Drafting of Contract and Arbitration Clauses

CONTRACT DRAFTING AND DRAFTING OF
ARBITRATION CLAUSES
RAMASUBRAMANIAN B.E. LLB FCIArb

e-mail: ram.s@adroitpmc.com
www.adroitpmc.com https://www.linkedin.com/in/ramadr/
CONTRACT DRAFTING AND DRAFTING OF ARBITRATION AGREEMENTS AND
ARBITRATION CLAUSES
CONTENTS
I. COMPANY SECRATARIES AND THE CONTRACTS. ......................................................... 3
II. CONTRACTS – THE PIVOT ........................................................................................... 4
III. CONTRACT versus CONTRACT ACT: ............................................................................ 5
IV. IMPORTANCE OF DILIGENT CONTRACT DRAFTING!..................................................... 6
V. RELEVENT STATUES /RULES / PROTOCALS .................................................................. 8
VI. TYPES OF CONTRACT ................................................................................................. 9
VII. SOURCES OF CONTRACT .......................................................................................... 11
VIII. ELEMENTS OF A CONTRACT: .................................................................................... 13
IX. GENERAL OBJECTIVE OF A CONTRACT ...................................................................... 15
X. RED FLAG /CRITICAL CONTRACT CLAUSES: ............................................................... 15
XI. CONTRACT CLAUSES MITIGATING THE FUTURE LITIGATION ...................................... 21
XII. ARBITRATION AGREEMENT / CLAUSE ....................................................................... 22
ARB-MED-ARB CLAUSE ................................................................................................... 28
XIII. REMEDIES FOR THE BREACH OF CONTRACTS ............................................................ 30
XIV. GENERAL WRITING PRINCIPLES: ............................................................................... 31
XV. SPECIAL CONTRACTS ................................................................................................ 39
XVI. NEGOTIATION, EXECUTION AND STAMPING OF AGREEMENTS ................................. 44
XVII.STAMPING OF ARBITRATION AGREEMENT ............................................................... 48
XVIII. SUMMARY: ....................................................................................................... 50
CONTRACT TERMINOLOGY ............................................................................................. 51
TEMPLATE CONTRACT AGREEMENT ................................................................................ 56
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“A Contract is only as good as the people signing it” ~ Jeffrey Fry
I. COMPANY SECRATARIES AND THE CONTRACTS.
The Company Secretary is expected to advise the board on the critical sections of the
agreements and Contracts of the Company. Moreover, the Company Secretary has
responsibility to ensure that the organisation complies with all relevant statutory
and regulatory requirements.
Under these premises, it is imperative for the Company Secretaries to acquire the
knowledge of critical or red flag clauses in a Contract that may impact the interests
of the Company.
Further, the Company Secretary should be able to identify the Contract terms that
may contravene the various statues prevailing at the time of Contract formation
which in turn safeguard the Company against unwanted litigations, resultant losses,
and disrepute.
Therefore, it is essential to get acquainted with the following related to any Contract
review or drafting as follows:
• What is the purpose of the Contract?

• Whether it is a domestic or an international Contract?
• Are all boilerplate terms effectively incorporated in the Contract?
• Are all important terms carefully accommodated in the Contract?
• Is there a correct arbitration clause included in the Contract?
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II. CONTRACTS – THE PIVOT
Over the last decade, substantial quantum of commercial disputes opted for
Alternative dispute resolution (ADR) than the litigation which incurs enormous time
and whopping an average 39% cost of the claim value! It is obvious from the
milestone amendments to the Arbitration and Conciliation Act 1996 to facilitate
seamless and equitable remedy via ADR mechanism for the business community.
Whether it is a Project or commercial transaction, disputes are inevitable from the

onset until completion due to various factors; However, a diligently drafted Contract
that balances the rights and liabilities of the stake holders ensures timely remedy
and thus accomplishment of the Project within the anticipated time becomes a
reality.
Hence it is quintessential to draft the Contracts with exemplary terms that synergises
the rights of the parties and fosters business relationship for the symbiotic
development. For this reason, a well drafted Contract is otherwise termed as ‘Vedas’
for a Project or Commercial transaction that stipulates ethical way forward and
balanced remedy for the malaise of the stakeholders. Therefore, the terms of the
Contract should be indisputable.
It is pertinent to mention that a well drafted Contract only can ensure dispute
avoidance and mitigate the insurmountable losses to the stakeholders. The risk
averse investors seek suitable remedy from the terms of the Contracts as
appropriate to the breach events.
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III.CONTRACT versus CONTRACT ACT:
Contract – Section 2(e) of the Indian Contract Act, 1872 defines an agreement as
“every promise and every set of promises forming consideration for each other”; An
agreement which is enforceable by law is called a Contract.
Section 10 of the Act stipulates the conditions of enforceability. Pursuant to this

section, an agreement is a contract when it is made for some consideration between
parties who are competent, with their free consent and for a lawful object. There are
many types of Contracts on a different basis.
• It is apt to state that Indian Contract Act 1872 is the Genus and the Contract
document is the species to the Act.
• Therefore, it is pertinent that the terms of the Contract shall not contravene
the provisions of the Act or otherwise the Contract will be invalidated before
the Court in case of any disputes arising among the stakeholders.
Further, the drafting team shall be aware of various other statues and protocols
pertinent to the trade of the Contract in addition to the Indian Contract Act 1872.
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IV.IMPORTANCE OF DILIGENT CONTRACT DRAFTING!
It is a settled fact that a Contract creates a private body of law between its parties.
This private body of law generally includes:
a) the statement of facts that each party made that induced the other party
to enter the transaction;
b) each party’s promises as to its future performance;
c) each party’s rights and duties;
d) the events that must occur before each party is obligated to perform;
e) each party’s discretionary authority;
f) how the contract will end, including the events that constitute a breach
and the remedies for breach; and
g) the general policies that govern the parties’ relationship.
A contract, therefore, sets out future rights and obligations of parties, and at the
same time, record rights and obligations that are already conferred on the parties.
Hence, it is necessary that such rights, benefits, duties, and liabilities are set out in a
definitive form, preferably in writing.
It is more so important because a contract is meant to provide written evidence of

parties’ wishes and mutual understandings.
If a contract records such wishes and mutual understandings accurately and is signed
by the parties, the scope for fraud, forgetfulness, or inaccuracy is reduced.
Moreover, such an explicit record helps prevent fraud.
It is also required when there are intricate details involved, or when the subject
matter is so complicated that it requires a careful record in writing to ensure that the
contract is appropriately carried into effect.
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Therefore, a contract needs to be drafted to memorialize the mutually agreed
understanding accurately, clearly, and unambiguously between the parties. It should
be sufficiently specific that the parties know their rights and obligations, and at the
same time, be flexible enough to cope with changed circumstances. It should
advance parties’ goals, reduce their risk to the maximum extent possible and
ultimately prevent litigation.
Clearly, drafting a contract is more than a mechanical process of recording the terms
of a transaction in writing. If this were to be a simple exercise of merely writing what
is agreed upon, lawyers would not have been needed to draft such contracts.
However, the fact that almost all contracts are drafted by lawyers or people with a
legal background, it makes it clear that drafting a contract indeed involves the
application of a variety of skills and processes. The following section is an attempt to
understand such process of contract drafting and how a lawyer goes about drafting a
contract.
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V.RELEVENT STATUES /RULES / PROTOCALS
The schedule shown above is not exhaustive and vary as per the trade of the
Contract. It is prudent to refer the latest amendments of the respective Act during
the Contract formation in order to secure the rights of the stakeholders.
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VI.TYPES OF CONTRACT
1. EXECUTED CONTRACT
When both the parties have completely performed their respective obligations under the
contract, it is said to be executed contract. It means that whatever was the object of the
contract has been carried out. In most executed contracts the promises are made and then
immediately completed.
The buying of goods and/or services usually falls under this category. There is no confusion
about the date of execution of the contract since in most cases it is instantaneous.
2. EXECUTORYCONTRACT
An executory contract is one in which one or both parties are yet to perform their
obligations. In such Contracts, the consideration is the promise of performance or
obligation. In executory contracts, the consideration for the promise made is carried out
sometime in the future.
Example – Delivery within 5 days and payment to be made after 15 days. The contract is
executory. Another good example of an executory contract is that of a lease and
Construction contracts.
3. CONTINGENT CONTRACT
‘A contingent contract is a Contract to do or not to do something, if some event
collateral to such contract does or does not happen’.
In simple words, contingent contracts, are the ones where the promisor perform his
obligation only when certain conditions are met. The contracts of insurance, indemnity,
and guarantee are some examples of contingent contracts.
4. COST PLUS CONTRACT

In a construction cost-plus contract, the buyer agrees to cover the actual expenses of
the project. These costs include labor and materials, plus other costs incurred to
complete the work. The “plus” part refers to a fixed fee agreed upon in advance that
covers the contractor's overhead and profit.
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5. FIXED PRICE CONTRACT

A fixed-price contract is a type of contract in project management wherein the payment
does not depend on the resources or the time spent. It involves setting fixed price for
the product, service or result defined in the contract.
6. LUMPSUM CONTRACT
In this type of contract, the contractor offers to do the whole work as shown in drawings
and described by specifications, for a total stipulated sum of money.
7. REMEASUREABLE CONTRACT
In re-measurable contracts, works will be carried out based on the pre-agreed unit rates.
All the Payments will be paid based on the actual work done after measuring the work
done. So the final value of the project will be derived based on the unit prices and exact
quantities.
8. CONSULTANCY CONTRACT
The consultancy contract is made between the company and consultant. It outlines the
scope of work to be performed by them and other terms and conditions related to their
appointment in the company.
9. COMMERCIAL CONTRACTS
A commercial contract refers to a legally binding agreement between parties in which
they are obligated to do or restrain from doing particular things. Commercial
contracts can be written, verbal, or implied in a formal or an informal manner.
10. E-CONTRACTS
E-contract is one of the divisions of e-business. It holds a similar meaning of traditional
business wherein goods and services are switched for a particular amount of
consideration. The only extra element it has is that the contract here takes place
through a digital mode of communication like the internet. It provides an opportunity
for the sellers to reach the end of consumer directly without the involvement of the
middlemen.
11. GOVERNMENT CONTRACTS

As the name suggests a Government contract is a contract in which one of the parties is
the Government. The State, as well as the Central Government, maybe the party in
a Government contract.
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VII.SOURCES OF CONTRACT
Contemporary contract law seeks to respect free markets, regulate the freedom of
powerful contractors, safeguard the rights of weaker parties, and affect social policy
concerning matters of consumer protection, employee rights, and business ethics.
Comparing the Civil and Common Law Approaches to Contract Law
The system known as the “Common Law’ developed in England and became adopted in
Britain’s colonial territories. Thus, the common law of England has remained the basic
legal system in most of Britain’s ex-colonies, including India. Therefore the term
“common law”, used in the broadest international sense, designates a country whose
legal system is based on the common law of England.
The Meaning of “Common Law”
In addition to characterizing the English and American legal systems on an international
level, the term “common law” refers to those portions of law based upon decisions of
the courts (as distinct from those created by legislation).
In common law countries, many statutes govern aspects of Contracts. These
statutestend to codify the common law by taking rules and principles already developed
byjudges and putting them into statutory form, in order to clarify the law or make
itmore accessible.
JUDICIAL OPINIONS
A fundamental principle of justice is the equal treatment of people in like situations. As
common law developed, it became established practice for court decisions to be
recorded so that they could be used as the basis for resolving later cases. Thus, a court
decision not only settled the dispute between the immediate parties, but it also formed
a rule to be followed in the next case involving similar facts.
SOURCES OF THE CONTRACT FORMATION:

