What is agreement

Every promise and every set of promises, forming the consideration for each other, is an
agreement.

What agreements are contracts

All agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and are not hereby expressly
declared to be void.

Nothing herein contained shall affect any law in force in India, and not hereby expressly
repealed, by which any contract is required to be made in writing or in the presence of witnesses,
or any law relating to the registration of documents.

Who are competent to contract

Every person is competent to contract who is of the age of majority according to the law to
which he is subject, and who is sound mind and is not disqualified from contracting by any law
to which he is subject.

What are consequences of breach of contract

i. Compensation of loss or damage caused by breach of contract: When a contract has been
broken, the party who suffers by such breach is entitled to receive, form the party who has
broken the contract, compensation for any loss or damage caused to him thereby, which naturally
arose in the usual course of things from such breach, or which the parties knew, when they made
the contract, to be likely to result from the breach of it. Such compensation is not to be given for
any remote and indirect loss of damage sustained by reason of the breach.

ii. Compensation for failure to discharge obligation resembling those created by contract: When
an obligation resembling those created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is entitled to receive the same
compensation from the party in default, as if such person had contracted to discharge it and had
broken his contract.

iii. Compensation of breach of contract where penalty stipulated for: When a contract has been
broken, if a sum is named in the contract as the amount be paid in case of such breach, or if the
contract contains any other stipulation by way of penalty, the party complaining of the breach is
entitled, whether or not actual damage or loss or proved to have been caused thereby, to receive
from the party who has broken the contract reasonable compensation not exceeding the amount
so named or, as the case may be, the penalty stipulated for.

iv. Party rightfully rescinding contract, entitled to compensation: A person who rightfully
rescinds a contract is entitled to consideration for any damage which he has sustained through
the no fulfillment of the contract.

What are stages in contracts

Following are stages in evolution of contracts:

1) Defining the scope of the agreement;
2) Agreement drafting; and
3) Contract implementation & its management

What are specimen clauses in a contract

The clauses generally included in contract document are:

Description of parties
Nature of contract
Description of subject matter
Consideration
Payment terms
Taxes & charges
Remedies / liquidated damage
Licences
Packing
Quality, quantity, inspection & acceptance
Shipment
Passing of property & risk
Warranty / Guarantee
Insurance
Duration & renewal of the agreement
Times for performance
Intellectual property rights
Restrictive covenants
Indemnities
Options
Disputes resolution
Force majeure
Termination
Severability
Assignment
Modifications
Confidentiality
Notices
Governing laws
Effective date
Signature portion

What are commonly used agreements

Following are few commonly used commercial agreement:

Sale & Purchase agreement: It is agreement that involves pricing negotiation where both
the buyer and the seller try to get the best offer before closing a deal.

Construction agreement: It is formal agreement for construction, alteration, or repair of
buildings or structures (bridges, dams, facilities, roads, tanks, etc.)

Distribution agreement: A distribution agreement is one made between a manufacturer and a
supplier to distribute and/or sell items manufactured. The supplier may make such an agreement
with separate stores selling the product that involves how goods will be merchandised or how
much supplies will available to the store. The agreement may also include terms regarding
advertising of a product.

Employment agreement: It is a formal agreement that specifies the conditions of
relationship between an employee and an employer including compensation and expectations.

Scheme of Amalgamation: It is a scheme made for arrangement whereby the assets of two
companies become vested in, or under the control of one company, which may or may not be one
of the original two companies.

Franchise agreement: It is an agreement in which a well-
established business consents to provide its brand, operational model and required support to
another party for them to set up and run a similar business in exchange for a fee and
some share of the income generated. The franchise agreement lays out the details of
what duties each party needs to perform and what compensation they can expect.

Joint Venture agreement: It is a contractual agreement between two or more business partners to
assume a common business strategy on a project. All partners generally agree to share the profits
and losses through their common shareholdings.

Non-competition agreement: It is a contract between two parties, where one party agrees not to
compete with the other for a period of time.

Services agreement: It is an agreement between two persons or businesses where one agrees to
provide a specified service to the other.

Shareholder agreement: An arrangement among a company's shareholders describing how the
company should be operated and the shareholders' rights and obligations.

Agency agreement: It is a legal contract creating a fiduciary relationship whereby the principal
agrees that the actions of the agent binds the principal to later agreements made by the agent as
if the principal had himself personally made the later agreements.

Arbitration agreement: It is a written contract in which two or more parties agree to settle a
dispute outside of court.

Hypothecation agreement: The established practice of a borrower pledging an asset as collateral
for a loan, while retaining ownership of the assets and enjoying the benefits therefrom. With
hypothecation, the lender has the right to seize the asset if the borrower cannot service the loan
as stipulated by the terms in the loan agreement.

Collaboration agreement: It is agreement between two parties for exchange of technical know-
how, technical designs and drawings; training of technical personnel and/or research and
development; continuous provision of related services.

Lease agreement: It is a contract between lessor and lessee for the fixed term for the use on hire
of a specific asset selected by lessee.

License agreement: It is an agreement where one person grants to other person, a right to do in
or upon the immovable property of the grantor, something which would, in the absence of such
right, be unlawful and such right does not amount to an easement or an interest in the property.

Loan agreement: It is a contract between a borrower and a lender which regulates the mutual
promises made by each party.

Manufacturing agreement: It is a contract that defines responsibilities and bridges the
relationship between an original equipment manufacturer and a contract manufacturer.

Partnership agreement: It is an agreement between two or more persons who have agreed to
share profits of business carried on by all or any one of them acting for all.

Trust deed: It is an agreement in which an obligation is annexed to the ownership of property,
and arising out of a confidence reposed in and accepted by the owner, or declared and accepted
by him for the benefit of another or of another and the owner.

Contract of guarantee: It is a contract where one person makes a legally binding promise to take
on the legal responsibilities of another person, if that person defaults in their obligations.

Assignment deed: It is a form of transfer of property and it is commonly used to refer the
transfer of an actionable claim or a debt or any beneficial interest in movable property.

Power of Attorney: It includes an instrument empowering a specified person to act for and in the
name of the person executing it.

Outsourcing agreements: It is the contracting out of a non-core, non-revenue producing activities
to specialists.

Indemnity agreement: It is a contract where one party agrees to protect another party against
certain future claims or losses.

Management agreement: It is contract between the owner of property and someone who agrees
to manage it.

Settlement agreement: It is an acknowledgment by parties to a civil lawsuit that it is in their best
interests to agree to settle their dispute without the need for further litigation.

Promissory Note: It is an unconditional promise in writing made by one person to another signed
by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum
certain in money, to, or to the order of, a specified person or to bearer.

Release agreement: It is a legal contract drafted in which one party relieves the other of liability,
releasing any rights to legal claims arising out of a given situation.

Reference: The Indian Contracts Act, 1872

Disclaimer: This is a general information on the commercial agreements and do not constitute
opinion to users.