Business Documents – Deeds | Agreements | Contracts

• Inclusive definitions of “document” in various legislations, including the General Clauses Act and the Companies Act, provide a comprehensive framework that covers a wide range of written or recorded matters.
• These definitions contribute to the effective functioning of businesses by reducing misunderstanding and vagueness during transactions.
• Business documents, such as deeds, contracts, circulars, public notices, tenders, etc., fall under these inclusive definitions, ensuring clarity and facilitating smooth business operations.

In legal terms, a deed is a solemn document used to describe various instruments through which two or more individuals agree to establish a right or liability. This includes documents like Gift Deeds, Sale Deeds, Deeds of Partition, Partnership Deeds, Deeds of Family Settlement, Lease Deeds, Mortgage Deeds, and more. Even a power of attorney has been considered a deed in older English cases. The term “deed” also includes a bond within its scope. A deed is a present grant rather than a mere promise to be performed in the future. Deeds are in writing, signed, sealed and delivered.

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.

Accordingly, there cannot be an agreement unless there are two or more parties that agree to perform certain acts or refrain from doing something.

In other words, an agreement between the parties is an instrument whereby the parties freely agree to perform certain acts or refrain from doing something, unilaterally or bilaterally. The purpose of the instrument is to bind the parties to the terms and conditions agreed upon.

Few types of Agreement and their purposes are as under:

1. Sale/Purchase Agreements – Sale and Purchase agreements are entered into by the parties for the purpose of transfer to property. These agreements ensure that the property legally transferred and conveyed to the other party without dispute.
2. Commercial Agency Agreements – Sometimes businesses are conducted by traders not directly with their counterparts but through the agency of independent agents appointed for the purpose. Such agents would locate customers for the principal’s goods and in certain conditions, would have an implied authority to deal with the goods of the principal, allow credit terms to customers and receive payment from the customers on behalf of the principal. Commercial Agency Contracts are entered into by organisations for running businesses though this mode of business operation.
3. Collaboration Agreements – 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; continuous provision of technical, administrative and/or managerial services, they are said to be collaborating in a desired venture. Commercial Agency Contracts are used in such scenarios.
4. Arbitration Agreements – The ‘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 defined relationship whether contractual or not. It may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
5. Hypothecation Agreement – 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.
6. Outsourcing Agreements – Outsourcing is the contracting out of a company’s non-core, non-revenue producing activities to specialists. It differs from contracting in that outsourcing is a strategic management tool that involves the restructuring of an organisation around what it does best its core competencies.
7. Agreement for Assignment – An assignment is a form of transfer of property and it is commonly used to refer the transfer of an actionable claim or a debt or any beneficial interest in movable property. An important aspect of intellectual property laws deals with assignment agreements. A transfer of an actionable claim is usually called an assignment thereof. For example, Assignment of Patents, Assignment of Trade Marks, Assignment of Copyrights, Assignment of Business and Goodwill etc.
8. Shareholders’ Agreements – Shareholders’ agreements (SHA) are quite common in business. In India, shareholder’s agreement has gained popularity and currency only lately with bloom in newer forms of businesses. There are numerous situations where such agreements are entered into – family companies, JV companies, venture capital investments, private equity investments, strategic alliances, and so on. Shareholders’ agreement is a contractual arrangement between the shareholders of a company describing how the company should be operated and the defining inter-se shareholders’ rights and obligations.
9. Employment Agreements – They are entered into between parties for the purpose securing the availability of manpower for an organisation.

An agreement gives birth to a contract. As per Section 2(e) of the Indian Contract Act, 1872 “every promise and every set of promises, forming the consideration for each other, is an agreement.

It is apparent from the definition that an agreement is based on a promise.

According to Section 2(b) of the Indian Contract Act, 1872, “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. An agreement, therefore, comes into existence when one party makes a proposal or offer to the other party and that other party signifies his assent thereto.

Therefore, every contract is an agreement but not vice versa. Agreements in which the idea of bargain is absent and there is no intention to create legal relations are not contracts.

• Circular is a letter or notice sent to a large number of people. The purpose of circulars is to disseminate the information to large number of individuals. Generally, circulars are in written form so as to create a permanent record of the information and the same may be accessed to by the individuals in present as well as in future.
• A circular may be issued and circulated in various modes but in present era, the prevalent mode in which circulars are issued are in electronic form such as by placing them at the website, sending them by emails etc.
• For Example –Central Government may issue a circular for giving clarification on any point of Law or providing any other necessary information to public at large.

