration of the contract: Whether the contract is
composition. As a result, B pays Rs. X to C as for a fixed term, or is renewable. If renewable, then
compensation. B can claim the amount of this how many times and for how many years in each time.

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c. Payment of price: Payment to be made in which 2.6 The construction of draft – whether
currency and mode i.e. by check, cash, draft, account
transfer etc. For contracts related to complex or huge lengthy, bulky, or difficult to understand?
projects, it is advisable not to enter into fixed-price
contracts because there are greater chances of hold, A draft shall be clear, unambiguous, clean, and
delay, fluctuation in prices of construction materials easy to read and understand.
etc., and so, such unforeseen circumstances shall be
taken careof. It shall not be too bulky unless required for
the need of a particular industry. For example:
d. Defect removal: In case one party fails to perform Hospitality related contracts and Government
an obligation under the contract, the time provided contracts are usually lengthy and bulky. An effort
for defect removal or rectification. shall be made to see that the length of the contract
does not kill the purpose of the contract.
e. Payment of interest: In construction or building
contracts, there is usually a provision that where a The draft shall be to the point and
customer defaults on payment of any installment or unnecessary references or language shall be avoided,
where the builder does not give possession to the but it shall be structured in such a way so as to give
customer on time, an interest provision is inserted to solutions for all issues arising out of the transaction.
deal with such defaults.
There shall not be repetitions in a draft. At
f. Implied and express warranties: This includes the the same time, the language of the terms shall not
obligation of any party to pay any taxes, fines etc. contradict each other. For example: A draft shall not
arising out of the contract. have an arbitration clause along with another clause
which gives exclusive rights to a civil court to exercise
Thus, it is important that all relevant terms suitable to its jurisdiction over all disputes arising out of the
the particular contract shall be included and contract.
constructed in a way so as to facilitate the purpose of
the contract and the smooth completion of its The draft shall be adequately titled so as to
performance by the parties. give the reader a preliminary sense of the object of
the agreement. For example: Confidentiality
Agreement, License Agreement, Technical Services
Agreement, Arbitration Agreement, Hotel Operating
Agreement etc.

As far as possible, the terms in a draft shall be

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adequately and appropriately titled and also k. Avoid drafting in the passive voice and use
numbered into sections and sub-sections, articles and active voice as it is more direct and vigorous than
sub-articles, or just plain numbers and sub-numbers. the passivevoice.
This will help the parties not only to identify the l. As far as possible put statements in a positive
clauses with their titles, but also to refer them with form and make definite assertions.
the help of their numbering. m. Avoid unnecessary, hesitating and non-
committal language.
Special caution shall be taken in using defined n. Express co-ordinate ideas in similar form.
terms, and undefined words shall not be inserted in o. Keep related words together as the position
capital letters. of words in a sentence is the principal means of
showing theirrelationship.
Every draft shall go under proof-reading p. In summaries, keep to one tense, especially
and/or review by an expert before final execution. the presenttense.
q. The emphatic words of a sentence should be
2.7 Points to be kept in Mind while drafting placed at the end.

Agreements 2.8 How to draft a document ?
a. Prepare anoutline.
b. Establish a single principle of division and use A legal document is basically an enumeration of the
that principle to divide the subject matter into transaction and all terms and conditions agreed to
major topics. between the parties involved. The following ten easy
c. Arrange the items in a logic sequence. and important steps can be followed for drafting a
d. Give appropriate headings. document:
e. Remember the client in mind when drafting a
document. a. Ascertain a proper title of the document,
f. The text should be in clear writing. which aptly describes the nature of transaction in
g. Use concrete words and be concise. brief.
h. Avoid gender-specific words as far as b. Ascertain the parties to the
possible. transaction/agreement or the persons executing
i. Write in short sentences. the document representing the parties. The
j. Use proper punctuations.