The drafting team draws the essential elements in order to construct the resilient
Contract from various sources as follows:
1. Tender submission / quotations
2. Negotiation / Communication
3. Letter of Acceptance
4. Minutes of Meetings
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5. Contract Act
6. Risk Identification and Transfer
7. Material / Project Specifications
8. Statutory Provisions
9. Scope of Work / Supply
10. Protocols – Domestic and International
CROSS SECTION OF A CONTRACT DOCUMENT:
There is no specific legislation regulating standard form of contracts in India as they are
also governed by the principles of Indian contract law. The general view taken by the
Indian courts is that standard form contracts cannot be avoided, unless the aggrieved
party can establish that the contract vitiates the essential ingredients of a valid contract.
In some cases, Indian courts have refused to enforce standard form contracts on the
ground that such contracts are ‘unfair’ and ‘unreasonable’. This assumes significance in
cases where the bargaining power of the contracting parties is not at the same level or if
such a contract was found to be of unconscionable nature.
Hence it is essential to understand the cross section of a Contract irrespective of its form
and type. Essentially the Contract document is a compilation of the rights , liabilities and
remedies of the stake holders.
All along the Contract document, one may dissect and identify the intertwining of the
stakeholder’s respective rights as shown above. It is imperative to keep in mind this
essential thread that binds and nurture the relationship throughout the lifecycle of the
Contract and beyond. Before defining each and every terms of the Contract the above
fact should be evaluated before their inclusion in the Contract.
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VIII.ELEMENTS OF A CONTRACT:
Although every Agreement or Contract possess different parts depending upon its
nature and trade however there some parts which are usually seen in the agreement:
• Title effective date and Description of Parties.
• Recitals (Background information on what leads the parties to come
together)
• Definitions of certain Terms.
• Terms and Conditions.
• Legal Disputes redressal mechanism.
• Escalation clauses.
• Confidentialities.
• Witness Clause.
• Schedules or Annexures.
• Registration, Stamping and Attestation
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TYPICAL CONTRACT DOCUMENT STRUCTURE:
(INFRASTRUCTURE PROJECT)
VOLUME 1: FORM OF AGREEMENT & CONDITIONS OF CONTRACT

Part 1: Form of Agreement
Part 2: General Conditions of Contract
Part 3: Letter of Acceptance
VOLUME 2: APPENDIX A - SCOPE OF WORK & TECHNICAL INFORMATION
Part 1: Scope of Work
Part 2: General Requirements
Part 3: Site Specific Information
Part 4: Heath& Safety, Environment & Sustainability Regulations & Requirements
Part 5: Risk Management

Part 1: Particular Specifications
VOLUME 5: APPENDICES B TO F
Part 1: Appendix B - Schedule of Prices and Rates
Part 2: Appendix C - Insurance
Part 3: Appendix D - Contractor Technical Proposal
Part 4: Appendix E - Contract Execution Plan
Part 5: Appendix F - Administrative Procedures
Attachment 1 – Advance Payment Bank Guarantee
Attachment 2 - Bank Guarantee (Performance Security)
Attachment 3 - Contract Variation Form
Attachment 4 - Completion Certificate
Attachment 5 - Discharge Certificate
Attachment 6 – Instruction Form
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IX.GENERAL OBJECTIVE OF A CONTRACT
The Contracts and agreements are basically ‘meeting of minds’, however as all the
businesses runs with various scenarios, it is vital that the intentions of parties is always
advised to be noted down on a piece of paper with clear communicable terms and
conditions. It must be such that it can be interpreted harmoniously and in true letter and
spirit of document. They must not be misinterpreted and provide a clear picture of
intention conveyed in such contracts/ Agreements.
From this understanding, the objectives of any Contract are:
• Mitigation of Financial and Legal Risks;
• Creation of Legal rights and liabilities between the stakeholders
• Protection of Business strategies and Ideas.
Nevertheless, the foremost objective of the Contract document shall be to transcribe

the commercial objective which the stakeholders strive to achieve.
X.RED FLAG /CRITICAL CONTRACT CLAUSES:
Any Contract document is a compilation of both Boiler plate and Operative clauses.
Boiler plate Clauses– the clauses, generally appearing at the end of a contract, whichare
used to settle general matters such as
• Choice of law,
• Notice procedures,
• Amendment procedures,
• Interpretation issues,
• Dispute resolution mechanisms and the like.
The term also has a more general definition meaning any standardized or preprinted form
for agreements. The term is also used to talking about the 'smallprint'. For example, the
small print after a TV commercial about a product or contestwhich list all the various
restrictions.
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Operative Clauses- These terms vary as per the Contract requirements and often form part
of the negotiation; the terms include Warranty, Indemnity, Payment terms, Termination,
Suspension etc.,
TERMINATION PROVISIONS
When negotiating a contract, special attention should be given to “exit provisions”.

Well-drafted termination provisions are among the most valuable contractual
protections.
Termination for Cause provisions
Termination “for cause” refers to a material breach that is not cured within a
specified period.
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Opportunity to Cure provisions
Termination sections often grant the damaged party the right to terminate the
agreement in the event of a material breach of the agreement by the other party.
With respect to curable breaches, such provisions typically provide that the damaged
party shall have the right to terminate the contract if the breach is not cured within a
specified time period.
Events Triggering Termination
Contracts also often grant the parties the right to terminate upon the occurrence of
certain specified events. These can include (but are not limited to):
a. Insolvency, bankruptcy, or liquidation
b. Merger of the other party
c. Change of control of the other party
d. Changes in governmental regulations
e. Failure to meet certain specified performance levels
Impracticality of Performance
Impracticability applies when events following contract formation are so

differentfrom the assumptions on which the contract was based, that it would be
unfair to hold the adversely affected party to its commitments.
A mistake causes a defect in contract formation, permitting a party to be excused

fromaccountability for amanifestation of assent. Impracticability, on the other hand,
has nothing to do with any problem in formation and presupposes that a binding
contract was made. Rather, it is concerned with whether a post-formation change of
circumstances has such a serious effect on the reasonable expectations of the
parties that it should be allowed to excuse performance. Similarly, the doctrine of
frustration of purpose is also concerned with a post-formation change of
circumstances but in a slightly different context than the doctrine of impracticality of
performance.
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Elements of the Excuse of Impracticality
The excuse of impracticability can be available to the party who is adversely affected
by the change in circumstances. However, all elements to this excuse must
besatisfied in order for a party to be relieved from performance.
These elements include:
1. After the contract was made, an event occurred, the non-occurrence of which was
a basic assumption of the contract.
2. The effect of the event is to render the party’s performance “impracticable”, i.e.,
truly burdensome.
3. The party seeking relief was not at fault in causing the occurrence.
4. The party seeking relief must not have borne the risk of the event occurring.
FRUSTRATION OF PURPOSE
Similar to impracticability, frustration of purpose is concerned with a post-formation

event, the non-occurrence of which was a basic assumption on which the contract
was made. This event must not have been caused by the fault of the party whose
purpose is frustrated; and that party must not have borne the risk of its occurrence.
The essential difference lies in the effect of the event. Frustration of purpose arises
when the impact of the event is on the benefit reasonably expected by a party in
exchange for the performance, rather than directly affecting the performance of the
adversely affected party by making it unduly burdensome. In this case, the event so
seriously affects the value or usefulness of that benefit that it frustrates the
contract’s central purpose for that party. As to the purpose that has been frustrated,
the purpose must be so patent and obvious to either party that it can be reasonably
regarded as the shared basis of the contract.
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FORCE MAJEURE CLAUSES
Force majeure is a term used to describe a “superior force” event. Force majeure
clauses have two purposes: they allocate risk and put the parties on notice of events
that may suspend or excuse service.
The essential requirement of force majeure is that the invoking party’s performance
of a contractual obligation must be prevented by a supervening event that is
unforeseen and not within the control of either party.
Typical force majeure provisions include: “acts of God”, superseding governmental

authority, civil strife and labor disputes. However, there is no uniform set of events
that constitute force majeure. Instead, force majeure remains a flexible concept that
permits the parties to formulate an agreement that corresponds to their unique
course of dealings and industry idiosyncrasies.
Moreover, recent world events have increased the necessity of including additional
unthinkable events, such as terrorism and the risk of biological and chemical
warfare.
Negotiating Force Majeure Clauses Parties negotiating a force majeure clause must
scrutinize the events and allocation of risk to assure that the clause is not one-sided
or unenforceable.
Drafting a Force Majeure Clause
The terms of the Force Majeure clause shall corroborate with the Indian Contract Act
1872 and appropriate to the respective trade. For example, Force Majeure clause
for an export import Contract will not suit for a Construction Contract wherein the
circumstances vary altogether.
In drafting force majeure clauses, parties may rely on general clauses or specifically
enumerate which events will constitute force majeure. A prudent force majeure
clause specifically enumerates the events that will prevent performance and entitle a
party to suspend or excuse an obligation. Force majeure clauses may also include
language that is industry specific.
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INVOKING A FORCE MAJEURE CLAUSE
Generally, a party may invoke a force majeure clause if an enumerated event occurs
that is out of the party’s control and prevents performance of a contractual
obligation. The burden of proof is on the party seeking to invoke the force majeure
clause. The force majeure event may either suspend or excuse a party’s
performance.
Sample Force Majeure Clause
Neither party shall be liable in damages or have the right to terminate this
Agreement for any delay or default in performing hereunder if such delay or default
is caused by conditions beyond its control including, but not limited to Acts of God,
Government restrictions, wars, insurrections ad/or any other cause beyond the
reasonable control of the party whose performance is affected.
Additional Risk Allocation Clauses
In addition to a force majeure clause, a contract may impliedly place risk on a party
by means of a provision such as a warranty, an undertaking to obtain insurance, or
some other commitment from which the assumption of risk may be inferred. It is
good planning for the parties to consider potential risks and to provide for them
clearly in the contract. This reduces the possibility of later disputes and litigation.
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XI.CONTRACT CLAUSES MITIGATING THE FUTURE LITIGATION
Too often, a situation that might have been quickly and easily resolved by simply
referring to well-drafted contract language turns into costly and time-consuming
litigation. Whether the contract is simple or complex, clauses that address the
possibility of future litigation should never be overlooked.
Forum Selection Clause
Forum selection clauses specify the place where lawsuits will be filed in the event a
dispute arises between the parties to a contract. Specifically, the parties utilize such
clauses to expressly agree to litigate all disputes arising from the contract in a
specific jurisdiction and venue.
Choice of Law Clause
Parties may also negotiate which laws will govern their contract. Specifically, choice
of law clauses specify the legal jurisdiction under which the agreement shall be
governed and construed. While there are clear advantages to the parties for
inserting such clauses into their contract, there must also be a rational reason for the
specifie choice of law. Such clauses require careful research and negotiation,
because the laws of different jurisdictions may affect the parties differently.
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XII.ARBITRATION AGREEMENT / CLAUSE
Arbitration agreement is the very foundation of arbitration. It is the very source of the
powers of arbitrators. It determines the scope of their authority. As arbitration is a
voluntary process there cannot be arbitration without there being an arbitration agreement.
According to Section 7(1)1 ―arbitration agreement means an agreement by the parties to

