COMMON MISTAKES IN A CONTRACT

M/S. CRAWFORD BAYLEY & CO.

(Advocates & Solicitors)

September 2019
 RELEVANCE OF A CONTRACT

• Remembering the commercial terms

• Enforceability
 MACRO LEVEL MISTAKES

 Standard Form Agreements from the Internet

• Not Jurisdiction specific

• Do not address all facets of the commercial understanding

• May not be legally correct

• Affects enforceability
Standard Form Agreement
 MACRO LEVEL MISTAKES
 Type of Document

• Nature of arrangement being entered into

• Binding or Non Binding or just a letter of intent

• MoU or Agreement or Letter of Intent

• NDU vs NDA

 Pay Stamp Duty and Register (if required)

 MICRO LEVEL DISCUSSION
 Date and Place of entering
“THIS AGREEMENT (“Agreement”) is made on _____ at ______________”
 Place:
• Initiating litigation
• Stamp Duty
 Date:
• Determine limitation period
• Linked to several clauses
 Parties to the Agreement
• Know whom to enter into a contract with.
• “between xyz corporation with its principal place of business at xyz office (unless repugnant
to the context shall deem to mean and include its successors and assigns) and …..” .
 MICRO LEVEL DISCUSSION

 Definition and Interpretation Clause

• Relevance of definitions

• “As used in this Agreement, the following words and phrases shall, unless
the context requires otherwise”

• Relevance of Interpretation clause. Applies to the entire Agreement.

 MICRO LEVEL DISCUSSION

 Definition and Interpretation Clause (cntd.)

• “Any requirement under this Agreement which requires consent of one

party, then unless such Consent is expressly granted within the
timeframe, such consent shall deemed to have been refused.”

• All references in this Agreement to statutory provisions shall be construed

as meaning and including references to any statutory modification,
consolidation or re-enactment made after the Effective Date and for the
time being in force.
 MICRO LEVEL DISCUSSION

 Calculation of Amounts in a Contract

• Formulae for calculation should be clearly fixed and mentioned.

• Illustration should be provided in the contract for calculation of an amount

to avoid future dispute over method of calculation.

• Dispute resolution by a third party auditor should be provided in case

Parties do not agree on the calculation of amounts in the future.
 MICRO LEVEL DISCUSSION

 Force Majeure clause

• Purpose of Force Majeure

• Excuses performance
 MICRO LEVEL DISCUSSION
 Force Majeure Clause

“FORCE MAJEURE: Seller shall be relieved from liability hereunder for failure to perform any or all of its obligations, for the time and to the extent of such failure to
perform where Seller’s failure is occasioned by any cause or causes of any kind or character reasonably beyond the control of Seller (any such cause herein called “Force
Majeure”), including, without limitation: Acts of God, accidents, fire, explosion, flood and hurricanes; strikes, lockouts or other industrial disturbances; riots or civil
commotion; war, declared or undeclared; compliance with any laws, rules, regulations, ordinances, codes or Executive Orders of any kind and nature now or hereafter
in effect promulgated by any federal, state, county or local government, or any other government (domestic or foreign) or any other governmental agency (domestic or
foreign)(collectively, the “Laws”) including, without limitation, priority, rationing, allocation or pre-emption orders or regulations affecting the conduct of Seller’s
business which Seller in its sole discretion deems it advisable to comply with as a legal duty; cancellation of Seller’s license to operate its plant; shortage or breakdown
inability to secure, in Seller’s sole discretion, all at
or other failure of facilities used for manufacture or transportation; shortage of labor;
reasonable prices or on account of shortages of, transportation, power, fuel, materials or supplies; or total or partial
shutdown due to Seller’s normal plant turnaround or as required by Seller’s operation. If Seller is rendered unable by Force Majeure to
carry out its obligations under this Agreement, Seller shall give notice to Buyer, and upon the giving of such notice the obligations Seller, so far as they are affected by
such Force Majeure shall be suspended during the continuance of any inability so caused. Upon the cessation of the cause or causes for any such failure or delay,
performance hereof shall be resumed, but such delay shall not, except by mutual agreement, operate to extend the term of this Agreement or obligate Seller to make up
deliveries or Buyer to purchases quantities so missed. Settlement of strikes or lockouts shall be entirely within the sole discretion of Seller, and Seller shall not be
required to settle strikes or lockouts by acceding to the demands of the employees involved, when such course is inadvisable in Seller’s sole discretion. Seller shall not
be responsible for reasonable delays in filling any order when due. “Reasonable delays” include, without limitation, delays to which Buyer, when notified, makes no
objection. In the event of any such delay, the date of delivery shall be extended for a period equal to the time lost by reason of the delay.”
 MICRO LEVEL DISCUSSION
 Arbitration and Governing Law

• Importance of Governing Law.

• Reason for need of an Arbitration agreement.

• Seat vs Venue of Arbitration.

• What should be the Jurisdiction.

 MICRO LEVEL DISCUSSION

Boilerplate Clauses

“Severability : If any term of this Agreement is to any extent invalid, illegal, or incapable of being
enforced, such term shall be excluded to the extent of such invalidity, illegality, or unenforceability;
all other terms hereof shall remain in full force and effect”

“Entire Agreement Clause: This Agreement constitute the full and complete undertaking and
agreement of the Parties with respect to the subject matter hereof, the purchase and sale of Goods,
and supersedes all other representations, agreements, undertakings and understandings between the
Parties, whether oral or written, relating thereto.”
 KEY TAKEAWAYS
 Macro Level
• Customize standard formats
• Choose the type of document basis the nature of the arrangement
• Pay Stamp Duty

 Micro Level
• Importance of Date and Place
• Choose the correct Parties
• Get the Definitions and Interpretation right
• Use Examples to describe complex financial and commercial terms if necessary
• Carefully customize boiler plate clauses
• Carefully select Governing law and jurisdiction
• Always get a lawyer!