Commercial Contracts and Agreements: Drafting and Vetting

Do I need a lawyer to draft a contract, or will a template do?

A template is fine for a low-value, routine transaction where both sides trust each other and little can go wrong. Once the contract involves real money, exclusivity, intellectual property, a long term, or personal data, a template usually leaves out the clauses that matter most when a dispute arises. Templates are also often drafted for another country's law, with clauses that do not work in India.

Common examples: a non-compete clause that is void under section 27 of the Contract Act; an arbitration clause with no seat, or one that lets one side alone appoint the arbitrator; a penalty clause that a court will not enforce as written; and no clause at all on what happens to advances when the deal ends. Each of these costs far more to argue over later than to fix at the drafting stage.

If you do use a template, have it vetted. Vetting is a review of a draft against your actual deal, marking the risks and suggesting changes, and it is usually quicker and cheaper than drafting from scratch.

What makes a contract legally valid and enforceable in India?

Under section 10 of the Indian Contract Act 1872, an agreement is a contract if it is made by the free consent of parties competent to contract, for a lawful consideration and a lawful object, and is not declared void. Consent obtained by coercion, undue influence, fraud or misrepresentation makes the contract voidable at the option of the affected party. An agreement whose object is unlawful or against public policy is void under section 23.

Oral contracts are valid for most purposes, but proving their terms is hard, and some documents must be in writing and registered by law. A written agreement also lets you fix things the law would otherwise decide for you, such as the place of jurisdiction, the method of dispute resolution and the measure of damages.

Two sections void clauses that people often include without realising. Section 27 voids agreements in restraint of trade, which is why post-employment non-competes generally fail in India. Section 28 voids clauses that stop a party from enforcing its rights in the ordinary courts, or that cut short the limitation period, though arbitration agreements are expressly allowed.

Common agreements and what to watch in each

How we draft or vet a contract

The work follows the same pattern whether it is a two-page NDA or a long supply agreement. What changes is the time spent on each step.

1. Understand the deal

   We start with a call or meeting to understand who the parties are, what is being exchanged, the money, the timelines, and what you are most worried about. A short note or term sheet from you saves a lot of back and forth.

2. Read the existing papers

   If there is a draft from the other side, earlier emails, a purchase order or a quotation, we read them first. Terms already agreed in correspondence can bind you even before the formal contract is signed.

3. Draft or mark up

   For drafting, we prepare a first version suited to Indian law and your deal. For vetting, we mark up the draft with tracked changes and short comments explaining each risk, so you can decide what to push for.

4. Negotiation support

   We revise the draft as the other side comments, and join calls where useful. We tell you which points are worth holding firm on and which are ordinary commercial give and take.

5. Execution formalities

   We advise on stamp duty, the state where it should be paid, whether registration is needed, witnesses, authority of signatories, and whether electronic signing is valid for this document. A well-drafted contract signed on the wrong stamp or by the wrong person creates avoidable trouble.

6. After signing

   We give you a short note of key dates: renewal, notice periods, lock-in expiry, payment milestones. Many disputes start because someone forgot a notice deadline written in their own contract.

What should an NDA cover?

An NDA should define confidential information clearly, say what the receiving party may do with it, and say what happens at the end. A definition that covers everything is hard to enforce; one that lists categories (business plans, pricing, customer lists, source code, designs) with a general sweep is more useful. Standard exclusions cover information already public, already known to the recipient, independently developed, or required to be disclosed by law.

Decide whether it is one-way or mutual. A startup pitching to an investor often finds that investors refuse to sign NDAs at all, while a vendor receiving technical drawings should always sign one. The term matters too: obligations for trade secrets and source code may need to run for years after the business relationship ends.

The real remedy for a breach of an NDA is usually an injunction, because damages are hard to measure once information is out. The NDA should record that the recipient accepts that an injunction is an appropriate remedy, and should name a convenient court or seat of arbitration. If the information includes personal data, the NDA should also deal with how it is protected under the Digital Personal Data Protection Act 2023.

What goes into a service or consultancy agreement?

