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CHAPTER - 1

GENERAL PRINCIPLES OF DRAFTING AND RELEVANT SUBSTANTIVE RULES CONCEPT 1 DRAFTING (MUST DO)

CONCEPT 2 CONVEYANCING (CS STUDY)

CONCEPT 3 DRAFTING vs. CONVEYANCING (*** STAR)

Drafting Conveyancing

Drafting in general means preparation of documents which included all types of legal document including for transfer of property.

Conveyancing is preparation of documents for the purpose of transfer of property only.

It is a broader concept as it includes conveyance.

Conveyancing is a part of drafting thus it has narrower scope than drafting.

Meaning: Drafting, in legal sense, means an act of preparing the legal documents like agreements, contracts, deeds etc.

Or

Drafting is the crystallization of expression in definitive forms of a legal right, privilege, function, duty or status.

Need: We need drafting for- a. Interpretation of documents;

b. Carrying out documentation departmentally; and c. Obtaining legal consultation.

Conveyance is an act of transferring any property whether movable or immovable from one person to another permitted by customs, conventions and law within the legal structure of the country. Transfer may be by sale, by lease, by giving gift, by exchange, by will or bequeathment. It doesn’t include acquisition of property by inheritance.

Start where you are. Use what you have. Do what you can

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CONCEPT 4 CONVEYANCING vs. CONTRACT (V.V. IMP.)

Conveyancing Contract

Conveyancing is preparation of documents for the purpose of transfer of property only.

Contract is a part of drafting/conveyancing which demands specific performance from any party.

Conveyancing doesn’t create any right of action but alters the ownership of existing right.

It may or mayn’t create a right of action.

It is governed by Transfer of Property Act 1882

It is governed by Indian Contract Act 1872.

CONCEPT 5 DOCUMENT vs. DEED (CS STUDY)

Document Deed

As per General Clauses Act, 1894- Document means any matter expressed or described upon any substance by means of letters, figures or marks, or by the more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter.

Deed is an instrument by which 2 or more person agrees to affect any right or liability.

It provides information & acts as a proof or evidence of anything.

Deeds are in writing, signed, sealed and delivered.

E.g. A writing, a map or plan, words printed, photographed etc.

E.g. Partnership Deed, Deed of family, Lease Deed etc.

CONCEPT 6 INSTRUMENT (*** STAR) As per Indian Stamp Act, 1899, the word “instrument” includes every document by which any right or liability is, or purports to be, created, transferred, modified, limited, extended, suspended, extinguished or recorded.

The expression is used to signify a deed inter partes or a charter or a record or other writing of a formal nature. Instrument includes-

a. an order made by the President in the exercise of his constitutional powers (Mohan Chowdhary v. Chief Commissioner)

b. awards made by Industrial Courts (Purshottam v. Potdar) c. A will (Bishun v. Suraj Mukhi)

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CONCEPT 7 GENERAL PRINCIPLES OF DRAFTING (MUST DO) (i) Fowler’s five rules of drafting: According to Fowler, “anyone who wishes to become a good writer should endeavor, before he allows himself to be tempted by more showy qualities, to be direct, simple, brief, vigorous and lucid.”

a. Prefer the familiar word to the far fetched b. Prefer the concrete word to the abstract c. Prefer the single word to the circumlocution d. Prefer the short word to the long

e. Prefer the Saxon word to the Roman

f. Always prefer active voice to the passive voice in the drafting of documents (ii) Sketch or scheme of the draft document: It is advisable to sketch or outline the

contents of a document before taking up its drafting. This rule was suggested by Davidson.

(iii) Skelton draft and its Self-appraisal: The draftsman should note down briefly the matters or points which he intends to incorporate in his intended Draft.

Once the draft of the document is ready, the draftsman should appraise it with reference to the available facts, the law applicable in the case, use of simple language intelligible to layman, and adherence to the use of Fowlers’ Rules of drafting, so as to satisfy himself about its contents.

(iv) Special attention to be given to certain documents: Certain documents require extra care before taking up the drafting. For example, documents where transfer of immovable property is involved it is necessary to ensure the perfect title of the transferor to such property proposed to be transferred by causing investigation.

(v) Expert’s opinion: If corporate executive feels necessary he should take the opinion of expert to ensure any document suitability and legal fitness.

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CONCEPT 8 SOME DO’S & DON’TS (SALMAN TYPE)

CONCEPT 9 GUIDELINES FOR USE OF PARTICULAR WORDS AND PHRASES

a) For general words refer to ordinary dictionary for ascertaining the meaning of the words.

b) For legal terms refer to legal dictionary like Wharton’s Law Lexicon or other dictionaries of English Law written by eminent English Lexicographers.

c) As far as possible current meaning of the words should be used.

d) Technical words may be used after ascertaining their full meaning.

e) The choice of the words and phrases should be made to convey the intention of the executor to the readers in the same sense he wishes to do.