submit to arbitration all or certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual or not. Thus an
agreement whereby parties express their consent or intention to settle the dispute through
arbitration is termed as an arbitration agreement.
Arbitration being a voluntary/ consensual process the consent must be very clear if there is
any doubt about the said consent/ intent the matter cannot be referred to arbitration. For
example if the agreement provides the parties ―may refer the dispute to arbitration that
would not be a competent arbitration agreement as the intention to opt for arbitration is
ambiguous.
On the other hand if parties say that the matter ―shall‖ be referred to arbitration that
would be a valid agreement. Therefore, one must be very careful while drafting the
arbitration agreement. Also there must be no ambiguity about the identity of the parties to
the arbitration agreement. If some of the parties to a dispute are not a party to the
arbitration agreement they cannot be referred to arbitration. Only those who are a party to
the arbitration agreement can be referred to arbitration.
The primary source of the tribunal's powers is the parties' arbitration agreement.
Consensual arbitration is contractual in nature as between the parties, arbitrators, and
arbitral institutions. The arbitration agreement is supplemented by provisions of the
arbitration rules incorporated into it. These rules also contain specific powers and rights
exercisable by the arbitrators. According to the doctrine of severability (or separability for
some), the arbitration agreement contained in a contract can survive the invalidity or
termination of the main contract so that the jurisdiction it confers on the tribunal allows it
to decide on the consequences of that invalidity. If this were not the case, all a reluctant
1
Arbitration and Conciliation Act, 1996
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respondent would need to do is allege invalidity, in order to take the proceedings before a
state court – thus putting the parties back into the very place they sought to avoid by going
to arbitration.
TYPES OF ARBITRATION AGREEMENT:
According to Section 7 (2) arbitration agreement can be in the form of a clause in the main
contract or it can be in the form of a separate agreement. The latter is called submission
agreement. Generally, arbitration agreements are in the form of a clause in the main
contract.
FORM OF ARBITRATION AGREEMENT:
The Act does not prescribe any form for an arbitration agreement apart from that it must be
in writing. If it is not in writing it cannot be enforced. An oral agreement to refer a dispute to
arbitration is not competent. Section 7 (4) mentions the above-mentioned agreement is
considered to be in writing if it is contained in:
a) a document signed by the parties;

b) an exchange of letters, telex, telegrams or other means of telecommunication which
provide a record of the agreement; or
c) an exchange of statements of claim and defence in which the existence of the
agreement is alleged by one party and not denied by the other.
The Supreme Court has held that the ―statement of claim and defence mentioned in
Section 7 (4) (c) need not be the statement of claim and defence filed before the arbitrator
and could be a statement of claim and defence in any suit, petition or application filed
before any court.
An arbitration agreement can be entered into by incorporating it from some other contract.
According to Clause (5) of Section 7 the reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the contract is in writing and the
reference is such as to make that arbitration clause part of the contract.
As per section 7 of the Act, the parties have the freedom to form the agreement in several
ways as below:
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By an arbitration clause- most often in commercial arbitration in India, a contract consists
of an arbitration clause as a protectionist clause which states the party’s intent to settle any
disputes arising out of the contract to be resolved by the arbitration mechanism.
By incorporating a clause- By the virtue of the Doctrine of Kompetenz- Kompetenz, an

arbitration clause which is a part of a separate contract can also be considered an
arbitration agreement. Section 7(5) of the Act, it provides that when an agreement refers to
any agreement containing an arbitration clause, it will be considered as an arbitration
agreement providing the same is in writing and when it is drafted with the intent of
incorporating it as a clause in the contract.
By communication- In precedence set by invoking provisions 7(b) and (c) in cases like Galaxy
Infra an engineering 2, MurarjiSavla3 and S. N Prasad4 communication by letters or
telecommunication also signifies the intention of parties to refer to arbitration as a form of
the arbitration agreement.
HOW TO DRAFT AN EFFECTIVE ARBITRATION AGREEMENT?
By virtue of the judgements of Jagdish Chander v. Ramesh Chander5 and KK Modi v. K.N.
Modi6, the Supreme Court of India has laid down the validity and principles of an arbitration
agreement.
The principle laid down in the judgment regarding the arbitration agreement are
• It must be in writing,
• The agreement to settle the dispute in a private tribunal is mutual,
• The private tribunal has the power to adjudicate disputes without bias and by
following the principles of natural justice,
• The parties agree to be bound by the arbitral tribunal’s decision,
• The parties must refer the dispute to a private tribunal with no prior
reservations,
2 Pravin Electricals Pvt. Ltd vs Galaxy Infra And Engineering Pvt. ... on 8 March, 2021
3 (1998) 1 GLR 778
4 S.N. Prasad vs The Executive Engineer on 7 October, 2015
5 Jagdish Chander v. Ramesh Chander
6 K.K. Modi vs K.N. Modi &Ors on 4 February, 1998
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• The parties must have mutual agreement reflecting from the maxim
“consensus ad idem”,
• The clauses of the agreement must raise an obligation of performance,
• The clauses of the agreement do not exclude the essentials of separability,
severability, autonomy or any other essentials of the agreement.
GENERAL PRINCIPLES IN AN ARBITRATION AGREEMENT:
Scott v. Avery clause: in contracts involving parties of different countries such as

export transactions, foreign element and plant installation contracts, the arbitration
clause should provide a machinery suitable to the international character of the
transaction for facilitating the execution of award that may be made. This clause
provides that no action shall be brought until an award has been made and such
provision is very common in commercial contracts. This type of a clause is named
after the case Scott v. Avery7. This clause is a condition precedent to the
determination of liability of a party to a contract. Repudiation of contract does not
affect this clause. A party successfully pleading Svott v. Avery clause as a defence in
the suit cannot subsequently challenge the jurisdiction of an arbitrator when the
matter in the suit is remitted to arbitration. There are two exceptions in which this
clause may not be pleaded as a defence to a suit. First, where the conduct of the
defendant is such that it disentitles him from relying on such clause. Secondly, where
the agreement to arbitrate has ceased to exist.
In Viney v. Bignold 8under an insurance policy there was a clause which provided
that any dispute arising in the adjustment of a loss should be submitted to
arbitration and the award should be conclusive evidence of the amount of the loss. It
was further provided that the insured should not be entitled to commence any
proceeding until the amount of the loss is determined by an arbitration award. In an
action by the insured the arbitration clause was held to be good defence to the
action.
7 (1856) 5 HL Cas 811
8 (1887) 20 QBD 172
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Equity clause: amiable composition. It is settled law that an arbitrator shall act in
accordance with law to decide a dispute. If the arbitration agreement is silent as to
the matter in which decision of the arbitrator is sought, it is the duty of the
arbitrator to decide the dispute according to equity and good conscience. He may
not in such case follow the strict rule of law. It is often provided in arbitration clause
that “the arbitrator shall be entitled to act as amiable compositeur”. Provision of
such term in arbitration agreement is called “equity clause” or ‘amiable composition
clause’9.
The Arbitration agreement effectively incorporate the following :
NUMBER OF ARBITRATORS- Sec 10 of the Act provides for the appointment of arbitrators at
the discretion of the parties. However, the number of arbitrators must be odd and it is also
necessary to select arbitrators who would not show any sort of bias. The number of
arbitrators determines the cost of the arbitral proceeding.
LANGUAGE OF PROCEEDING- In cases of international commercial arbitration in India, the

agreement usually deems smartest to have a prescribed language in which the proceeding
takes place in order to avoid any future issues in the proceeding.
SEAT AND VENUE OF THE ARBITRATION- Arbitration law in India has evolved over the years
and through precedents set by cases like the BALCO 10 and the BGS Soma 11, the importance
of the differentiation and specific mention of the seat and venue have been highlighted. The
venue signifies the place where the proceeding is held, whereas the seat is where the cause
of action rises. The mechanism of commercial arbitration in India also lays down certain
principles and doctrines regarding the seat and venue.
INSTITUTIONAL ARBITRATION- The procedures and clauses are set and agreed to in a
specialized institution which appoints the arbitrator by themselves. This is a pre-defined
means of carrying out arbitral proceedings.
9 Article 33 of the UNCITRAL Arbitration Rules

10 Bharat Aluminium Co vs Kaiser Aluminium Technical ... on 6 September, 2012
11 (2020) 4 SCC 234.
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ESSENTIAL ELEMENTS OF AN ARBITRATION AGREEMENT
TYPICAL ARBITRATION CLAUSE:
All disputes arising between the parties shall be resolved by arbitration under the
Arbitration and Conciliation Act, 1996 or any amendment thereof.
The number of arbitrators shall be three and Nani Palki Wala Arbitration Centre,
New Delhi will conduct the Arbitration Process in accordance with its rules.
The seat of arbitration shall be Pune and the language shall be English.
Arbitration, Mediation, Arbitration may be an option during the process.
In case of unforeseen circumstances caused by Govt actions due to epidemic or

Nationwide lockdown, arbitration process shall be conducted online under the rules
of the above referred Arbitration Centre.
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Arb-Med-Arb Clause
In the recent years, the “Arb-Med-Arb” process has gained traction as a dispute
resolution mechanism. The process of “Arb-Med-Arb” entails exactly what its name
suggests: the commencement of arbitration proceedings, followed by mediation to
attempt an amicable resolution, followed by continuation of arbitration proceedings
irrespective of the outcome.
The Singapore International Arbitration Centre (“SIAC”) and the Singapore

International Mediation Centre (“SIMC”) have formalised their very own SIAC-SIMC
Arb-Med-Arb Protocol (“AMA Protocol”) for an “Arb-Med-Arb” clause.
The key aspects of the AMA Protocol are as given below:

a) Pursuant to the “Arb-Med-Arb” clause or as otherwise agreed by parties, the
arbitration is commenced in accordance with the applicable arbitration rules.
b) After exchanging the Notice of Arbitration and Response to the Notice of
Arbitration (“arbitration pleadings”), the arbitration is stayed.
c) Under the AMA Protocol, the case file with all documents lodged by parties will
then be sent by the SIAC to the SIMC where the mediation will be conducted.
d) If the dispute is not been settled by mediation (whether partially or entirely), the
arbitration proceeding will resume in respect of the remaining part of the dispute.
In India, if the mediation renders settlement agreement under the Arb-Med-Arb

clause, it will be incorporated as consent award pursuant to S.30 & S.31 of the A&C
Act.
Arb-Med-Arb is very ideal for construction disputes wherein multiple disputes exist
within an arbitration case.
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Sample Arb-Med-Arb clause

