Legal drafting

an art of creating Legal Document.

1. 1 LEGAL DRAFTING an art of creating legal documents.

2. 2 Drafting, in legal sense, means an act of preparing the legal documents like agreements, contracts, deeds etc. A proper understanding of drafting cannot be realized unless the nexus (a connection or series of connections linking two or more things ) between the law, the facts, and the language is fully understood and accepted.   Drafting may be defined as the synthesis of law and fact in a language form [ Stanley Robinson: Drafting Its Application to Conveyancing and Commercial Documents (1980);]   The process of drafting operates in two planes: the conceptual and the verbal. Besides seeking the right words, the draftsman seeks the right concepts. Drafting, therefore, is first thinking and second composing. DRAFTING

3. 3 The Constitution of India; The Companies Act 1956 and 2013; The Indian Evidence Act, 1872; The Indian Contract Act, 1872; The Indian Stamp Act, 1899; The Registration Act, 1908; The Transfer of Property Act, 1882; LAWS RELATING TO DRAFTING

4. 4 A deed is an instrument- Written on parchment/paper; Executed by some person or corporation; Consent or giving assurance; Interest in some property or subject matter; legal or equitable right, title or interest; governed by some laws/act’; Affecting the legal relation; WHAT IS DEED ?

5. 5 Section 3 of the Indian Evidence Act, 1872, defines a document to mean Any matter expressed/described; Upon any substance; By means of letters/figures/marks/ Intended to be used For recording that matter; WHAT IS DOCUMENT ? Difference between Conveyancing and Documentation . Conveyancing: Act of transferring property title from one person to another; Documentation: the preparation, finalization and execution of documents;

6. 6   An agreement which is enforceable at law is called a contract. Generally when a contract is reduced to writing, the document itself is called an agreement.   Form of Contract There is no particular form prescribed for the drawing up of trade contracts, except that they must fulfill all the essential requirements of a valid contract under the law applicable to the contract. If the law requires any particular category of contracts to be in writing or to be registered, these formalities must be complied with. A contract may be hand written, type written or printed. It may be as brief or as detailed as the circumstances of a particular trade transaction demand. DRAFTING OF CONTRACTS

7. 7 A valid and binding agreement Consideration.  Capacity.  Intention. Formalities.  Legal purpose.  Requirements of a valid contract (The Contract Act, 1872)

8. 8   Description of Parties to the Contract: names, status and address. In case of an individual, father’s name and in case of a company, the place where registered office is situated be also given. In case of firms and companies the particulars of persons representing them be invariably given including details of particulars of the firm. Legal Nature of the Contract: In the title or in the introductory part of the contract, the parties should clearly indicate the legal nature of the contract as to whether it is a sale/purchase contract or a commercial agency contract or a contract for technical assistance and advice or building construction and erection contract, etc. so as to avoid any doubt as regards the nature of the contract and the legal position of the parties thereunder. Important points in regard to drafting of Contracts:

9. 9 3. Licenses and Permits: It is generally the commercial practice to provide that each party to the contract may obtain the requisite licenses in its own country. 4. Taxes, Duties and Charges: A provision regarding the responsibility for payment of taxes, duties and other charges, if any, may also be included in the contract. Provision should also be made for fluctuations in the rate of taxes, duties and fees, after the conclusion of the contract and it may be agreed upon whether any increase in such rates would be borne by the buyer or the seller. Important points in regard to drafting of Contracts: Contd …

10. 10 Quality, Quantity and Inspection of Goods; Insurance Documentation: Guarantee; Passing of the Property and Passing of the Risks; Amount, Mode and Currency of Payment; Force Majeure; Specific Performance; Proper Law of Contract/ Governance of Law; Settlement of Disputes and Arbitration Important points in regard to drafting of Contracts:

11. 11 The vendor and the purchaser must be sufficiently described, irrespective of the fact that the parties know each other. If one of the parties to the agreement is acting in his representative capacity, such capacity must be clearly and precisely disclosed and his authority to act in that capacity must form part of the agreement. specific performance may be enforced not only against a party to the contract but also against a person claiming title under it. Legal representatives of parties have a right to require specific performance of a contract or are bound by the promise to perform the contract. CONTRACTING PARTIES

12. 12 Subject Matter Subject-matter of the agreement must be described in detail giving its precise situation and the extent of interest agreed to be conveyed therein should be clearly stated. If the property is subject to certain charges, easements, encumbrances, restrictions, covenants etc., the same should be clearly stated. The vendor should not conceal any material particular with regard to the property he is selling, which the purchaser has a right to know. Time for Performance If the time for performance is the essence of the agreement, the same should be clearly stipulated and the consequences of non-performance within the stipulated time should also be clearly and precisely declared.

13. 13 Attestation: It is not necessary for an agreement to be attested by any witness. But where registration is desired the agreement should be attested by two witnesses. Registration: Agreements not relating to immovable property and agreements not creating an interest in immovable property are not compulsorily registrable. Only agreements creating an interest in immovable property worth more than Rs. 100 are required by law to be registered. Stamp Duty: For the purpose of stamp duty, agreements are covered by Article 5 of Schedule I to the Indian Stamp Act, 1899. The stamp duty for different kinds of agreements varies from State to State. ATTESTATION, REGISTRATION AND STAMP DUTY

14. 14 Document should be clear; Simple words No ambiguity Ascertain meanings used Avoid legal jargon 2. Logical arrangement: Logical order of document Eliminate inadequacy and repetition 3. Consistent usage of words same words in same sense Final product should be clear   PRINCIPLES OF GOOD DRAFTING