The scope of work is the heart of a service agreement, and vague scope is the most common source of disputes. List deliverables, timelines and the standard of performance, and say how extra work is requested and priced. For software, design or marketing services, add an acceptance process: what counts as delivery, how long the client has to test, and what happens if it fails.

Payment terms should cover milestones, invoices, GST, TDS deductions, and interest for late payment. If you are a micro or small enterprise registered under the MSMED Act 2006, the buyer must pay within the agreed period, not exceeding 45 days from acceptance (section 15), failing which compound interest at three times the RBI bank rate is payable (section 16), and you can approach the Micro and Small Enterprises Facilitation Council (section 18).

Two clauses decide the size of any dispute. Intellectual property: who owns the code, designs or content created, and when ownership passes (a freelancer keeps copyright unless it is assigned in writing). Limitation of liability: a cap on damages, usually linked to fees paid, with exceptions for fraud, confidentiality and IP. Our page on trademark and copyright registration explains why ownership of brand assets should be settled in the contract.

Supply and distribution agreements: what protects the buyer and the seller?

A supply agreement should state specifications precisely, with drawings or samples referred to and annexed, and say how quality is tested and what happens to rejected goods. The Sale of Goods Act 1930 fills gaps on when risk and ownership pass, but its default rules may not suit you, so write them in: risk on delivery at the buyer's warehouse, title on payment, and so on.

Price clauses need care in long contracts. Fix the price for a period, or link changes to a published index or raw material cost, with a notice period and a right to terminate if the increase exceeds a limit. Minimum purchase commitments, exclusivity and territory in distribution agreements should be clear and reasonable, because very wide restrictions can raise questions under the Competition Act 2002.

Add a force majeure clause that names the events covered and says what happens if the event lasts long, such as a right to terminate after a set number of days. Without one, a party must rely on frustration under section 56 of the Contract Act, which Indian courts apply narrowly.

Rent agreement or lease in Delhi, Noida and Ghaziabad: do I need registration?

A lease of immovable property for a term exceeding one year, or from year to year, must be registered under section 17 of the Registration Act 1908. If it is not registered, under section 49 it cannot be used as evidence of the lease terms, though it may still be used for limited collateral purposes. This is the reason so many residential rent agreements in Delhi NCR are made for 11 months.

An 11-month agreement still has to be stamped. Stamp duty on leases depends on the state, the rent, the deposit and the term, and Delhi and Uttar Pradesh calculate it differently, so check the current rate before you buy the e-stamp. In Uttar Pradesh, the 2021 tenancy law requires tenancy agreements to be in writing and the Rent Authority to be informed, so landlords in Noida and Ghaziabad should follow that process.

For commercial leases, the clauses that matter are the lock-in period, rent escalation, the security deposit and its refund timeline, fit-out and restoration, permitted use, subletting, and maintenance charges. Landlords and tenants in Delhi should also complete police verification of tenants. Property title, builder disputes and RERA are covered on our real estate law page.

Is there a franchise law in India?

India has no separate franchise statute, so franchise relationships are governed by the Contract Act, the Trade Marks Act for the brand licence, the Competition Act, tax law and, for foreign franchisors, foreign exchange rules. That makes the franchise agreement itself the main source of rights for both sides. A franchisee who signs a vague agreement has very little to fall back on.

The franchisor should own a registered trademark (or at least a pending application) before licensing it, and the agreement should define the licensed marks, the territory, the term and renewal, fees and royalty, required supplies, training, operating manuals, audits and quality standards. The franchisee should look hard at exit: refund of the initial fee, buy-back of stock and equipment, the period to remove signage, and any restriction on running a similar business afterwards, which may be unenforceable under section 27.

GST applies to franchise fees and royalty, and payments to a foreign franchisor are made through the bank under FEMA rules. We draft franchise agreements for both franchisors and franchisees, and the brand protection side is covered on our trademark and copyright law page.

Do co-founders need a shareholders agreement?

Yes, if there is more than one owner. A shareholders agreement records what the law does not: who sits on the board, which decisions need everyone's consent, whether founders' shares vest over time, what happens if a founder leaves, and how shares can be sold. Without it, disputes are decided by the Companies Act 2013 and the articles of association, which may not reflect what the founders thought they agreed.

