Indore (Madhya Pradesh): Common belief is that contracts are used for sophisticated business deals and common people have no use for them. Busting this myth, Preena Salgia Sethi, advocate & legal cconsultant said on average a common man enters into 10 contracts a day.
Addressing a HR Forum meet of Indore Management Association, Sethi said buying vegetables, hiring help, using social media, going to restaurants are all contracts which people enter into on a daily basis and they may be either written or express. She was speaking on the topic ‘Contract Negotiation & Drafting: Common Mistakes & how to avoid themes.'
In her address Preena covered various areas of the contracts and she suggested how to be smart while carrying them out. She said that parties often realize later, when disputes arise, that some of the clauses included in the agreements on which they relied are in fact not enforceable under law. For example, some non-compete and limitation of liability provisions. Thus, it is important to take correct legal advice before executing such contracts. Different components of a contract, and their purpose, were also discussed in detail during the session. Such as indemnities, representations and warranties, conditions precedent, etc.
Preena said that many clauses in contracts, which do not appear to be important, are simply copied and pasted from previous contracts. Such clauses are often referred to as ‘boiler plate clauses’. But such copy-paste approach has the potential to undermine parties’ interests. Their lawyers must pay attention to such clauses as well. They include clauses for dispute resolution, force majeure, waiver, etc.
Executing documents, the right way is also essential to determine their enforceability. Many documents are required by law to be compulsorily registered. If such documents are not registered, courts cannot assist
a party in enforcing them.
Similarly, payment of adequate stamp duty on agreements is also necessary to make them enforceable, although it’s a curable defect. An important clause in every contract is that of dispute resolution, which is often ignored. Parties blindly choose arbitration as the dispute resolution method.
While arbitration has its benefits, it is not necessarily an appropriate remedy in all business relationships. Its appropriateness would depend on the nature of each contract, considering the factors of cost, time, convenience and effectiveness.
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