The SIAC and SIMC have provided a sample “Arb-Med-Arb” clause, which we
reproduce below and in italics the portions which are subject to change depending
on the agreement of parties“
Any dispute arising out of or in connection with this contract, including any
question regarding its existence, validity or termination, shall be referred to
and finally resolved by arbitration administered by the [Singapore
International Arbitration Centre ("SIAC")] in accordance with the [Arbitration
Rules of the Singapore International Arbitration Centre ("SIAC Rules")] for the
time being in force, which rules are deemed to be incorporated by reference in
this clause.
The seat of the arbitration shall be .
The Tribunal shall consist of [Three] arbitrator(s).
The language of the arbitration shall be .
The parties further agree that following the commencement of arbitration,
they will attempt in good faith to resolve the Dispute through mediation at
the [Singapore International #mediation Centre ("SIMC")], in accordance with
the [SIAC-SIMC Arb-Med-Arb Protocol] for the time being in force. Any
settlement reached in the course of the mediation shall be referred to the
arbitral tribunal appointed by [SIAC] and may be made a consent award on
agreed terms.
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XIII.REMEDIES FOR THE BREACH OF CONTRACTS
A breach of contract terms occurs when a party fails to perform either fully or
adequately the obligations provided in the contract. In the event of breach, the
nonbreaching and performing party may be provided relief for the breaching party’s
failure to perform its obligations.
DAMAGES
Damages are generally designed to compensate the non-breaching party for the
benefit of its bargain. Damages may be compensatory, consequential, punitive or
nominal. The non-breaching party generally has an obligation to mitigate its
damages.
Types of damages include:
• Direct damages: Losses incurred by the victim of a breach in acquiring the

equivalent of the performance promised under the contract, so as to substitute for
the performance that should have been rendered by the breaching party.
• Consequential damages: Losses suffered by the victim of a breach going beyond

the mere loss in value of the promised performance (direct damages), and resulting
from the impact of the breach on other transactions or endeavours dependent on
the contract.
PENALTY:
Damages awarded, not to compensate the victim for established loss, but to punish
the breaching party and make an example of him.
LIQUIDATED DAMAGES
At the time of contracting, the parties may wish to avoid disputes and uncertainty
over damages if a breach should occur in the future. They may include a term in the
contract itself that seeks to fix in advance the amount of damages to be paid if a
breach occurs. Such “agreed damages” provisions are referred to as liquidated
damages clauses.
Liquidated damages clauses can be enforceable if the clause was fairly bargained,
was a genuine attempt to forecast probable loss, and is not disproportionate to the
actual loss ultimately suffered. If the clause fails to meet these standards, it is
generally treated as a penalty and is unenforceable.
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SPECIFIC PERFORMANCE
The non-breaching party may seek a court order to force the breaching party to
perform in accordance with contract terms. This remedy is generally granted in
situations where money damages are inadequate as a remedy.
RESCISSION AND RESTITUTION
Another remedy involves cancelling the contract and making restitution to the
parties. Rescission is the cancellation of a contract. In its most common use,
rescission is the victim’s termination of the contractual relationship following a
material and total breach by the other party. Rescission ends the victim’s
performance obligations under the contract.
Restitution is a judicial remedy under which the court grants judgment for the
restoration of property or its value to the damaged party.
Reformation
Reformation is an equitable remedy that allows the parties to rewrite or reform the
contract as originally created in order to reflect what they intended.
LIMITATIONS AND WAIVERS
The non-breaching party may waive its right to enforce a remedy. Generally,
contracts provide that waiver of one event of default does not mean waiver of any
future defaults. If permitted by law, the contracting parties can limit the type and
amount of remedies provided to the non-breaching party.
XIV.GENERAL WRITING PRINCIPLES:
Before writing, clarity about what parts the contract must be included and what
situations the contract must cover. Parties requirement should be crystalized;
Precisely because this is an obvious point, it is often overlooked.
Try outlining the contract to make sure that all the needed pieces are included and
are organized logically.
The following guidelines may be helpful in beginning to draft a contract:
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Contracts by their very nature are prospective documents. Unlike legal
memoranda and briefs that generally look back at past actions, contracts are
forward looking and serve a planning purpose to guide future behaviour. A
significant reason for putting a contract in writing is to memorialize what the
parties have agreed upon in hopes of preventing future disputes. The goal
when drafting contracts should be to draft every sentence with precision
such that only one possible interpretation follows—the interpretation the
drafter intends. You should aim to avoid any ambiguity in the contract. Below
are some tips to keep in mind that can add clarity when drafting a contract. 1.
Use Plain English: Like in litigation documents, you should do your best to
avoid legalese and use Plain English in drafting a contract. Legalese adds
clutter to a contract and makes provisions difficult to understand. Avoiding
legalese makes the contract readable to all audiences including the parties
themselves and a judge who could interpret the document later on.
• E.g., “Seller has not entered into any other contract or agreement to sell or
encumber the Property or any part thereof.” Here, “its” can replace
“thereof.” This sentence can be rewritten as “Seller has not entered into any
other contract or agreement to sell or encumber the Property or any of its
parts.”
• E.g., “Borrower acknowledges that Lender is about to fund the Loan on the
date contemplated hereby.” Here, “hereby” can be replaced with the thing
by which “hereby” is referring to. This sentence can be rewritten as
“Borrower acknowledges that Lender is about to fund the Loan on the date
contemplated by this Agreement.”
2. “Shall v. Will”: Be very careful that you use each of these words correctly in
a contract. You should use “shall” when referring to an obligation to be
completed by a party. If a party does not precede the word “shall,” then
“shall” has probably been used incorrectly. Use “will” to establish future
consequences of events and circumstances that do not obligate the parties.
• E.g., “Seller shall reimburse Buyer for all delivery fees.”
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• E.g., “This Agreement will be governed by the laws of the State of
Delaware.”
3. Using “May”: May, like “shall” and “will,” should be used very carefully.
Courts usually read the word “may” to mean permissive or discretionary
unless the context indicates otherwise. You can use “may” as the auxiliary
verb in a statement permitting, but not obligating, a party to act in a
particular way. “May” can be thought of as replacing the phrase “reserves
the right to.”
• E.g., “For as long as Mark Jackson has a fifty-percent stake in the company,
he may appoint one director to the board.”
4. The Power of Short Sentences: Shorter sentences often make a contract

more readable. As a rule of thumb, if a sentence is longer than three lines,
you should consider reworking it by either reformatting the provision into
sub-sections or breaking it up into two or more sentences.
5. Use the Active Voice and Keep the “Core” Together: Like in litigation
documents, contracts written in the active voice are generally easier to read.
Because contracts obligate parties to take action, the active voice is especially
preferred. In using active voice, it is helpful to keep the “core” of the
sentence together. The “core” consists of the sentence’s subject, verb, and
object. Try to avoid creating a break between the subject and verb or
between the verb and object with clauses and phrases.
• E.g., “Ten days prior to Closing, Borrower shall furnish an updated and
current Rent Roll.” In this sentence, the active voice is used, and the “core” is
kept together. The subject (“Borrower”), the verb (“shall furnish”) and the
object (“an updated and current Rent Roll”) all next to each other.
• E.g., “Exelon may not, without the prior written consent of Empire
Industries, transfer the Class A Shares to any Person.” In this sentence,
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“without the prior written consent of Empire Industries” creates a break
between the subject “Exelon” and the verb “transfer.”
6. Beware of Modifier Placement: A modifier is a phrase or clause that

changes the meaning of another part of a sentence. Modifiers are used
frequently in contract provisions. For example, “to the knowledge of the
Seller” is a common modifier. Modifiers can add ambiguity when they
precede or follow a compound phrase or a series. A reader of a contract may
be confused about whether the modifier applies to all items in the compound
phrase or series or only the item closest to the modifier. Make sure when
drafting that it is clear what items the modifier actually modifies. Using
commas can help fix a potential ambiguity.
• E.g., “No litigation against the Seller is pending or, to the knowledge of the
Seller, threatened.” In this sentence, the commas help make clear that the
modifier “to the knowledge of the Seller” only modifies litigation that is
“threatened,” and does not modify litigation that is “pending.”
7. Try Not to Bury Verbs: In drafting your contract, try not to use abstract
nouns at the expense of verbs. This is often called “burying” the verb. Buried
verbs allow you to avoid naming the actor like the use of the passive voice
sometimes does.
• E.g., “Immediately following issuance of the stock…” can be rewritten as
“Immediately after Exelon issues the stock….”
8. Use Words Consistently: In non-legal writing, authors aim to vary their

language to make for more interesting prose. Contract drafters, however,
must avoid variation and inconsistency. Maintaining consistency is more
important than avoiding repetition.
• E.g., If you refer to the subject matter of a sales contract as “goods,” use
the same term throughout the contract to refer to that subject matter
instead of calling it “items” or something different.
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9. Avoid Gender-Specific Language: Gender-specific language may mislead,

distract, or offend some readers. You can avoid using gender-specific
language by using a plural noun or repeating the noun.
• E.g., “Directors will not receive compensation for their services.” This
sentence avoids gender-specific language by using the plural noun
“Directors.”
• E.g., “The Executive Director will not receive compensation for the
Executive Director’s services.” This sentence avoids gender-specific language
by repeating the noun “Executive Director.”
10. Formatting Sections and Sub-Sections: An easy way you can add clarity to
a contract is to use sections and subsections effectively. Using shorter
sections generally make a contract easier to read. When a provision consists
of a large block of text, the reader’s eyes may be tempted to glaze over it.
You can break up such a provision by drafting a general heading for the
section and drafting more specific sub-section headings. Be sure that the
headings you give to the sections and sub-sections correctly describe and
apply to that entire section or subsection’s contents.
• E.g., In a provision about the company’s officers, the section heading could
read “The Company’s Officers” with sub-sections titled “Appointment of
Officers,” “Approval of Officers,” and “Indemnity of Officers.”
BASIC LANGUAGE GUIDE

1. Avoid Archaic terms
2. Passive to Active
3. Sentences: short is sweet
4. Sentences: subjects and verbs together
5. Sentences: compound verbs together
6. Sentences: put verbs early
7. No Inconsistency
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8. make verbs strong
9. Prefer the present tense
10. Use plain English
USING DEFINED TERMS
Obvious goal in drafting a transactional document is to make it unambiguously and

accurately. Future readers should know exactly what our document means—
regardless of whether those future readers are your client, you client’s successors,
some other party, or a judge. A good technique for achieving this goal is the use of
defined terms.
When should you use defined terms?