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particulars of identity like father’s/husband’s appropriate authority, within a reasonable time
name, residential/official address, age, date of after execution.
incorporation in case of company etc. should also i. Necessary number of copies of the document
be mentioned. should also be prepared on stamp paper of
c. Note down the transaction/agreement and appropriate value, if so required.
the considerationinvolved.
d. State the mode and manner of payment of 2.9 How to write Legal Drafting
consideration.
e. Note down the various terms and conditions There is a substantial difference between legal
of the agreement. These terms actually state the writing and legal drafting. While legal writing
rights and liabilities of each party under the typically deals with persuasive documents such as
agreement. These terms should be drafted in very court briefs, legal drafting involves creating
clear and precise language. The words used should documents such as statutes, rules, regulations, and
be unambiguous so that only one contracts that establish the rights, duties, and
meaning/interpretation is possible. It should be obligations of various parties. While there is some
ensured that no condition is left out. overlap, legal drafting differs from legal writing in its
f. At the end, the document should bear highly specified format and intended use.
signatures and stamp/seal where necessary of the
executing parties. The date and place of execution 2.9.1 Formatting yourDocument
should also be mentioned. xvii. Some documents
also require to be witnessed by some independent 1. Search for forms or samples - There are a
person who is not party to the document. number of legal drafting form books and style guides
g. Where a document is required to be executed that may be extremely helpful to you in determining
on stamp paper, then the stamp paper should be of how you need to format a particular document.
prescribed value as applicable in the concerned
state. The Library of Congress, as well as many law
h. If a document is required to be registered, it libraries, have lists of form books and legal
should be presented for registration before the drafting guides available on their websites.

The public law library, typically located in your
county courthouse, also has form- books and
samples of various legal documents, including

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contracts, statutes, and regulations, that you can Typically, your text should be double-spaced in 12-
use asguides. point font. Your font should be a traditional, easily
2. Check for agency- or court-specific readable one such as Times New Roman or Courier.
formatting rules - Eachgovernmentagencytypically
has its own rules that specify everything from font Keep the substance of your document in mind
size and margins to the type of paper that your when you choose a font. For example, if your text will
document must be printed on. include names or titles that you intend to place in
italics, Courier is not a good font choice because it
For example, the federal government doesn't renderitalics.
publishes a handbook with the formatting
requirements for federal registry documents, 2. Create your main heading and any
including proposed rules and regulations. You can subheadings - If you're drafting a document such as a
download a PDF copy of this handbook on the U.S. legislative proposal or a regulatory document, you
Archive's website. typically must include a required heading, the format
of which is specified by the agency with which you are
While some formatting rules may seem filing yourdocument.
arbitrary to you, keep in mind that these rules are
designed to make similar documents look the The heading includes information that allows
same so readers can quickly and easily access the readers to quickly determine where your
information theyneed. document fits into the overall organization of the
code or regulatory section for which you're
1. Set your font and margins - Before you begin writing. This information will vary depending on
writing your document, check to ensure that the page the agency for which you're writing.
margins are set at 1 inch on all sides (unless otherwise
specified by the agency for which you're drafting the If you're writing a contract or other legal
document) and that you are using a legible font in an document, instead of a formal heading you
appropriate size. typically will simply title the document. Your title
For example, if you are drafting a federal regulatory may be as brief as "Contract," or it may be more
document, the margin on the left-hand side should be detailed and include the names of the parties or
1.5 inches, while all other margins are 1 inch each. the purpose of the agreement.

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If your document has distinct sections, you one that works the best.
also need subheadings to break up the parts or Ideally, you want each major part or section to
sections of your overall document.
be of similar length, or have similar numbers of
For example, if you were drafting a proposed items. This makes your document appear
regulation of veterinarians and veterinary balanced. If one section is significantly longer than
services, you might include headings for the others, consider breaking it into two sections.
"Veterinary Licenses" and "Veterinary Facilities."
Once you've determined how to break up
3. Outline your document - Creating an outline your information, you need to figure out how your
prior to drafting allows you to organize the sections sections will be arranged in your document.
of your document in a logical manner. If you're Generally speaking, you want to place the most
drafting a regulatory document, the titles of each important sections at the top of the document,
section likely will become your headings. along with those you believe will be most
frequently used.
In contract drafting, your top-level headings
typically should be bolded to set them apart from However, you also want to ensure that more
the rest of your text. You also may choose to have general, broad provisions appear before more
them in a larger font size than the rest of the specific, narrow ones. This arrangement will save
document. you a lot of time in writing, because it will be easier
to move from broad rules to narrower exceptions
Contracts typically can be numbered in or limits.
whatever organization method you feel best suits
your content. However, if you're drafting Any administrative clauses or penalty
government rules or regulations, they typically provisions (in contracts these are typically
must be numbered following a pre-existing referred to as "boilerplate" and placed in a section
scheme. labeled "Miscellaneous") should be at the end of
your document.
Decide how you plan to divide the subjects in
your document by grouping related statements to 2.9.2 Using clear and concise language
establish sections. Sometimes this division may be
self-evident, but other times you may have to play 1. Write simple, active, affirmative, and
with several different themes until you find the declarative sentences - Short sentences in present
tense, using a basic subject-verb-object construction,