15. 15 Compliance with legal requirements Legal requirement should be incorporated A document which is void ab initio has no existence in law. Contractual obligations should not be contrary to the law. 5. Concise and brief document Irreducible minimum of clear words; Avoid repletion and redundancy 6. Direct expression in document Nothing implicit Active voice preferred to passive Simple sentence preferred to complex Objective preferred to subjective PRINCIPLES OF GOOD DRAFTING Contd …

16. 16   7. Miscellaneous Divide into paragraphs First word/phrase of important part of deed in capitals Proper punctuation Clauses in subsequent paragraphs should not be referred without giving numbers; Small sentences in simple language Avoid negatives in successive phrases State dates, sums and numbers in both figures and words Fill blank spaces in document before execution Use font Times new roman or Book Antique as this is the most readable font in all versions of MS Roman/Arabic numerals, capital/lower case letters for sub divisions Headings and sub headings No spelling/ grammatical/typing mistake PRINCIPLES OF GOOD DRAFTING Contd …

17. 17 Collect facts from client Understand clients requirements Determine most appropriate legal document Selection of the right document is of vital importance to the client for tax or other reasons. Section 46 and section 9 of the companies Act 1956 and 2013 Article 299 in The Constitution Of India 1949 (Contract) Try to provide all provisions which may arise in future Provide clauses to cover every situation of the transaction PROCESS OF DRAFTING OF DOCUMENT

18. 18 DRAFTING OF DEED

19. 19 The deed commences with its name Name in capital letters Name should reflect the nature of the deed Deed should be commenced as “THIS DEED OF SALE…..” Place of execution stated after name. Date of execution Eg .: THIS DEED OF SALE MADE AT JAIPUR ON THE 25TH DAY OF JANUARY, 2018. The full description of all the parties to the deed, for Eg .: Mr. XYZ S/o Shri ABC, R/o xxxxxxxx , Jaipur, Rajasthan, having PAN: QWER5678IK, AADHAR No. 7777 8888 9999, hereinafter referred to as the "Seller", (which expression shall, unless repugnant to the context or meaning thereof be deemed to mean and include their legal successor(s), administrators, executors successors & permitted assignees) of the FIRST PART. (Change if the party is company or any other entity) DRAFTING OF DEED

20. 20 Minor are not competent to contract (Section 10 of Indian Contract Act) Person of Unsound mind or a lunatic is not competent to contract (Section 12, Indian Contract Act); If there are more than 2 parties- use terms like “FIRST PART”; “SECOND PART”; RECITALS: NARRATIVE RECITAL- history of property or the parties and title of the transferor; INTRODUCTORY RECITAL- motive or intention of the parties; In chronological order TESTATUM: It is the operative part of the deed Form: “NOW THIS DEED WITNESSETH AS FOLLOWS:”   CONSIDERATION: Fully and truly set forth in the deed (Section 25 of the Indian Contract Act E.g.: “THAT IN PURSUANCE OF THE SAID AGREEMENT AND IN CONSIDERATION OF A SUMOF Rs. 1,00,000/- (Rupees One Lakh only) PAID BY THE TRANSFEREE TO THE TRANSFEROR BEFORE EXECUTION HEREOF (THE RECEIPT OF WHICH THE TRANSFEROR DOES HEREBY ACKNOWLEDGE)” DRAFTING OF DEED Contd …

21. 21 COVENANTS: Include clear and unambiguous covenants on the part of the parties, e.g. “in a lease deed, the lessor and lessee covenants to perform duties _______”   SCHEDULE OF THE PROPERTY: Description of the property given in the schedule append to the deed Words “more particularly described in the schedule hereunder attached.”   MAP: Map of the property annexed Section 21(4) of the Indian registration Act.   ESTATE: All state clause: Expresses that the transferor conveyed all his estate, interest, title, claim, rights and demands whatsoever in the said property of its part thereof; Makes clearer the rights, interests and title etc. of the transferor DRAFTING OF DEED Contd …

22. 22 TESTIMONIUM: Concluding part Eg .- “IN WITNESS WHEREOF THE PARTIES HERETO HAVE SET THEIR RESPECTIVE HANDS THE DAY, MONTH AND YEAR FIRST ABOVE WRITTEN.” GOVERNING LAW: Specify which law is applicable; Specify which court will resolve the dispute Arbitration- Specify all details DRAFTING OF DEED Contd …

23. 23 EXECUTION: Signed by the parties to the deed in presence of the witnesses; Stamp duty to be paid (Section 3 of the Indian Stamp Act) ATTESTATION: Two or more witnesses (Section 3 of the Transfer of Property Act) Necessary in bond, gift and will Name and description of the Witness DRAFTING OF DEED Contd …

24. 24 Addendum/Supplementary Deeds Addition/alteration to the deed usual form of Deed after the name of the Deed following words added- “In continuation of the sale deed executed on 8th day of August, 2015 at Jaipur, this Supplementary Deed is executed on 25th day of January, 2018 at Jaipur between the parties as below:” mention details of original deed   SUPPLEMENTAL DEED

25. 25 in the TESTATUM clause mention the Clause number want to alter, modify, substitute or delete. At the end write that except changes in this agreement rest clauses will remain same. “TO THE EXTENT of the modification agreed in this Supplementary Deed, the Original Agreement dated 8 th August, 2015 stands modified. The other clauses of the said Original Agreement shall stand mutatis mutandis and have full force and effect, bind and regulate the relations of the Promoter and the Allottee and shall be subject to the same terms, covenants, stipulations, declarations, and conditions as are expressed and contained therein except in so far as the same shall be necessarily modified or effected by these presents.   SUPPLEMENTAL DEED Contd …

26. 26 Contact Us For further Clarification and discussions: Contact: CS Harleen V. Bedi, Legal Consultant B.com, C.S, LL.B.  [phone]  [email protected]