A. As soon as you know you will refer to the same concept more than once in a
document; and
B. When it takes more than a few words to explain the concept
How do defined terms work?
A. “External” defined terms are unique to the external circumstances of this
particular transaction (names of parties, location of real property, etc
How can defined terms simplify transactional documents?
A. They can assure that any particular laundry list will appear only once in a
document. This preserves simplicity, certainty, and consistency.
B. If properly structured, defined terms can allow you to make a necessary change
only once—by fine-tuning or modifying a defined term—as the terms of the
transaction are negotiated and modified over time.
C. Defined terms can help you prevent a maze of cross-references.
BASIC ATTRIBUTES OF THE CONTRACTUAL RELATIONSHIP

A Contract may be defined as an exchange relationship created by oral or written
agreement between two or more persons, containing at least one promise and
recognized in law as enforceable. The essential elements of a contract thus include:
an oral or written agreement; the involvement of two or more persons; an exchange
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relationship; at least one promise; and enforceability.
Two or More Persons

While it requires two parties to create a contract, it should be noted that a contract
is not confined to two participants. There can be as many parties to a contract as the
needs of the transaction dictate. In fact, multiparty contracts are common.
Mutual Relationship
By entering into an agreement, parties bind themselves to each other for the
common purpose of the contract. Thus, the essence of a contract is the relationship.
Some contractual relationships last only a short time and require only a minimal
interaction. Other contractual relationships, however, can span many years and
require constant dealings between the parties, regulated by detailed provisions in
the agreement.
Promise
For a contract to exist, there must be promise. A promise is an undertaking to act or
refrain from acting in a specified way at some future time. This promise may be
made in express words or implied.
Legal Enforceability
Legal Recognition of enforceability is a hallmark of contracting that it creates rules
binding on the parties and confers on them rights and obligations cognizable in law.
The fundamental role of contract law is to ensure that promises are upheld. Without
legal enforceability of promises, only instantaneous exchanges could ultimately
occur—with devastating effects on society.
Where promises are broken, the power of legal enforcement enables the
disappointed party to sue. Once it is established that a contract was entered into and
breached courts can enforce the contract by providing a remedy for the breach. Such
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remedies can include monetary compensatory damages, specific enforcement of the
promise, and other types of damages. Legal enforceability thus serves to deter
breaches of contract because a reluctant party knows that failure to perform can
result in litigation with costly results.
ESTABLISHING CONTRACTUAL RELATIONSHIP
It is the pinnacle of skill of an ace Contract Administrator to draft the relationship

among the stakeholders in such a way that it flows like the rivers enter in to the sea;
The definition of relationship among the stakeholders shall be subtle at the same
time consummate. It shall never disintegrate the degree of relationship that has
been established at the Contract formation stage unto the performance of the
Contract.
Five essential elements of a valid contract include:
1. Competent Parties
2. Subject Matter
3. Legal Consideration
4. Mutuality of Agreement
5. And Mutuality of Obligation.
Competent Parties
Competency of parties includes being of adult age (18 years of age in some jurisdictions) and
being in complete control of mental faculties. This means that the contracting party must
not have a mental defect that would affect his/her ability to understand and appreciate
what he/she is doing.
Subject Matter
The contract must clearly and sufficiently set out the subject matter of the agreement. The
subject matter may not be illegal or for an illegal purpose.
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Legal Consideration
Simply stated, consideration is the inducement to a contract. It is the cause, motive, price or
impelling influence, which influences a contracting party to enter into a contract. Legal
consideration is consideration recognized or permitted by the law as valid and lawful. It is
also referred to as good or sufficient consideration. The most common form of
consideration is money. However, goods or services or a combination thereof may also
constitute valid consideration.
Mutuality of Agreement
For a contract to be valid and enforceable, the parties must be in agreement as to their
respective rights and duties under the agreement. Mutuality of agreement is also referred
to as a “meeting of the minds.”
Mutuality of Obligation
The doctrine of mutuality of obligation provides that neither party to a contract is bound
unless both parties to the contract are bound. Thus, if performance of an obligation (which
is the consideration of the particular contract) is elective, rather than mandatory, and the
other party is required to perform some duty, then there would be no mutuality of
obligation and, accordingly, no valid enforceable contract.
XV.SPECIAL CONTRACTS
E-CONTRACTS
E-Contract is meant for negotiating successful contracts for consumer and business e-
commerce and related services. It contains model contracts for the sale of products and
supply of digital products and services to both consumers and businesses.
An e-contract is a contract modelled, executed and enacted by a software system.

Computer programs are used to automate business processes that govern e-contracts. E-
contracts can be mapped to inter-related programs, which must be specified carefully to
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satisfy the contract requirements. These programs do not have the capabilities to handle
complex relationships between parties to an e-contract.
An electronic or digital contract is an agreement “drafted” and “signed” in an electronic

form. An electronic agreement can be drafted in the similar manner in which a normal hard
copy agreement is drafted. For example, an agreement is drafted on our computer and was
sent to a business associate via e-mail. The business associate, in turn, e-mails it back to us
with an electronic signature indicating acceptance. An e-contract can also be in the form of
a “Click to Agree” contract, commonly used with downloaded software:
The user clicks an “I Agree” button on a page containing the terms of the software license
before the transaction can be completed. Since a traditional ink signature isn’t possible on
an electronic contract, people use several different ways to indicate their electronic
signatures, like typing the signer’s name into the signature area, pasting in a scanned
version of the signer’s signature or clicking an “I Accept” button and many more.
E-Contracts can be categorized into two types i.e.
i. web-wrap agreements and

ii. shrink-wrap agreements.
Web-wrap agreements are basically web based agreements which requires assent of the
party by way of clicking the “I agree” or “I accept” button e.g. E-bay user agreement,
Citibank terms and conditions, etc.
Whereas Shrink-wrap agreements are those which are accepted by a user when a software
is installed from a CD-ROM e.g. Nokia PC-suite software
Law governing e-contract:-
Section (11) of information technology Act, 2000
Section (12) of information technology Act, 2000
Section (13) of the information technology act, 2000 and
Section 10 of the Indian Contract Act, 1872
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FIDIC FORM OF CONTRACTS FOR THE CONSTRUCTION INDUSTRY:
FIDIC Stands for Fédération Internationale Des Ingénieurs-Conseils (International Federation

of Consulting Engineers) which has about 102 countries as members. The FIDIC forms of
contract have conditions suitable for use in all types of construction, electrical, mechanical,
and domestic contracts.
FIDIC published four new editions of forms of contracts:
1. Conditions of contract for construction

2. Conditions of contract for plant and design-build
3. Conditions of contract for EPC and Turnkey projects
4. Short form of Contract
This Second Edition of the Conditions of Contract for Construction has been published by
the Fédération Internationale des Ingénieurs-Conseils (FIDIC) as an update of the FIDIC
1999 Conditions of Contract for Construction (Red Book), First Edition.
Along with the FIDIC 1999 Yellow Book (the Conditions of Contract for Plant and Design-
Build) and the FIDIC 1999 Silver Book (the Conditions of Contract for EPC/ Turnkey Projects),
the FIDIC 1999 Red Book has been in widespread use for nearly two decades.
In particular, it has been recognised for, among other things, its principles of balanced risk
sharing between the Employer and the Contractor in projects where the Contractor
constructs the works in accordance with a design provided by the Employer. However, the
works may include some elements of Contractor-designed civil, mechanical, electrical
and/or construction works.
This Second Edition of the FIDIC Red Book continues FIDIC’s fundamental principles of
balanced risk sharing while seeking to build on the substantial experience gained from its
use over the past 18 years. For example, this edition provides:
1) greater detail and clarity on the requirements for notices and other communications;
2) provisions to address Employers’ and Contractors’ claims treated equally and separated
from disputes;
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3) mechanisms for dispute avoidance and
4) detailed provisions for quality management, and verification of Contractor’s contractual

compliance.
These Conditions of Contract for Construction include conditions, which are likely to apply
to the majority of such contracts. Essential items of information which are particular to each
individual contract are to be included in the Particular Conditions Part A – Contract Data.
In addition, it is recognised that many Employers, especially governmental agencies, may

require special conditions of contract, or particular procedures, which differ from those
included in the General Conditions. These should be included in Part B – Special Provisions.
It should be noted, that the General Conditions and the Particular Conditions (Part A –
Contract Data and Part B – Special Provisions) are all part of the Conditions of Contract.
To assist Employers in preparing tender documents and in drafting Particular Conditions of

Contract for specific contracts, this publication includes Notes on the Preparation of Tender
Documents and Notes on the Preparation of Special Provisions, which provide important
advice to drafters of contract documents, in particular the Specifications and Special
Provisions.
Drafters of contract documents are reminded that the General Conditions of all FIDIC
contracts are protected by copyright and trademark and may not be changed without
specific written consent, usually in the form of a licence to amend, from FIDIC. If drafters
wish to amend the provisions found in the General Conditions, the place for doing this is in
the Particular Conditions Part B – Special Provisions, as mentioned above, and not by
making changes in the General Conditions as published.
Navigating the Evolution of FIDIC Red Book: 1987, 1999, and 2017 Editions
The construction industry has witnessed profound changes over the years. Reflecting these
changes, the International Federation of Consulting Engineers (FIDIC) has progressively
updated the Red Book - its most widely recognized form of contract for construction. Let's
delve into the major differences between the 1987, 1999, and 2017 editions.
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1987 Edition:
The FIDIC Red Book (4th Edition) was a base document with a simple structure, allowing
parties to add or delete clauses to suit their specific needs. It was a balanced risk-sharing
model where contractors were responsible for completing the works as per the provided
design, while employers carried the risk of unforeseen ground conditions.
1999 Edition:
This edition marked a significant shift in the FIDIC suite. It introduced a more comprehensive
and complex structure, featuring a proactive role for the Engineer and expanded dispute
resolution procedures. The risk-sharing model subtly shifted towards the contractor,
particularly concerning design responsibility and unforeseen ground conditions. The 1999
version also introduced the "DAB" (Dispute Adjudication Board), a significant step in dispute
avoidance mechanisms.
2017 Edition:
The latest FIDIC Red Book revision aimed to provide greater clarity and certainty. It
introduced enhanced provisions for dispute avoidance and a more detailed role of the
Engineer for proactive project management. The 2017 edition also improved risk allocation
and management, making contractors' obligations more explicit. It placed emphasis on
clear, fair, and transparent contract management procedures, including advance warning
provisions that require parties to notify each other of potential issues as soon as they
become evident.
The evolution of the FIDIC Red Book mirrors the developments of the global construction
industry. It's a testament to FIDIC's commitment to fostering a balanced and fair contractual
environment that aligns with best practices and caters to the ever-evolving needs of the
industry.
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XVI.NEGOTIATION, EXECUTION AND STAMPING OF AGREEMENTS
It is equally important with drafting that Negotiation, Execution and Stamping Of

Agreements render the completeness and legally enforceable documents. Let us strive to
delve in to this penultimate requirement of the Contract drafting craft.
NEGOTIATION:
Best Alternative To a Negotiated Agreement (BATNA) before going into any mediation or
negotiation. That way, you will have a reference point by which to judge your progress and
position at all times. Calculate other parties’s BATNA also.
In negotiation theory, the best alternative to a negotiated agreement or BATNA (no deal
option) refers to the most advantageous alternative course of action a party can take if
negotiations fail and an agreement cannot be reached. The exact opposite of this option is
the WATNA (worst alternative to a negotiated agreement).
FACTORS INVOLVED IN NEGOTIATIONS:
• Preparation of draft note on the structure and purpose of the agreement