Reduce the group of words to single word;

Use simple verb for a group of words;

Avoid round-about construction;

Avoid unnecessary repetition;

Write shorter sentences;

Express the ideas in fewer words;

Prefer the active to the passive voice sentences;

Choose the right word;

Know exactly the meaning of the words and sentences you are writing; and

Put yourself in the place of reader, read the document and satisfy yourself about the content, interpretation and the sense it carries.

Avoid the use of words of same sound.

Draftsman should avoid the use of words

“less than” or “more than”, instead, he must use “not exceeding”.

Negative in successive phrases would be very carefully employed.

When the clause in the document is numbered, it is convenient to refer to any one clause by using single number for it.

KNOWLEDGE IS POWER & POWER CURRUPTS SO STUDY HARD & BE EVIL

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CONCEPT 10 INTERPRETATION OF DEEDS AND DOCUMENTS (MUST DO) A. Informal Agreements: In interpretation of informal agreements, the rule to be applied

is that of reasonable construction.

B. Formal Agreements: Where the agreement is formal and written, the following rules of the interpretation may be applied:

a) A deed constitutes the primary evidence of the terms of a contract

b) According to Cardinal Rule- Clear and unambiguous words prevail over any hypothetical considerations or supposed intention.

c) In case words aren’t clear & unambiguous the intention will have to be ascertained.

d) An obligation created by an earlier clause can’t be destroyed by a latter clause.

e) An invalid clause in a deed can’t render the whole deed void unless it is impossible to severe that invalid clause from the rest.

f) Executed contract shall prevail over the executory contract.

g) The court must interpret the words in their popular, natural and ordinary sense, subject to certain exceptions.

h) All mercantile documents should receive a liberal construction. The governing principle must be to ascertain the intention of the parties through the words they have used.

i) The ordinary grammatical interpretation is not to be followed, if it is repugnant to the general context.

CONCEPT 11 VARIOUS KINDS OF DEEDS (AKSHAY Kr TYPE) a) Good Deed: It conveys a good title, not one which is good

merely in form. It is also called lawful deed.

b) Good and Sufficient Deed: It transfers the title relating to a particular property, i.e., land.

c) Inclusive Deed: It contains within the designated boundaries lands which are expected from the operation of the deed.

d) Latent Deed: A deed kept for twenty years or more in man’s escritoire or strong box.

e) Pretended Deed: It is apparently or prima facie valid but in real not valid because it isn’t properly drafted.

f) Voluntary Deed: Deed given without any valuable consideration.

g) Warranty Deed: A deed containing terms of warranty.

h) Special Warranty Deed: A deed containing terms of warranty subject to happening of some event.

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CONCEPT 12 SOME IMPORTANT TERMS (MODI TYPE)

Deed Pool: A deed between two or more parties where as many copies are made as there are parties, so that each may be in a possession of a copy. This arrangement is known as deed pool.

Deed Poll: A deed made and executed by a single party. E.g. - power of attorney. It is called a deed poll, because in olden times, it was polled or cut level at the top.

Indenture: Indenture are those deeds in which there are two or more parties. It is written in duplicate upon one piece of parchment and two parts were severed so as to leave vary (uneven) edge. This makes forging of such document difficult.

Cyrographum: This was another type of indenture. The word “Cyrographum” is written between two or more copies of the document and the parchment was cut in a jugged line through this word.

Deed Escrow: A deed signed by one party will be delivered to another as an “escrow” for it is not a perfect deed. It is escrow because it is not signed by all the parties. Deed operates once all parties signed and dated it from the date it was last signed.

CONCEPT 13 COMPONENTS OF DEEDS

:

The usual parts or components or clauses of deeds in general are mentioned as follows:

1) Description of the Deed Title

2) Place and Date of execution of a Deed 3) Description of Parties to the Deed

4) Recitals: Recitals contain the short story of the property up to its vesting into its transferors. Recitals may be of two types. (i) narrative recitals, which relates to the past history of the property transferred and sets out the facts and instrument necessary to show the title; and (ii) inductory recitals, which explain the motive or intention behind execution of deed.

5) Testatum: This is the “witnessing” clause which refers to the introductory recitals of the agreement, and also states the consideration. The witnessing clause usually begins with the words “Now This Deed Witnesses”.

6) Consideration 7) Receipt Clause

8) Operative Clause: Operative clauses identify the actions or recommendations made in a resolution. Each operative clause begins with a verb (called an operative phrase) and ends with a semicolon.

9) Description of Property

10) Parcels Clause: This is a technical expression meaning methodical description of the property.