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are the most effective way to write the actual text of negative. Write what will happen, not what won't
your document. happen.

Active voice eliminates ambiguity by For example, the sentence "The committee
identifying the party responsible for fulfilling the approves projects with a simple majority vote" is a
verb's action. In passive voice, on the other hand, lot easier to understand than "A project won't be
the object becomes the focus of the sentence. approved unless a majority of the committee votes
for it," which not only uses a negative construction
For example, if you write "when the product is but also is passive.
delivered," the question of who is to deliver the 2. Avoid complex or confusing sentences and
product is left up in the air. Writing "When phrases - Legal drafting is seldom, if ever, a one-shot
Manufacturer delivers the product" clears up any deal, and may require multiple revisions before you
ambiguity. can be certain that the words you've used effectively
convey the correct meaning and intent.
A legal document has a timeless quality to it,
in that once enacted or executed the document Focus on writing short sentences that don't
must provide answers to people over years include multiple clauses. Where explanation is
regarding their rights and duties concerning the required, consider breaking your sentence into
subject of the document. two sentences – one that provides the explanation
and another that describes the action to take
For this reason, declarative, present-tense place.
sentences tell future readers what they must do
without confusion. If you write "The Manufacturer Reading your sentences aloud can help you
will deliver the product," an astute reader might see if they are needlessly complex. If you stumble
wonder when the obligation actually begins, since over them as you read, or if they don't sound clear,
the document is written in future tense. you should consider redrafting the sentence so it's
more easilyunderstood.
Writing a declarative sentence in present
tense, such as "The Manufacturer delivers the Keep in mind that readers can get lost in
product on the third Tuesday of every month" multiple clauses, and complex sentences invite
preserves the document's clarity. misinterpretation. For example, the sentence "If
developers don't submit their applications by the
You also want to avoid negative statements,
particularly sentences that require more than one

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deadline, and fail to complete their affidavits, they The same principal applies to "and/or." In
will be unable to participate in subsequent bidding legal drafting, the word "and" means both things
rounds" may raise questions of whether are required, while the word "or" means only one
developers must both submit applications and is required. If you write "and/or," that means only
complete affidavits by the deadline, or if the one thing is technically required, although both
affidavits have a different deadline. may be present. Since you want your language to
be functional, the word "or" by itself is sufficient.
A more understandable construction of the
example sentence would be "Developers must When in doubt, ask yourself if the word or
submit a completed application and affidavit by phrase adds anything important to the sentence. If
the deadline to participate in subsequent bidding it doesn't, take it out.
rounds." 4. Create bulleted lists for long series of items
3. Omit vague, needless, or repetitive words or conditions - Long series in sentences are hard to
and phrases - Whenyou'redraftingalegaldocument, follow, and the punctuation can lead to confusion.
every word should have an active, operative meaning Bulleted lists will break up the information into pieces
in the sentence. Any other words and phrases will that your readers can understand at a glance and
confuse readers and can possibly distort your easily reference.
meaning.
Use parallel construction in your lists. You can
You probably think of many of these words check this by taking the first part of the sentence
and phrases as "legalese." They clog up your that introduces the list and completing it with each
writing and make it confusing to the average word or phrase you've listed next to a bullet.
reader. Keep in mind that many legal documents
that are drafted will be read by laypeople first and If any of the phrases in the list don't complete
foremost – not by judges and attorneys. the first half of the sentence in a way that makes
grammatical sense, recast the phrase so that it
Phrases such as "any and all" or "full and does.
complete" are repetitive and should be avoided.
Each item in your list should be a complete
Many other words or phrases can be thought in and of itself.
simplified. For example, "in order to" is a phrase
often used in legal writing, but it says nothing that Keep in mind that these sorts of documents
"to" doesn't already say by itself. are meant to be used as quick references for
specific clauses or statements. Your average