• Company position on points of difference between the parties
• Role clarity – who in the organisation signs off on an exception.
• Track changes by tracking the communication.
• Arriving at the consensus
TIPS ON NEGOTIATION
• Always familiarize yourself with the document before the negotiation call
• Understand the rationale behind the mark-ups and prepare with examples
• Spend a minute or two discussing proposed course of action and identifying
who will lead whom through the document
• Always acknowledge client’s position and suggest solutions and alternatives
rather than reiterating stated positions
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• Speak in a measured tone that is clear and audible
• Always have the document (including previous drafts and emails) on screen
and easily accessible so you have the information in your fingertips
• Do not be perturbed by a hostile or aggressive opposing attorney
• Always maintain your cool and professionalism
• Try not to make mistakes, but if you realize that you have made one, it is
good to accept the same and keep moving.
STAMPING AND REGISTRATION OF AGREEMENTS:
Agreements being the heart and soul of a business, they need to be enforceable documents.
The enforceability of such documents are subject to the satisfaction of the provisions under
the Indian Stamp Act,1899 read with the Registration Act, 1908.
Every country’s economy is based on Agreements and contracts wherein two or more
parties agree to a certain defined, listed and expressed terms & conditions put down in
black and white which becomes binding upon signing of the parties involved.
Further, the agreements being the heart and soul of a business, they need to be enforceable
documents. The enforceability of such documents are subject to the satisfaction of the
provisions under the Indian Stamp Act,1899 read with the Registration Act, 1908.
Accordingly, they should be duly stamped for being a valid document in the eyes of the law.
However, in a situation like the present, where nation-wide lockdown has been imposed for
a prolonged period, execution and stamping of documents is a challenge.
The following questions arise:
1. What will happen to the commercial transactions in the country?
2. How will the businesses move ahead and undergo deals?
3. How will the parties enter into an Agreement and get it executed
4. What happens to the payment of Stamp duty during the Pandemic?
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It is evident that even during the situation of complete lockdown, no commercial
transactions are on hold, starting from rent agreements, to service agreements and ranging
to agreements between corporate entities et al.
However, though we have evolved as a technology friendly nation yet physical signing of
Agreements are preferred by the individuals and the corporates for better assurances and
negotiations, wherever required.
A Solution to this can be E-Contracts. As per Section 10A of the Information Technology Act,
2000; e-contracts have been given recognition to the enforceability of any contract,
expressed and agreed, through electronic means or records.
The Section is reproduced for your reference herein below:

“10A. Validity of contracts formed through electronic means. —Where in a contract
formation, the communication of proposals, the acceptance of proposals, the revocation of
proposals and acceptances, as the case may be, are expressed in electronic form or by means
of an electronic record, such contract shall not be deemed to be unenforceable solely on the
ground that such electronic form or means was used for that purpose.”
However, the Act does not include Contracts for the sale or conveyance of immovable
property or any interest in such property as mentioned under the First Schedule ofthe Act.
Therefore, the Act provides legal recognition to the Electronic records which are rendered
and are available in Electronic Form and can be accessible for future reference.
The halt in the economy can help give a push to E-Contracts making the negotiations and
executions faster and easier and further promote business relationships.
While referring to any agreement or a contract, it is important to comply with the provisions
of the Indian Contract Act, 1872(“the Act”) while entering into ane-contract through e-mail
or any other internet medium.
While concluding the negotiation of the contract, execution of the agreement comes into
picture through electronic signature as inserted vide the Information Technology
(Amendment) Act, 2008. Further, the evidentiary value of these contracts are governed
under the Indian Evidence Act, 1872.
In the case of Trimex International FZE Ltd. Dubai vs. Vedanta Aluminium Ltd., India(2010)
3 SCC 1 the Supreme Court of India while dealing with a contract executed over e-mail, the
Court held that,
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“…Once the contract is concluded orally or in writing, the mere fact that a formal contract
has to be prepared and initialled by the parties would not affect either the acceptance of the
contract so entered into or implementation thereof, even if the formal contract has never
been initialled.”
Therefore, it is important to note that, the Indian Contract Act, 1872 does not prohibit or
question the validity of electronically concluded agreements.
Having referred the precedent and the requirement of stamping for making contract
enforceable in law, it is equally important to understand the pillars of contract through the
provisions of Section 4 and 7 of the Indian Contract Act,1872(the Act). An acceptance to an
offer conveyed by a party, satisfies the requirements of Section 4 of the Act.
Section 4 reads as “Communication when complete-The communication of an acceptance is

complete as against the acceptor, when it comes to the knowledge of the proposer.”
The completing limb is provided by Section 7 of the Act which stipulates that an acceptance
must be absolute and unconditional. In other words, it is that an irrevocable contract is
concluded.
STAMPING OF AGREEMENTS
The Union Finance Minister during the enactment of the Finance Act, 2019 has amended
the Indian Stamp Act, 1899 in order to prevent tax evasion. As a result of the outbreak of
COVID – 19, the Revenue Department vide Notification No. F. No. S.33013/3/2019 ST-I, DOR
dated 30th March, 2020 notified the applicability of the Amendments to be extended and
coming into force from 1st July,2020.
In addition to the above, while discussing stamping of Agreements which are to be extended
or freshly entered into, there exists online stamp duty payment portals that have come to
the rescue through several Banks. This is when the State of Maharashtra introduced the
Electronic Secure Bank and Treasury Receipt (e-SBTR) system which provided for e-stamping
facilities by authorized banks thereby, reducing the administrative costs also.
On the other hand, the State of Gujarat and Delhi NCR have adopted Stock Holding
Corporation of India Limited (SHCIL) which is an agency started by the Central Government
for E-stamping.
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XVII.STAMPING OF ARBITRATION AGREEMENT
A three-judge bench in N.N. Global Mercantile Pvt. Ltd. v. M/s Indo Unique Flame Ltd. & Ors.
referred the question of whether an arbitration agreement contained in an unstamped
principal agreement is enforceable to a larger constitution bench. On 25 April 2023, the
larger constitution bench, in 3:2 majority answered the question in the negative and held
that the principal agreement containing the arbitration provision must be sufficiently
stamped prior to initiation of arbitration.
Prior to the decision in erstwhile NN Global, the Supreme Court considered the issue of
validity of arbitration agreement when the principal agreement is unstamped / insufficiently
stamped. In SMS Tea Estates Pvt. Ltd. v. Chandmari Tea Co. Pvt. Ltd. (SMS Tea) and Garware
Wall Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd. (Garware), it was held
that an agreement only becomes a contract if it is enforceable under law; however, if an
agreement is unstamped / insufficiently stamped, it may not be as per relevant substantive
laws i.e., stamp laws, and hence, unenforceable. Accordingly, an arbitration agreement
contained in a principal agreement which is not stamped / insufficiently stamped would not
exist since it is not enforceable.
The larger constitution bench in NN Global Decision disagreed with the view of the three-
judge bench in erstwhile NN Global. In fact, the Supreme Court while agreeing with SMS Tea
and Garware made the following observations under each of the Acts mentioned:
(i) Stamp Act, 1899 (“Stamp Act”)
It was recognised that while the Stamp Act is a fiscal enactment to book revenue, it is
substantive law which must be adhered to by parties. Therefore, a document which is non-
compliant with substantive laws such as Stamp Act will be unenforceable.
Moreover, as per the scheme of the Stamp Act, a document that is not duly stamped cannot
be admitted to evidence.
Keeping in view the above position, the Supreme Court in NN Global Decision held that
where the document is unstamped or insufficiently stamped, the State will not extend its
protection or enforce the rights and obligations of parties under that document.
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(ii) Contract Act, 1872 (“Contract Act”)
Under the Arbitration Act, an arbitration agreement must comply with the Contract Act in
order to be valid. Moreover, as per section 2(h) of the Contract Act, only an agreement
enforceable under law is a contract. However, since an unstamped / insufficiently stamped
agreement is violative of substantive laws (i.e., Stamp Act), it is said to be unenforceable
and hence, void.
Accordingly, an arbitration agreement contained in an unstamped / insufficiently stamped

document cannot be said to be valid in the absence of a valid principal contract.
(iii) Arbitration Act
While the Supreme Court in NN Global Decision acknowledged the object of minimal judicial
intervention and the principle of kompetenz - kompetenz, it was held that the application of
the same leads to contravention of mandatory substantive provisions i.e., of the Stamp Act.
Therefore, such principles cannot be relied upon.
Citing the above, the Supreme court in NN Global Decision held that unstamped /
insufficiently stamped document is void and invalid until the defect is cured by impounding
and paying sufficient stamp duty. Therefore, an arbitration agreement being part of such a
document will be unenforceable till the document is duly impounded.
Consequences
As mentioned above, the Supreme Court in NN Global Decision answered whether an

arbitration agreement in an unstamped / insufficiently stamped contract is enforceable in
context of Courts’ powers during pre-referral stage. However, the question whether parties
will be able to seek interim reliefs from the Courts under Section 9 of the Arbitration Act in
such a situation is left open. It must be considered that interim reliefs are usually in
anticipation, to seek urgent protection against the other party. In the event the Court
decides to investigate the question of sufficiency of stamp duty at interim relief stage, the
purpose of interim reliefs will be defeated. Moreover, a party against whom interim reliefs
are asked may raise the issue of sufficiency of stamp duty as dilatory tactics.
Apart from the above, it appears that unless a document is sufficiently stamped, the Courts
will neither assist the parties to enforce their rights and obligations nor appoint an
arbitrator under the principal agreement.
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XVIII. SUMMARY:
While Contract drafting demands due diligence, there are a number of strongly held
ideological values underlying contract law and its rules are motivated by conscious and
deliberate public policy. Understanding these policy themes can help a practitioner
appreciate the goals and assumptions underlying the legal rules involved in drafting
Contracts.
One of the most important parts of drafting a contract is ensuring the language is clear and
unambiguous. We should shun flowery words and legal jargon. A contract should be clearly
understood by the stake holders who are not legal professionals.
For an effective Contract drafting/compilation, the Administrator should be involved from

the bidding stage itself; this will enable him to track all the negotiating communications and
meeting minutes integrated in to the respective sections and to construct a flawless ,
comprehensive Contract agreeable by the stakeholders.
In a nutshell the drafting team shall
• Adopt the time-tested ethos.