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11) Exceptions and Reservations: It refers to admission of certain rights to be enjoyed by the transferor over the property to be agreed to by the transferee. It is the contractual right of the parties to the contract or to the document to provide exceptions and reservations which should not be uncertain, repugnant or contrary to the spirit of law applicable to a particular document or circumstances.

12) Premises and Habendum: A habendum clause is a clause in a deed or lease that defines the type of interest and rights to be enjoyed by the grantee or lessee.

In a deed, ahabendum clause usually begins with the words "to have and to hold".

13) Covenants and Undertakings

14) Testimonium Clause: Testimonium is the clause in the last part of the deed.

Testimonium signifies that the parties to the document have signed the deed. This clause marks the close of the deed and is an essential part of the deed. The usual form of testimonium clause is as under:

“In witness whereof, parties hereto have hereunto set their respective hands and seals the date and year first above written”.

This is the usual English form of testimonium clause. In India, except in the case of companies and corporations seals are not used and in those cases testimonium clause reads as under:

“In witness whereof the parties hereto have signed this day on the date above written”.

15) Signature and Attestation

16) Endorsements and Supplemental Deeds 17) Annexures or Schedules

CONCEPT 14 ENGROSSMENT AND STAMPING OF A DEED: (IMPORTANT) The draft of document is required to be approved by the parties. In case of companies it is approved by BOD in their meeting or by various committees (e.g.-Audit Committee). The document after approval is engrossed i.e. copied fair on the non-judicial stamp-paper of appropriate value as may be chargeable as per Stamp Act.

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CHAPTER - 2

DRAFTING AND CONVEYANCING RELATING TO VARIOUS DEEDS AND AGREEMENTS

CONCEPT 1 IMPORTANT POINTS IN REGARD TO DRAFTING OF CONTRACTS

Names and descriptions of the contracting parties;

Consideration and earnest money if paid;

Subject-matter of the agreement;

Time within which the agreement is to be performed; and

Special terms agreed upon between the parties.

CONCEPT 2 DEL CREDERE AGENCY (*** STAR)

A del- credere agency is an arrangement where an agency is combined with guarantee. In this arrangement, the agent, i.e., del credere agent undertakes to guarantee the due performance of the contract by the buyer in lien of an extra remuneration.

He gives an additional security to the seller, but he does not shift the responsibility of payment from the buyer to the seller.

A del credere agent like any other agent, is to sell according to the instructions of his principal, to make such contracts as he is authorised to make for his principal and be bound, as soon as he receives the money, to hand it over to the principal.

CONCEPT 3 INGREDIENTS OF AN AGENCY CONTRACT (CS STUDY) a) Authority should be given either expressly or impliedly to bind his principal.

b) While the principal should not be a minor, an agent could be a minor.

c) Consideration is not necessary for an agency contract.

d) For the acts of the agent, the principal is liable unless the principal has exceeded his authority.

e) The authority of an agent extends to the doing of all that is necessary and collateral to the doing of the main act.

f) The obligations under the contract of agency is not assignable unless the nature of the business necessitates such assignment or, customs of usage of trade in the locality with regard to the business permit such assignment or, such assignment is expressly permitted by the contract of agency.

There are two kinds of people in this world: those who want to get things done and those who don’t want to make

mistakes

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CONCEPT 4 COLLABORATION AGREEMENTS (KRANTI TYPE)

When two parties join hands for exchange of technical know-how, technical designs and drawings; training of technical personnel of one of the parties in the manufacturing and/or research and development divisions of the other party; they are said to be collaborating in a desired venture.

The word “collaboration” has, however, acquired a specific meaning, which refers to cooperation between a party within India and a party abroad.

The agreements drawn and executed between such collaborating parties are known as

“foreign collaboration agreements”.

In order to ensure quick processing of the proposed collaboration arrangements and on a uniform basis, the Central Government has issued certain guidelines for prospective collaborators.

CONCEPT 5 GUIDELINES FOR ENTERING INTO FOREIGN COLLABORATION AGREEMENTS: (MUST DO) These guidelines cover the following aspects of foreign collaboration agreements:-

a) Investment i) Procurement of capital goods etc.

b) Lump sum payment j) Technicians

c) Royalty k) Training

d) Duration of agreement l) Exploitation of Indian patents e) Renewal or extension of agreement m) Consultancy

f) Remittances n) Brand Name

g) Sub-licensing o) Indian Laws

h) Exports p) Approval of Central Government

CONCEPT 6 ARBITRATION AGREEMENTS

As per Arbitration and Conciliation Act, 1996 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 defined relationship whether contractual or not.

In other words, it refers to an agreement for the settlement of dispute by a third person without going to a court of law.