Common clauses include a right of first refusal on share transfers, tag-along and drag-along rights, anti-dilution protection for investors, information rights, a deadlock procedure and exit routes. Rights that are meant to bind the company, or to restrict share transfers in a private company, should also be written into the articles of association, because a company is generally bound by its articles and not by a private agreement between shareholders.

When founders fall out, the alternative to a clear agreement is often a petition for oppression and mismanagement before the NCLT under sections 241 and 242. Our corporate law page covers those disputes, and company registration explains how the structure is set up in the first place.

Are non-compete clauses in employment agreements enforceable in India?

A non-compete that applies during employment is generally enforceable; one that stops an employee from working for a competitor after leaving is generally void under section 27 of the Contract Act. Indian courts have consistently refused to enforce post-employment restraints, however reasonable they look. Drafting one anyway often gives a false sense of security.

What does work: a confidentiality clause that survives termination, a clause assigning intellectual property created during employment to the employer, a reasonable non-solicitation clause for clients and employees (enforced more cautiously), garden leave during the notice period, and the return of devices and data. Under section 17 of the Copyright Act, work made in the course of employment belongs to the employer unless agreed otherwise, but an express clause removes argument, especially for software.

The four Labour Codes came into force on 21 November 2025, replacing 29 older labour laws, and state rules are still being notified. Appointment letters, wage terms, fixed-term contracts and gratuity provisions should be checked against the current rules. Disputes and compliance questions are covered on our labour and industrial law page.

The laws behind a commercial contract

How much stamp duty applies to my agreement, and what if it is not stamped?

Stamp duty depends on the type of document and the state where it is executed or brought, and rates differ between Delhi, Uttar Pradesh and Haryana. Some agreements attract a small fixed duty; leases, conveyances and some commercial instruments attract duty based on value. In Delhi and Uttar Pradesh, duty is usually paid through e-stamp certificates issued by Stock Holding Corporation of India (SHCIL) and its authorised centres.

Pay the duty before or at the time of signing, in the name of one of the parties, and make sure the e-stamp details match the document. If a document is unstamped or understamped, a court or authority can impound it, and it cannot be admitted in evidence until the deficit and a penalty are paid. The penalty can be several times the shortfall, so paying correctly at the start is much cheaper.

A seven-judge bench of the Supreme Court held in December 2023 that an unstamped agreement is not void and the defect can be cured by paying the duty, and that an arbitration clause in such an agreement can still be acted on. That decision removes one trap, but an unstamped contract still cannot be relied on in court until it is stamped and the penalty paid.

Does my agreement need to be registered or notarised?

Registration is compulsory only for the documents listed in section 17 of the Registration Act, mainly those dealing with immovable property: sale deeds, gift deeds, leases for more than a year, and agreements to sell where part performance protection is claimed. Most commercial contracts, such as NDAs, service, supply and shareholder agreements, do not need registration. Where registration is needed, the document is presented at the Sub-Registrar's office within four months of execution, with the parties and witnesses present.

Notarisation is different. A notary under the Notaries Act 1952 attests that the person signing appeared and was identified; it does not register the document, does not cure missing stamp duty, and does not make an invalid clause valid. Many people believe a notarised rent agreement for three years is safe. It is not: if the lease is for more than a year, it needs registration.

Where a document is to be used abroad, it may need notarisation followed by apostille or attestation, depending on the country. We tell you which formality your document needs before you sign.

Are e-signatures and online contracts valid in India?

Yes, for most commercial contracts. Section 10A of the IT Act 2000 says a contract is not unenforceable merely because it was formed electronically, and electronic signatures that meet the Act, including Aadhaar-based eSign and digital signature certificates, are legally recognised. Click-to-accept terms on a website and contracts concluded by email exchange are also generally binding if consent and terms are clear.

The exceptions are in the First Schedule of the IT Act: negotiable instruments other than cheques, powers of attorney, trusts, wills, and contracts for sale or conveyance of immovable property. These still need physical signatures, and many need registration. Stamp duty also still applies to electronically signed documents, and e-stamping should be done for the transaction.