• Contracts shall foster synergetic relationship between the stake holders.
• Balancing of rights and liabilities among the stakeholders is the priority.
• The language shall be clear and unambiguous.
• Contract drafting team shall be involved in all the stages.
• Track all the negotiating communications and meeting minutes.
• A diligent check list should be in place.
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CONTRACT TERMINOLOGY
The below given is a list of common terms that a typical contract usually consists of. The
definitions of these terms are dynamic and may vary pertinent to the specific Contract (s).
Agreement: A generic term for a legally-binding undertaking between the parties, in
terms of the obligations, relationships, and responsibilities between them.
Assignment: The transfer of rights or duties by the assignor to the assignee. This may
occur only by agreement or by operation of law, for example, when someone dies or
when a company is bankrupt.
Battle of Forms: A common situation where parties establish their relationship by
sending standardized forms to each other. Often, the terms of the forms do not agree, and
it can be difficult to tell if the parties have concluded a contract, and if so, what the terms
of that contract are.
Bid: A bid is an offer to pay a particular amount of money for something that is being
sold, especially at an auction.
Boilerplate: Certain standard clauses that are often interchanged with miscellaneous or
general clauses that usually appears at the end of a contract. These concern general
provisions relating to non-negotiable or general one-size-fits all clauses like the choice of
law, entire agreement clauses, notice, dispute resolution clauses, etc. that find places in
almost all contracts.
Choice of Law: This clause is used to specify the rules or laws that will be used to
resolve any dispute between the parties.
Collateral: Collateral is anything of economic value, such as an immovable property,
pledged by a borrower to secure a loan or other credit which is subject to seizure in the
event of default.
Condition Precedent: An event that must happen before a contract or a contractual
obligation goes into effect or which triggers the performance of a contractual obligation.
Condition Subsequent: An event or a happening which terminates the duty of a party to
perform or do their respective part.
Consideration: It is a promise of something of value given by a promisor in exchange for
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something of value given by a promisee. Anything of value promised by one party to the
other when making a contract can be treated as consideration.
Copyright: Copyright is a legal term used to describe the exclusive legal rights that
creators have over their literary and artistic works to reproduce, publish, sell or distribute.
Covenant: A promise to do or not to do something. A covenant establishes a duty, also
called an obligation to perform. There are two types of covenants, positive covenant (the
things the promisor agrees to do) and negative covenant (the things the promisor agrees
not to do).
Default: The circumstances where an obligor (one who is obligated under the contract) is
considered to be in breach of the contract.
Entire Agreement: Entire Agreement clauses express the parties‟ intention that the
agreement is final and integrates all previous negotiations, representations, and
warranties. It is also known as a merger or integration clause.
Estoppel: An equitable concept that prevents a party from raising an argument when the
party has acted unfairly, fraudulently, or otherwise inappropriately.
Execution: An act of signing; the parties execute the contract by signing it; performance,
the parties may execute a contract by carrying out their obligations and duties; execution
of a judgement, order, or writ.
Force Majeure: An “Act of God” which prevents one party from performing the
obligations owing under a contract. Such cases include war, riots, earthquakes, floods,
strikes, etc.
Franchise: Franchise is a type of license that a party (franchisee) acquires to allow them
to have access to a business’s (franchisor) proprietary knowledge, processes, and
trademarks in order to allow the party to sell a product or provide a service under the
business’s name.
Governing Law: Governing law establishes the law that governs a dispute arising from
an agreement.
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Indemnity: An agreement in which one party agrees to reimburse another party if it is
held liable. An indemnity is in the nature of a guaranty but typically is used when the
party offering indemnity has some interest in, involvement with, or control over the
events leading to liability.
Intellectual Property Rights: A legal right given by law to a person in connection with
intellectual, industrial, or artistic work including inventions, designs, processes,
techniques, drawings, specification, technical information and know-how. Some of the
IPRs are patents, designs, trademarks, and copyrights.
Joint Venture: Joint Venture may be described as an association between a group of
persons (natural or legal entities) who enter into an agreement to do business together or
to undertake a particular project, without losing their independent corporate structures.
Letter of Intent: Letter of Intent is a document outlining the understanding between two
or more parties which they intend to formalize in a legally binding agreement.
License: Among various other meanings, in a general sense, it means the permission to
use the property of the licensor.
Lien: An interest in property granted by the owner of that property, to another party (the
lienholder), until the property owner fulfils a legal duty to the lienholder, such as the
repayment of a loan or the payment of lawful charges for work done on the property.
Liquidated Damages: Liquidated Damages are an amount of money, agreed upon by the
parties at the time of the contract signing, that establishes the damages that can be
recovered in the event a party breaches the contract.
Recitals: It is a clause that explains who the parties are, and their purposes for entering
into the contract (i.e. background of a contract).
Representation and Warranties: Statements made by a party in a contract which, if
untrue, carry legal consequences. They can even be implied by law and must not
necessarily be stated.
Severability: It is a characteristic of a contract that allows for the removal of duties or
portions that are incorrectly or illegally drawn up. The parties may agree that incorrect,
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impractical, or illegal portions be severed from the agreement and replaced by language
that best reflects the intent of the parties and comes closest to the business objective of
those severed portions.
Sunset Clause: Sunset clause is a provision that sets a date or time from when the
contract will cease to have effect unless otherwise re-authorized by the parties to the
contract.
Tender: The formal offer to supply goods or services issued by a vendor, seller, supplier,
manufacturer, agent, stockist, or other organization or person with the legal capacity to do
so. It is usually received in response to the buyer‟s invitation.
Term: Term is a fixed period of time for which a contract is decided upon by the parties
to be in force, notwithstanding any discovery of illegality, or termination.
Trademark: A registered name or logo that is protected by law.
Underwriter: Underwriter is an individual or an institution who undertakes the risk
associated with a venture, an investment, or a loan in lieu of a premium.
Void: Void means absolutely null, empty, having no legal force, and incapable of being
ratified.
Voidable: Voidable is a term typically used with respect to a contract that is valid, and
binding unless avoided or declared void by a party to the contract which is legitimately
exercising a power to avoid the contractual obligations.
Common Law – this term, when contrasted with Civil Law, refers to legal systems which have their
origin in the British legal system. The legal system of India is from the common law tradition.
Consideration – a common law concept which requires (in essence) that a promise be part of an
exchange to be enforceable as a contract.
Defects Liability Period – often, when a Default occurs under a contract, the obligor may have a
certain period of time to cure the Default before the affected party is allowed to exercise Remedies.
Default – the circumstances where an obligor under a contract is considered tobe in breach of the
contract. In formal written contracts, Defaults often include failure of a Representation or Warranty
to be true when made, failure to perform any Affirmative or Negative Covenant, insolvency or
bankruptcy, as well as other enumerated situations tailored to the specific circumstances.
Equity – this term, which is often used to mean fairness, also has a more technical legal meaning. It
used to be that the Common Law system was rather rigid,and in order to obtain relief, a litigant had
to fit into a limited class of situations.
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Impracticability – A legal doctrine closely related to Force Majeure. If some unanticipated event
makes performance of the contract unusually burdensome, some legal systems will allow a party to
be excused from the contract under the doctrine of impracticability. Different legal systems have
varied requirements for invoking this doctrine.
Remedies – the actions that can be taken upon an Event of Default. Sometimes an aggrieved party
can take action on its own. This is often referred to as“self-help.” Other times, the term “remedies”
is used to describe the court procedures and decisions that are available to help an aggrieved party.
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Note - Below given template is only for reference purpose and not for any legally binding utilisation.
TEMPLATE CONTRACT AGREEMENT

This Agreement is entered into on 22nd March, xxx (the “Effective Date”), by and between Elly
Resorts (ER), a company having its Registered Office at _______ hereinafter referred to as "the
Employer /Owner" (which expression shall unless repugnant to the context or meaning thereof
include its authorised representatives, successors and assigns) of the one part
AND
Palmyra Limited (PL) , a body corporate incorporated in xxx and having its registered office at
.............................................. hereinafter referred to as "the Contractor" (which expression shall
unless repugnant to the context or meaning thereof include its authorized representatives, successors
and assigns) of the other part.
WHEREAS
A. Elly Resorts is into business of operating resorts across India and they are having a resort in
Munnar , Kerala , India and want to build an amusement park within the said resort and is sourcing
for a Contractor who are having prior experience and knowledge for executing such contracts.
B. Elly Resorts as part of the contract works looking at the scope of works to be executed with
respect to Landscaping Works and automatic irrigation system with central control system, Designing
and building of indoor community swimming pool and designing and building musical fountains.
C. Palmyra Limited (PL) is a contractor based out of …..having vast experience in execution for
Landscaping Works and automatic irrigation system with central control system, Designing and
building of indoor community swimming pool and designing and building musical fountains and such
other works thus having a reputed name in the market.
D. Elly Resorts after verifying the contractor credentials and capabilities have issued a Letter of
Intent to Palmyra Limited (PL) for a contract price of USD 250000 with a mutual understanding that
the contract needs to be executed within 12 months of this contract execution and Defective Liability
period of 24 months.
E. Palmyra Limited (PL) has agreed and accepted the LOI and with an intent to execute the
contract and agreed scope of works as detailed and thus has started mobilizing resources for work
execution.
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F. Both the parties mutually agree to execute this contract with agreed terms and conditions
NOW IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. Definitions
In this Agreement words and expressions shall, save as otherwise provided herein, have the same
meanings as are commonly assigned to them. Capitalised terms not otherwise defined herein shall
have the meaning ascribed to such terms in the Agreement.
This Agreement shall mean the Contract for execution of Landscaping works , Indoor Committee
Swimming pool and Musical Fountains
The Contractor shall mean Palmyra Limited (PL)
The Works shall mean all those contracts and sub-contracts that relate to the services to be
carried out.
The Services shall mean all of the work of implementation of design and related services to be carried
out by the Contractor under this Agreement.
2. Construction Services. The Employer wishes to obtain the Contractor’s services to perform
the following work (the “Services”). Detailed plans and specifications illustrating the Services shall be
attached to this Contract.
a. Landscaping Works and automatic irrigation system with central control system,
b. Designing and building of indoor community swimming pool and
c. Designing and building musical fountains
The Contractor agrees to furnish the labor, materials, and supplies necessary to perform the Services
in accordance with the terms and conditions contained in this Contract. Upon completion of the
Services, the Contractor will remove all materials, supplies, and other debris.
3. Payment Schedule. An advance of 15% of Contract sum which is USD 250,000.00 will be paid
against Advance payment guarantee and remainder will be paid upon monthly running bills. All
monthly payments will be effected within 45 days from the date of certification of the respective bills.
Retention of 10% will be deducted in each running bill of which 50% will be released at the time of
substantial completion and remainder will be released upon practical completion ie upon expiry of
defects liability period.
4. Changes in the Services. The Customer may request reasonable changes to the Services
described in Section Any changes to the Services must be in writing and signed by both the Contractor
and the Customer. The Customer agrees that any changes to the Services may result in additional
charges and extend the Construction Schedule as described .
If, in the opinion of the Contractor, any variation or deviation from the said sites plan is necessary in
order to satisfactory completion of the said works, the Contractor shall do so only with the prior
permission in writing of the Owner.
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5. Account of Materials: The Contractor shall keep full and regular account of all the
materials purchased, brought on the site, consumed and balance lying on the site which
shall be open to inspection of Owner at all reasonable times. All materials or plants used
or to be used in construction shall remain at the contractor's risk and he shall not be
entitled to any compensation for injury to, or loss or destruction of such works or
materials arising from any cause, whatsoever.
6. Defect: If any defects, shrinkage or other faults appear in the works within six months after
their completion, it shall be the duty of Contractor to make good the loss.
7. Extension of Time: If due to certain unforeseen/uncontrollable circumstances, the Contractor

requires any extension of time for completing the works, he shall immediately make known the same
to the Owner and the Owner may, if he thinks such request reasonable, grant such extension of time
as he may think necessary.
8. Construction Schedule. The Contractor shalll complete the Services in accordance with the
following schedule.
Commencement date: 22nd March xxxx
Completion Date: 21st February xxxx
9. The Contractor agrees to provide a breakdown of all costs (i.e., materials and labor) .
10. Representations.
11.1. Contractor Representations. The Contractor is a duly licensed global contractor in

