What is legal vetting of agreement?
Any contract specifies the parties' duties and responsibilities, their legal remedies in the event of a breach, and insurance coverage for unforeseen losses. Here, we would look at the basic contract for the provision of commodities in order to understand the screening process. A draft would have to be reviewed and, if necessary, revised in collaboration with the counterparties.
Why legal vetting is important ?
Running a business now a days needs a specific understanding towards contracts, agreements, deeds, resolution, and various legal documents. These documents and acceptance of the laid out terms have become our day to day essentiality in general parlance of conducting any business. A little ambiguity and ignorance can cause a huge loss due to the non understanding of the ambiguity and ignorance which can cause your business heavy loss. The growth of the any business shall rely upon various factors and one such factor is that there shall be a necessity in understanding various commercial contracts, agreements which shall be entered with various vendors, creditors, clients and employees.
A legal agreement or contract safeguards one business entity's rights and remedies rather than being only a piece of paper that two parties sign.
An agreement also establishes duties, terms, protocol, deadlines, financial concerns, and other details to ensure that every detail is correctly sealed and doesn't result in unanticipated losses.
A legal contract or an agreement has to be drafted with all sine qua none i.e important limbs as below :
- Definitions – terms like accounting year, partners, office address., etc shall be denoted clearly and specifically for the clear understanding of those who signs the contracts.
- scope of work/service- the definite accepted service/ job/ contract to be specifically and clearly mentioned. The mentioned scope of work shall dominate the nature of the service performed.
- Terms and conditions - The buyer raises a purchase order in compliance with this agreement's terms and conditions. It is the Purchase Order that makes up the "Offer." The offer is "accepted" when the seller provides the buyer with a signed copy of the "Purchase Order" through email, letter, or fax. In the Definitions, it should be made clear what a true acceptance is.
- Confidentiality and Date Protection - It is the buyer's and seller's responsibility to protect the product's confidentiality. This is particularly true for software, where the buyer has access to the seller's source codes and the seller is aware of the processes, methods, and development work done on their main technological systems.
The agreement should outline each party's desired level of confidentiality and indicate when disclosure is necessary in the event of a court order, tax responsibilities, regulatory agencies, or other comparable situations. These are crucial steps in the screening and agreement-negotiating process. - Obligations / do's and don’ts – the requirements which should be followed by both the parties to the contact.
- Commercial liability – any commercial formalities that has to be fulfilled by the business owner during the stipulated stay in the property of the party.
- Termination – inspite of having a specific duration of the contract, the parties to the contract though willing can teminate the agreement after notifying the other party with proper notice period as stipulated in the agreement. Further, The conditions under which either party may terminate this agreement should be covered by clauses in this document. Usually in cases of recurrent serious contract violations, pressing business needs, etc.
- Validity – tenure of the agreed contract/ agreement which shall stay in force and legally validate the scope of work described in the agreement.
- Waiver, liability and remedies - These clauses would protect the buyer and outline damages that would become payable in the event that the seller could not fulfill or honor his end of the bargain. In this case, it is recommended to declare a liability cap based on the product's value. If there are quality claims, losses, damages, or non-delivery, the supplier's liability is restricted to fifteen percent of the invoice amount.
In a similar vein, a clause might be added stating that further supplies to the buyer will stop if invoices are not paid by a certain date, excepting quality claims.
The product should be decided upon by the parties, and the agreement should state how the aforementioned case will be handled and how a remedy will be obtained. - IPR protection – Intellectual property is essential to software and items that are properly licensed. In the case that the supplier was accused of breaking any patents, copyright restrictions, or intellectual property rights, the supplier would have to reimburse the buyers' legal costs. Included in the indemnification should be a condition that states that the Buyer will reimburse the Supplier for expenses incurred in fighting the claim and that the Buyer will help the Supplier in doing so when needed. Here, it's critical to ensure that the buyer has a solid claim to reimburse his costs in the event of a violation. It is equally important for the Seller to be aware of this claim, as it is in the supplier's best interest to defend against any infringement of his TradeMark, property, or copyright.
- Force majeure - The parties to this agreement should concur that in the event of a breach brought on by terrorism, fire, flooding, civil unrest, earthquakes, etc.
- Dispute & settlement/ Arbitration - Using the judicial system to settle conflicts is costly and time-consuming. Arbitration is a viable alternative for resolving disputes arising from business transactions. The buyer and seller may agree to an arbitrator. The Buyer and Seller agree to take the disagreement to an arbitration lawyer in compliance with the Indian Arbitration Act. Included should be the requirements, the selection process, and the number of arbitrators. It should be made clear what the needs and conditions are. Contracts between parties should, whenever feasible, contain an arbitration clause.
- Observation and applicability of law – The applicable jurisdiction should be specified here. The legal requirements established by Indian courts may be followed by counterparties if they are based in India. The submission of international contracts to the non-exclusive or exclusive jurisdiction of English courts has become more common due to accessibility and similarities in legal application. Counterparties benefit from non-exclusive jurisdiction, which allows them to look into other options if they feel that subjecting themselves to English laws is too expensive or burdensome for any purpose.
