Contracts: the core of commercial legal work

Most in-house legal work in companies revolves around contracts: drafting, reviewing, negotiating and managing them.

What makes a valid contract (Indian Contract Act, 1872)

• Offer and acceptance: a clear proposal and unconditional acceptance.
• Lawful consideration: something of value exchanged (it can be a promise).
• Capacity: parties of the age of majority, of sound mind, not disqualified by law.
• Free consent: not caused by coercion, undue influence, fraud, misrepresentation or mistake.
• Lawful object: not forbidden by law, fraudulent, or against public policy.
• Not expressly declared void (for example, agreements in restraint of trade, subject to exceptions).

Void (no legal effect) vs voidable (valid until the aggrieved party chooses to cancel it, for example where consent was obtained by coercion).

Common commercial agreements

NDA (non-disclosure agreement), master services agreement (MSA) with statements of work (SOWs), vendor/supply agreements, SaaS subscription terms, employment and consultancy agreements, lease agreements, distribution and franchise agreements, shareholders' agreements, and website terms of use and privacy policies.

Key clauses to understand

• Parties, recitals and definitions: who is bound, background, defined terms used consistently.
• Scope of services/deliverables and acceptance criteria.
• Payment terms: fees, invoicing, taxes (GST), late payment interest.
• Term and termination: duration, renewal, termination for convenience vs for cause, notice periods, consequences of termination.
• Confidentiality: what's confidential, exceptions, duration.
• Intellectual property: who owns what's created, licences granted.
• Representations and warranties: statements of fact and promises about quality.
• Indemnity: one party compensates the other for specified losses (often third-party claims).
• Limitation of liability: caps on damages (often linked to fees paid) and exclusion of indirect losses.
• Data protection and security.
• Force majeure: relief when events beyond control prevent performance.
• Governing law and dispute resolution: courts vs arbitration (under the Arbitration and Conciliation Act, 1996), seat and venue.
• Assignment, notices, entire agreement, severability, amendment.

Reviewing a contract: a practical approach

1. Understand the commercial deal and your client's priorities.
2. Read the whole contract once without marking up.
3. Check the high-risk clauses first: liability caps, indemnities, IP, termination, payment, data protection, governing law.
4. Mark up with tracked changes and short explanatory comments; propose fallback positions.
5. Keep a clause playbook (preferred, acceptable and walk-away positions) for consistency.
6. Track key dates (renewals, notice deadlines) in a contract management system.

Check yourself

• What makes a contract voidable rather than void?
• Explain indemnity vs limitation of liability to a business manager.
• Which five clauses would you review first in a vendor's MSA?