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i. A dispute between parties to an agreement, requiring a settlement;

ii. Its submission for a settlement to a third person; and

iii. A decision by such third person according to his own judgment based on the facts and circumstances of the dispute, which is binding on both the parties.

CONCEPT 7 AWARD (SHRDDHA KAPOOR TYPE) MEANING OF AWARD: Award means decision of the Arbitrator to whom the dispute is referred.

U/S 2(1) (c) of Arbitration & Conciliation Act 1996- Arbitral award includes “an interim award”.

REQUISITE OF AN AWARD:

i. it must be consistent with the submission;

ii. it must be certain;

iii. it must be fair to the parties;

iv. it must be final;

v. its implementation must be possible.

COMPONENT OF AN AWARD:

(a) Recitals

(b) Operative clause (c) Cost of the Award (d) Date & place of Award

CONCEPT 8 GUARANTEES (CS STUDY)

A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default.

The person who gives the guarantee is called the “surety”; the person in respect of whose default the guarantee is given is called the “principal debtor”; and the person to whom the guarantee is given is called the “creditor”.

Kinds of Guarantee

(a) Continuing Guarantee: It extends to a series of transactions.

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(b) Fidelity Guarantee: Here employer is guaranteed against the misconduct of an employee.

(c) Counter Guarantee: It’s a guarantee given by principal debtor to surety to indemnify him against any loss suffered due to the default on the part of the principal debtor.

(d) Performance Guarantee: It’s a guarantee which ensures the contracted performance of another person.

(e) Bank Guarantee: It’s a guarantee given by bank on behalf of its client to another person with whom client has entered into contract & call upon the bank to pay the guaranteed amount in event of any contingency.

CONCEPT 9 HYPOTHECATION vs. PLEDGE (DIFFERENCIATE)

BASIS HYPOTHECATION PLEDGE

Meaning Hypothecation is a form of transfer of property in goods. Hypothecation agreement is a document by which legal property in goods passes to the person who lends money on them, but the possession does not pass.

Pledge is a bailment of goods as security for payment of debt.

Governing Act

It is not regulated in India by any statute.

It is governed by Section 172-176 of Indian Contract Act 1872.

Possession of Goods

Here goods remains in possession of borrower

Possession is transferred to money lender.

Parties Hypothecator & Hypothecatee Pawnor & Pawnee Example A working capital loan given by bank on

the basis of goods

Mr. A delivers his goods to Mr. B as security for payment of debt of Rs.

50,000 payable by Mr. A to Mr. B.

CONCEPT 10 LEASE vs. LICENSE (DIFFERENCIATE)

LEASE LICENSE

In lease there is transfer of interest in land. In license there is no such transfer, although the license acquires a right to occupy the land.

Leases are generally heritable. Licenses aren’t so.

Leases are transferable. Licenses aren’t so.

Leases aren’t revocable at the will of the leasers.

Licenses can be revoked at the will of licensee.

Transferee of lease is bound by lease. Transferee of license isn’t bound by license.

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Death of the leaser doesn’t terminate lease. Death of licensee terminates license.

In case of breach- aggrieved party can claim for the specific performance.

In case of breach- aggrieved party can only claim compensation.

CONCEPT 11 E-CONTRACTS (CS STUDY) ELECTRONIC CONTRACTS: It is any kind of contract formed in the course of e-commerce

by the interaction of two or more individuals using electronic means, such as e-mail.

ESSENTIALS OF E-CONTRACT:

a) An offer or proposal by one party and acceptance of that offer by another party resulting in an agreement consensus- ad- idem.

b) An intention to create legal relations or intent to have legal consequences.

c) The agreement is supported by lawful consideration.

d) The parties to contract are legally capable of contracting.

e) Genuine consent between the parties.

f) The object and consideration of the contract is legal and is not opposed to public policy.

g) The terms of the contract are certain.

h) The agreement is capable of being performed TYPES OF E-CONTRACTS:

a) Click-wrap or Web-wrap Agreements: These are the agreements which we generally come across while surfing internet such as “I AGREE” to the terms or “I DISAGREE” to the above conditions. A click-wrap agreement is mostly found as part of the installation process of software packages.

b) The Shrink-wrap Agreements: Shrink wrap contracts are license agreements or other terms and conditions which can only be read and accepted by the consumer after opening the product like CD ROM of software. The terms and conditions are printed on the cover of CD ROM.

c) Electronic Data Interchange or (EDI): These contracts used in trade transactions which enable the transfer of data from one computer to another in such a way that each transaction in the trading cycle can be processed with virtually no paperwork.

Drafts to be must practice in this chapter:

Sale of House Property

 Agency contract

 Collaboration Agreement

 Arbitration Agreement

 Employment of Manager of a Business Concern

Leave & License Agreement

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References