Every agreement needs to be carefully crafted, as using stereotypes in the drafting process might be disastrous. Among the most essential components of a legitimate and legal agreement are
- simplicity
- clarity
- futuristic
- options
- definitions
- Straight & small sentences
Because of this, each of the following agreements needs to be written with certain requirements and the kind of supply or service that is involved:
- Service Agreement
- Supply Agreement
- Sale & Supply Agreement
- Technical Agreement
- Franchisee Agreements
- Confidentiality Agreements
- Procurement Agreements,
- Tri-partie agreement
- Joint Venture Agreement
- Authorisation Agreement
- Marketing Agreement
- Job Work Agreement
- Licencing Agreement
- Non Disclosure Agreement etc.
It's also critical to realize that no company can afford to be involved in perpetual legal disputes, which is why choosing an arbitration agreement is usually recommended. As a result, it is imperative to make sure that every agreement contains an arbitration clause.
Contract Vetting
Legal vetting is the process of carefully reviewing papers to ensure they comply with the law. Legal due diligence on contract provisions is the outcome of contract vetting, which also ensures the following:
- all safeguards are taken
- specific role is defined
- monetary security
- legal remedy
- well defined issues
- clarity of aspects and monetary terms etc.
Because a poorly written agreement could cause you to lose your position because of the oddity the words produce in addition to causing word confusion.
Because an agreement must be read, comprehended, and analyzed in accordance with the language and expression used within its body. It is important to realize that no meaning can be derived other than what is comprehended literally, and no fake words can be employed.
As a result, it is always advisable to have an agreement or set of documents legally vetted in order to prevent unanticipated losses that may be claimed if a law firm takes the appropriate steps to properly vet the documents on time.
To create a suitable legal agreement and to legally vet papers, one should consult a legal expert. Stereotypical or copy-and-paste legal agreements, contracts, and documents may be suicidal.
When a contract becomes Void?
There are several additional requirements set forth by the Indian Contract Law that must be met. "All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and a lawful object, and are not hereby expressly declared to be void," states Section 10 of the Indian Contract Act.
Therefore, it would be necessary to review the agreement to make sure that they follow the aforementioned guidelines. Furthermore, it is hereby ruled void in line with Section 29(g) of the Indian Contract Act if the entered contracts lacks the following:
- Both consideration and objects are prohibited.
- Without proper consent (being coerced/ undue-influence)
- no quid pro quo
- Marriage restraint
- Trade restrictions Legal proceedings restrictions
- Wagering agreements
- Bets and commitments to perform impossibly difficult tasks
How SKMC Global can help you ?
As service providers, we are essential to the legal due diligence process because we make that contracts and other legal documents are truthful, enforceable, and compliant with all applicable laws and regulations. Here's how we get involved:
Review and Analysis:
Examine contracts carefully in order to determine and evaluate important terms, conditions, and clauses. This entails making sure everything is accurate, consistent, and clear. Examine the terms and conditions' legal ramifications to make sure they protect the client's interests and adhere to the law.
Risk Assessment:
Determine any legal ramifications and hazards that the agreement may have. This entails assessing provisions pertaining to duties, fines, guarantees, and indemnities. Make suggestions for enhancements or modifications to reduce hazards and safeguard the client's interests.
Compliance Check:
Verify that the agreement abides by all applicable laws, rules, and industry standards. This involves making sure that regional, governmental, and global rules are being followed. Make sure the agreement is enforceable and written in a way that will not lead to legal problems.
Drafting and Modification:
Assist in the drafting or editing of agreements to make sure the parties' goals and legal requirements are appropriately reflected. To better safeguard the interests of the client, add bespoke provisions or suggest changes to standard terms.
Negotiation Support:
Assist in reaching a mutually agreeable agreement and offer advice on conditions during contract talks. On behalf of the customer, we assess the counterparty's suggested terms and work to secure advantageous terms.
Legal Interpretation:
We take the lead in deciphering intricate legal jargon and guarantee that the agreement is clear and devoid of unclear clauses. We offer advice on how to understand clauses in contracts and how they could affect the rights and duties of the client.
Documentation and Execution:
Give advice on how the agreement should be executed correctly, taking into account notarizations, signatures, and other necessary formalities. For convenience of retrieval and reference, we help arrange and save completed agreements.
Dispute Resolution:
If necessary, we provide guidance on how to resolve disagreements pertaining to the agreement through mediation, arbitration, or litigation. To provide equitable and efficient dispute resolution procedures, offering unambiguous means of resolving possible disputes.
Ongoing Support:
Our legal staff can also help with any necessary agreement extensions, addenda, or revisions when and where they are needed. Over the course of the agreement, we provide continuing support to manage and keep an eye on compliance and performance.
By utilizing the skills of our legal team, we will support, aid, and supervise legal due diligence to guarantee that your companies can be sure that their contracts are properly prepared, compliant with the law, and in line with their goals, reducing legal risks and strengthening contractual partnerships.