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reader likely won't read the whole document from The federal government has special rules that
beginning toend. apply with one federal agency cross-referencing
the rules or regulations of another federal agency.
2.9.3 Referencing other Sections or Documents Generally, these cross-references are not
considered regulatory and must meet at least one
1. Avoid unnecessary references - If you include too of a number of conditions, such as to test methods
many cross-references, your provision will be or consensusstandards.
confusing and cumbersome to read. Unnecessary
references won't add anything to your reader's 2. Cite the specific page or section - Unless your
understanding.
intent is to reference the other document or
Only use a cross-reference when it is
essential to the meaning of the provision you're regulation in its entirety, point your readers to
drafting. If you're drafting a rule or regulation,
cross-references also may be necessary if there's exactly where they should go to find the information
another regulation out there that provides an
important limit or exception to your provision. you're cross-referencing.

For example, if the regulation you're drafting 3. Use references to assist readers - Include a
is subject to state and federal anti-discrimination
laws, it's enough to simply say that. Providing a description of the document and your reasons for
lengthy list of code citations will only result in
readers getting lost in those other laws and trying cross-referencing it in parentheses after your
to figure out how they apply to the clause they
were originallyreading. citation, so readers know why it's mentioned and

When you're drafting contracts, incorporate have a summary of what it says.
other documents for reference only if those
documents are necessary to understanding the Providing a description enables your readers
contract as a whole, or to understanding the rights to understand what the other law or regulation is
or responsibilities of a party. about and why it relates to the provision they're
reading without having to stop and look it up.

2.9.4 Including Definitions

1. Complete your definitions after you draft your
document - Drafting your document first enables you
to see clearly which words should be defined and

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which areunnecessary. Sincethedefinitionsapplytothedocumentas
Before you write your document, you may a whole, they typically will appear at the beginning
of the document.
think a certain word is important and needs to be
separately defined. However, after drafting the However, you may be drafting a document
document you may realize that word was only with multiple sections that covers 20 pages. It
actually usedonce. would be impractical to require readers to
constantly flip back to the first section to find
Generally speaking, words that are only used definitions of words that only appear in the last
once or twice don't need to be included in a section.
separate section for definitions. If a definition is
necessary, you can define it in the text where it In these situations, it may be better to have
appears. short definitions sections at the beginning of each
part that include definitions of words your readers
Keep in mind that your definitions section is will encounter in that part specifically.
alerting your readers that these words are
important, and that they carry a different meaning You still may want to have an initial section of
from commonunderstanding. definitions at the beginning of the document for
words that appear throughout the document.
Determine where to put definitions in your
document - Generally, your definitions should be Organize your definitions in alphabetical
read before the document is read, so your readers will order without any paragraph numbering or other
understand what a key word means. However, with labeling. You may want to bold the term you're
lengthy documents you may need multiple sections of defining so your readers can find it more easily.
definitions.
Avoid unnecessary definitions - If a word has no
In shorter regulations or contracts, the different definition than the common understanding
definitions sections are one of the first sections of or dictionary definition of that word, there's no need
the documents. This goes back to the general to craft a special definition that applies solely to your
principal of legal drafting that you should place document.
more broadly applicable sections before more
limited sections. The point of a definition is to eliminate
ambiguity, not add to it. For example, if your

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document uses the word "motor vehicle," and by roads. Examples include cars, trucks, bicycles, and
"motor vehicle" you mean any car, truck, or van hover boards."
that operates on the roads, a separate definition of
that word typically isn't necessary. Leave any substantive rules out of definitions,
because readers are likely to miss them.
You also should avoid definitions that
contradict the commonly understood meaning of Contract Interpretation Issues
the word. For example, you would only cause Introduction
confusion if you defined "motor vehicle" as "any
car, truck, van, or bicycle," since people don't When the terms of an agreement are expressed
consider bicycles to be motor vehicles. clearly and comprehensively, the fact of contract
formation and the extent of each party’s commitment
In that case, you might consider changing the can be ascertained with relative ease by the
word "motor vehicle" in your document to interpretation of the language in the written
something that more readily includes bicycles. contract. However, problems arise in cases where the
parties fail to express their assent adequately, leave a
Keep your definitions clear and concise - The material aspect of their agreement vague or
purpose of definitions is to aid your reader in better ambiguous, or fail to resolve or provide for a material
understanding your document, not confuse him or aspect at all. Obviously, such problems can arise
her further. when insufficient attention to detail is given in
drafting the contract; similarly, poor drafting can
Avoid part or all of the term you're defining in result in the contract not clearly reflecting the
the term's definition. This can make your readers parties’ expectations. Indefiniteness can thus result
think they're missing something. from vagueness, ambiguity, omission or irresolution.