Evidence matters more than form. A simple image of a signature pasted on a PDF is weaker than an Aadhaar eSign or a platform with an audit trail showing who signed and when. If a dispute arises, the electronic record is proved with a certificate under section 63 of the Bharatiya Sakshya Adhiniyam 2023. Advocate B.K. Singh's computer science background helps here in setting up signing processes and in contracts for software, SaaS and IT services.

Arbitration or court: what dispute clause should my contract have?

A good dispute clause names the method, the place and the rules. For arbitration, it should state the seat (for example New Delhi), the number of arbitrators, how they are appointed, the language, and whether an institution such as the Delhi International Arbitration Centre will administer the case. A clause that only says disputes shall be referred to arbitration invites a preliminary fight over appointment under section 11.

Avoid clauses that let one party alone appoint a sole arbitrator; the Supreme Court has held such appointments invalid, and they lead to applications to the court for a fresh appointment. For smaller contracts where arbitration would cost too much, a jurisdiction clause choosing a court that already has jurisdiction (for example, courts at Delhi where the contract was signed and payments made) may be more sensible. Parties cannot give jurisdiction to a court that would otherwise have none.

Commercial disputes of ₹3 lakh and above go through pre-institution mediation under section 12A of the Commercial Courts Act 2015 unless urgent interim relief is needed. Our pages on arbitration and conciliation and alternate dispute resolution explain how these clauses play out once a dispute begins.

Clauses people most often get wrong

• Liquidated damages. A fixed amount payable on breach is treated as an upper limit under section 74, not an automatic entitlement. Set a figure that is a genuine estimate of loss, and keep evidence of how it was worked out.
• Unlimited indemnities. An indemnity covering all losses of any kind, without a cap or exclusions, can exceed the value of the whole contract. Limit it to specific risks such as third-party claims, IP infringement and breach of law.
• Termination. Many contracts allow termination for breach but say nothing about notice, cure periods, or what happens to advances, stock and data afterwards. Termination for convenience should come with a notice period and a settlement of accounts.
• Notices. A notice sent to an old address or a personal email may not count. Name the addresses and emails for notices, and say how a change of address is communicated.
• Automatic renewal. A contract that renews unless cancelled in a narrow window can lock you in for another year. Diarise the window or remove the clause.
• Entire agreement and side letters. An entire agreement clause wipes out promises made in emails and meetings. If a promise matters, it must be in the signed contract.
• Authority to sign. A contract signed for a company by someone without a board resolution or authority letter invites a challenge. Ask for proof of authority for large contracts.

Before you sign: a checklist

• The parties are named correctly, with the legal entity (not a brand name) and registered address
• The person signing for the other side has authority, with a board resolution or authority letter for large contracts
• Scope, price, payment timeline and late payment interest are written in full
• Ownership of IP, data and deliverables is stated
• Liability cap, indemnity and termination clauses are balanced and you can live with the worst case
• The dispute clause names the seat or court and the method of appointment
• Stamp duty has been paid in the right state and for the right amount before or at signing
• Registration has been checked where immovable property is involved
• Every annexure, schedule and price list referred to is actually attached
• You have a note of renewal dates, notice periods and lock-in expiry

Fees, turnaround and how we work on agreements

Fees are discussed at the first meeting and agreed in writing, either per document or for a set of documents, and by stage where negotiation is expected. Stamp duty, registration charges and other out-of-pocket costs are separate. Turnaround depends on the length of the document and how settled the commercial terms are; a short NDA can be quick, while a franchise or shareholders agreement with several rounds of negotiation takes longer.

Advocate Sadhna Singh usually handles the first discussion and the drafting, and keeps track of comments from the other side. Advocate B.K. Singh reviews higher-value or unusual agreements and joins negotiations where disputes are likely, drawing on his litigation work to test how each clause would read in court. You can read more about the partner who drafts most agreements.

If the other side has already breached a contract, the question becomes one of recovery and litigation; our page on commercial court cases in Delhi covers that. To have a draft vetted or a new agreement prepared, send the papers and a short note through our enquiry form.