good standing, License #____________. The Contractor will perform the Services in a
workmanlike manner, in compliance with all applicable laws, regulations, codes, restrictive
covenants, and homeowners’ association requirements.
11.2. Owner Representations. The Owner is the legal owner of the Property, or otherwise
has authority to permit construction upon the Property. The requested works and Services
are in accordance with all applicable laws, regulations, codes, restrictive covenants, and
homeowners’ association requirements. The Owner has the financial ability to pay the
Contractor for the Services.
11. Obligations.
Contractor Obligations. The Contractor will obtain, at its own cost, all necessary permits and
approvals to perform the Services. The Contractor agrees to provide the Customer lien
waivers, lien releases, and/or acknowledgement of full payment upon receipt of each
payment laid out in the Payment Schedule.
The Contractor will take all reasonable safety precautions in performing the Services. The
Contractor will comply with all applicable laws, ordinances, rules, regulations, and orders of
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public authorities for the safety of persons and property. The builders shall indemnify the
owner in respect of all claims, damages or expenses payable in consequence to any injury to
any employee, workman, nominee, invitee while in or upon the said premises.
The builders shall also be responsible for any damage to buildings, whether immediately
adjacent or otherwise and any damage to roads, streets, foot-paths, bridges or ways as well
as all damages caused to the buildings, and work forming the subject to this contract by
frost, rain, wind or other inclemency of weather.
Employer’s Obligations.
The Employer will provide the Contractor, its employees, agents, and subcontractors,
reasonable access to the Property for the purpose of performing the Services.
Employer shall implement payments as per the schedule from time to time,
Employer shall arrange free issue materials just in time to the Contractor.
12. Insurances. Contractor shall provide evidence of following Insurances prior to

commencement of the works, all in coordinate with the approved formats provided in the tender
documents.
a. Contractor All Risk Insurance

b. Workmen’s Compensation Insurance
c. Plant and Machinery Insurance
d. Professional indemnity Insurance
e. Public Liability Insurance
13. Owners right of Inspection: The Contractor will permit the Owner to have access to the said
works while the same are under construction and to inspect the same.
14. Subcontractors. The Contractor may engage subcontractors to perform work only upon
due approval by the Employer
15. Performance Guarantee : The Contractor shall submit Performance Guarantee (PG) within 7
days from the date of issue of Letter of Acceptance (LOA).
16. Termination of Contract by Owners :If the Owner is not satisfied with the progress of the
work or with the quality of materials used or of the workmanship or violates any provisions of this
Agreement, he may call upon the architect to make a report on the progress of the work. If the
architect in his report also certifies that progress is not satisfactory, the Owner may, after giving 15
days notice, terminate the contract. In such an event, the Owner may then enter upon the site of the
works and may employ another Contractor to complete the same and may pay such contractor the
cost of such completion out of the sum payable to the Contractor under this agreement or any other
sum as agreed to between the Owner and the new contractor.
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17. Liability Waiver. If a Contractor, or any of its employees, contractors, agents, or the like are
injured in the course of performing the Services, the Customer is exempt from liability for those
injuries to the fullest extent allowed by law, unless such injury is caused by the negligence of the
Customer.
18. Defect Liability Period : It is mutually agreed that the contract will be liable for any defect
liability arising out of 24 months from the completion of the contract and Contractor is solely
responsible to rectify the defects . Failure of defects rectification entail the utilisation of retention
monies to engage another Contractor to undertake the same. If the rectification amount exceeds the
retention monies , Employer reserve rights to recover from the Contract sum.
19. Indemnity: The Contractor shall keep indemnified the Employer from all claims, demands or
actions that may be raised against the Owner by reason of anything done by the Contractor in the
course of execution of works under this Agreement.
20. Force Majeure Clause:
(1) Neither Party shall be in breach of its obligations under this Agreement (other than
payment obligations) or incur any liability to the other Party for any losses or damages of any
nature whatsoever incurred or suffered by that other (otherwise than under any express
indemnity in this Agreement) if and to the extent that it is prevented from carrying out those
obligations by, or such losses or damages are caused by, a Force Majeure Event except to the
extent that the relevant breach of its obligations would have occurred, or the relevant losses
or damages would have arisen, even if the Force Majeure Event had not occurred .
(2) As soon as reasonably practicable following the date of commencement of a Force

Majeure Event, and within a reasonable time following the date of termination of a Force
Majeure Event, any Party invoking it shall submit to the other Party reasonable proof of the
nature of the Force Majeure Event and of its effect upon the performance of the Party's
obligations under this Agreement.
i. Change in legislation by the Govt
ii. Restriction on transportation due to any pandemic as declared by WHO.
iii. Act of God (such as, but not limited to, fires, explosions, earthquakes, drought, tidal
waves and floods)
21. Termination. The Owner can terminate the Contract by giving written notice: (a) if the
Contractor commits any material breach of this Contract and fails to correct the breach within 10
days of notice of the breach; or (b) if there is any repeated failure by the Contractor to execute the
Services in an acceptable standard and to the reasonable satisfaction of the Customer.
The Contractor can terminate the Contract by giving written notice: (a) if the Customer fails to make
the payments required and set forth in Section 4 within 5 days of notice of failure to make a
payment; or (b) if the Customer commits any other material, non-financial breach and fails to correct
the breach within 10 days of notice of the breach.
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22. Entire Agreement. This document reflects the entire agreement between the Parties and
reflects a complete understanding of the Parties with respect to the subject matter. This Contract
supersedes all prior written and oral representations. The Contract may not be amended, altered or
supplemented except in writing signed by both the Contractor and the Customer.
23. Dispute resolution:
Any dispute, controversy, difference, or claim arising out of or relating to this contract, including the
existence, validity, interpretation, performance, breach or termination thereof or any dispute
regarding non-contractual obligations arising out of or relating to it shall be referred initially for
negotiation, conciliation and mediation for an amicable settlement, failing which the disputes shall
be resolved via arbitration governed by Arbitration and Conciliation Act 1996 and subsequent
amendments hitherto.
The parties hereby agree as follows:
1. The parties agree to submit their dispute to arbitration for resolution upon exhausting of
pre arbitral steps stipulated above.
2. The arbitration proceedings shall be governed by the ICSI Arbitration Centre rules
3. The seat of arbitration is New Delhi, and the venue is Hyderabad.
4. Parties shall approach ICSI Arbitration Centre for the appointment of the Solo Arbitrator.
5. The arbitration proceedings shall be conducted in English
6. Parties may choose Video Conferencing for the arbitration hearings.
7. The award rendered shall be final and binding on both the parties.
24. Severability. If any provision of this Contract shall be held to be invalid or unenforceable for
any reason, the remaining provisions shall continue to be valid and enforceable. If the Court finds
that any provision of this Contract is invalid or unenforceable, but that by limiting such provision it
would become valid and enforceable, then such provision shall be deemed to be written, construed,
and enforced as so limited.
25. Waiver. The failure of either party to enforce any provision of this Contract shall not be
construed as a waiver or limitation of that party’s right to subsequently enforce and compel strict
compliance with every provision of this Contract.
BY SIGNING BELOW, PARTIES ACKNOWLEDGE HAVING READ AND UNDERSTOOD THE TERMS OF THE
AGREEMENT
ARBITRATION CLAUSES
The Parties agree to the terms and conditions set forth above as demonstrated by their signatures as
follows:
Contractor :
Employer:
Witness(es)
===============================The End====================================
Authored by:
Ramasubramanian BE LLB FCIArb
e-mail: ram.s@adroitpmc.com
https://www.linkedin.com/in/ramadr/

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CONTRACT DRAFTING AND DRAFTING OF

RAMASUBRAMANIAN B.E. LLB FCIArb

I. COMPANY SECRATARIES AND THE CONTRACTS. ......................................................... 3

II. CONTRACTS – THE PIVOT ........................................................................................... 4

III. CONTRACT versus CONTRACT ACT: ............................................................................ 5

IV. IMPORTANCE OF DILIGENT CONTRACT DRAFTING!..................................................... 6

V. RELEVENT STATUES /RULES / PROTOCALS .................................................................. 8

VI. TYPES OF CONTRACT ................................................................................................. 9

VII. SOURCES OF CONTRACT .......................................................................................... 11

VIII. ELEMENTS OF A CONTRACT: .................................................................................... 13

IX. GENERAL OBJECTIVE OF A CONTRACT ...................................................................... 15

X. RED FLAG /CRITICAL CONTRACT CLAUSES: ............................................................... 15

XI. CONTRACT CLAUSES MITIGATING THE FUTURE LITIGATION ...................................... 21

XII. ARBITRATION AGREEMENT / CLAUSE ....................................................................... 22

ARB-MED-ARB CLAUSE ................................................................................................... 28

XIII. REMEDIES FOR THE BREACH OF CONTRACTS ............................................................ 30

XIV. GENERAL WRITING PRINCIPLES: ............................................................................... 31

XV. SPECIAL CONTRACTS ................................................................................................ 39

XVI. NEGOTIATION, EXECUTION AND STAMPING OF AGREEMENTS ................................. 44

XVII.STAMPING OF ARBITRATION AGREEMENT ............................................................... 48

XVIII. SUMMARY: ....................................................................................................... 50

CONTRACT TERMINOLOGY ............................................................................................. 51

TEMPLATE CONTRACT AGREEMENT ................................................................................ 56

“A Contract is only as good as the people signing it” ~ Jeffrey Fry

I. COMPANY SECRATARIES AND THE CONTRACTS.

• What is the purpose of the Contract?

II. CONTRACTS – THE PIVOT

Whether it is a Project or commercial transaction, disputes are inevitable from the

Section 10 of the Act stipulates the conditions of enforceability. Pursuant to this

This private body of law generally includes:

It is more so important because a contract is meant to provide written evidence of

V.RELEVENT STATUES /RULES / PROTOCALS

4. COST PLUS CONTRACT

5. FIXED PRICE CONTRACT

11. GOVERNMENT CONTRACTS

SOURCES OF THE CONTRACT FORMATION:

CROSS SECTION OF A CONTRACT DOCUMENT:

VOLUME 1: FORM OF AGREEMENT & CONDITIONS OF CONTRACT

VOLUME 3: APPENDIX A - SCOPE OF WORK & TECHNICAL INFORMATION

IX.GENERAL OBJECTIVE OF A CONTRACT

From this understanding, the objectives of any Contract are:

• Mitigation of Financial and Legal Risks;

• Creation of Legal rights and liabilities between the stakeholders

• Protection of Business strategies and Ideas.

Nevertheless, the foremost objective of the Contract document shall be to transcribe

X.RED FLAG /CRITICAL CONTRACT CLAUSES:

When negotiating a contract, special attention should be given to “exit provisions”.

Termination for Cause provisions

Events Triggering Termination

a. Insolvency, bankruptcy, or liquidation

b. Merger of the other party

c. Change of control of the other party

d. Changes in governmental regulations

e. Failure to meet certain specified performance levels

Impracticability applies when events following contract formation are so

A mistake causes a defect in contract formation, permitting a party to be excused

Elements of the Excuse of Impracticality

These elements include:

Similar to impracticability, frustration of purpose is concerned with a post-formation

FORCE MAJEURE CLAUSES