Don't fall into the trap of thinking you have to Problems of Vagueness and Ambiguity
name every possible thing that might be included
under a broad term. Provide the definition, and Vagueness results when a term is stated so obscurely
then give a few examples. or in such general language that one cannot
reasonably determine what it means. Ambiguity
For example, you might write: "'Private
transport' means any non-public vehicle or device
that people use to move from place to place on the

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results when a term is capable of more than one “Gap Fillers”
meaning. Ambiguity can lie in a word itself or in the
structure of a sentence; ambiguity can also result A “gap filler” is a provision legally implied into a
from inept sentence construction. Sometimes, the contract to supplement or clarify its express
parties’ meaning can become clear if interpreted in language. In attempting to interpret indefinite
context. Some clarity may be gained by reference to contracts, gap fillers may be used to supplement
the parties’ course of dealing, custom or usage in the contracts (but not to override the parties’ probable
commercial environment in which the parties made intent). Gap fillers are standard terms supplied by
the agreement, or by 39 standardized terms law. Some gap fillers supply generalized obligations
recognized by law. But contextual evidence cannot that are likely to be implied in all kinds of contracts;
always save a vague or ambiguous term. Thus, failure some gap fillers are very specific and relate to
to properly communicate the parties’ intentions in particular types of terms in specialized contracts. An
the agreement can result in the contract not being example of a gap filler that supplies a general
sufficient to create an enforceable relationship. obligation is the obligation implied by the law that the
parties use their best efforts to effect the contract’s
Omitted Terms purpose.

If a term is omitted, it simply is not there. The Implication of Law Irrespective of Intent of the
agreement would have a gap regarding that Parties
particular aspect of the parties’ relationship.
Nevertheless, some legally implied obligations are so
Unresolved Terms fundamental to fair dealing or so strongly demanded
by public policy that they are mandatory and are part
Unresolved terms result when the parties have raised of the contract regardless of the parties’ actual intent.
an issue in their agreement, but have not yet settled Such terms are more a matter of regulation than of
it, leaving it to be resolved by agreement at some intent. That is, the law’s true purpose in imposing
later time. In such cases, indefiniteness results from standard terms is not so much to ascertain what the
the parties’ deliberate postponement of agreement parties reasonably must have intended, but to limit
on the particular term. Nevertheless, an “agreement contractual autonomy in the interests of public
to agree” is not regarded as definite enough to create policy. For example, the underlying policy may be to
a firm and final contract.

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protect a weaker party from one-sided and unfair have a number of alternatives. First, the parties can
contract terms. One of the most important and decide on a formula or an external source or standard
pervasive mandatory construed terms is the general in order to provide for objective criteria for future
obligation of both parties to perform the contract determination of the term. As a second alternative,
reasonably and in good faith. It should also be noted the parties can opt to leave the determination of the
that there are some construed terms that are so term to the discretion of one party, although such a
strongly implied as a matter of public policy that they provision is risky to the party who defers discretion
become part of the contract unless the express terms to the other. The parties can also opt to omit the term
of the agreement clearly exclude them. In some cases, from the contract; however, the omission of a central
even a clear exclusion is not sufficient unless it term may render the contract itself unenforceable.
complies with specified rules that may 40 prescribe The parties may also deliberately defer the term by
the use of particular language or format. Examples “agreeing to agree”; however, caution is necessary in
would include disclaimers of warranties. such cases since the general rule is that no contract
comes into existence until all its material terms have
Terms Left for Future Determination been settled.

If the parties cannot agree upon a specific term and
determine to leave it for future determination, they

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