Important Points for drafting a circular are:

• Issuing Authority – It is important to mention the name of the issuing authority on the circular for communicating the position and authority of the addressor. It reduces the chance of confusion in addresses and increase the chances of observance.
• Details of Addressee – It is essential to mention the details of addressees by name, designation etc. in circulars. The addressees are required to comply with the information specified a circular. Therefore, mentioning the details of addressees make the circulars effective.
• Subject – The mention of subject in a circular ensures that the circular receives the required attention. This will make circular more effective and chances of avoidance gets reduced.
• Reference to Preceding information – It is mandatory to mention the reference to the information already provided before the present circulars. It ensures the completeness of information and the addressee may understand the complete matter contained therein.
• Main Information – The main purpose of the circular is to disseminate the information to selected group of individuals. The information should be complete and in understandable language leaving no chance of ambiguity.
• Source of Authority – It is always preferable to mention the source of authority under which the signatory has issued the circular. This gives emphasis on observance of the circular and increases the chances of amenableness.
• Signature – The signature on the circular makes it more reliable.

The advantages of issuing circular are:

• Ease of Dissemination of Information – Circulars play significant part in the development and easy working of the businesses of organisations. Through circulars the information is circulated with ease.
• Economical – Circulars are economical way of dissemination of information effectively. Through circulars, large number of individuals may be reached.
• Expeditious – Through circulars, important information can be disseminated to a large number of people expeditiously. Hence, it saves time and efforts of the authority.
• Less Efforts – Issuing circular for dissemination of information requires less efforts and can produce upright results.
• Develop Consciousness – Systematic and regular use of circulars for dissemination of information develop consciousness in the addressees and improves effectiveness.

Public notices are issued to convey information to large number of receivers that may called public. These are announcements made on a happening of a certain event of public interest. These may be issued by a Government Agency or by an individual including organisations.

These may be issued for varied reasons such as providing information relating to, change in a law, struck off the name of companies by Registrar of Companies, Status of Complaints by an authority, Call for Information regarding submission of information pertaining to ‘Unclaimed Non-convertible Securities’, Public Notices by companies etc.

They are published though websites, newspapers or any other prevalent way.

Entities or individuals authorised to issue such notices:

• Central Government
• State Government
• Corporates
• Statutory corporations
• Authorised persons of various authorities

• Name and Address of the Organisation – The name and address of the organisation be mentioned on the initial page of the document.
• Subject of the Document – The subject of the tender documents to be mentioned in clear and comprehensive manner in order to attract the attention of the Bidder.
• Index of the Tender Document – The index of the documents can make the document convenient for the prospective bidder.
• Important Dates and Necessary Information – The information such as Tender Publication Date, Last date and time for sending Pre-Bid Queries in writing, Cost of Tender, Earnest Money Deposit, Pre-Bid Meeting date, time & venue, Last Date & address of Submission of Bids, Date, time & Venue of opening of Technical Bids and Financial Bids, contact details etc. should be provided in the tender document.
• Disclaimer Clause – A disclaimer clause with respect to reservations or observation on the tender documents should be placed in the tender document.
• Job Description – The job description in details should be mentioned in the tender document in order to acquaint prospective bidders with the requirements attached with the Job and evaluate and prepare their bids accordingly.
• Division of Tender Documents in Parts – The tender document be preferably prepared asking for Bid submissions in two parts i.e. Technical Bid and Financial Bids.
• Fees and Deposits – The tender document should mention the fees and deposits commensurating the nature and quantum of work. The cost of the tender document may be required from the prospective bidder. Further, the provisions relating to Earned Money Deposit (EMD) and Security Deposit are also to be placed in the tender document.
• Conditions for Forfeitures of EMD – The clause providing for the circumstances in which EMD may be forfeited to be mentioned in the tender document. The general conditions in which EMD be forfeited are as under:

1. 1. If the bidder withdraws its bid;
   2. the selected bidder delays or does not accept the Purchase/Work Order;
   3. the selected bidder fails to supply goods/services as per the terms of the Tender or fails to execute Purchase/Work Order.

• Pre-Bid Meeting – Pre-Bid Meetings be conducted in order to provide any clarification sought on the tender.
• Scope of Work – The scope of work in details be mentioned in the tender documents.
• Mention of Technical and Administrative Requirements – The technical and administrative requirement be mentioned comprehensively in order to prevent the halt in the Job at the later stage. The document should be clear and specific with respect to technical and administrative requirements for performing the Job.
• Eligibility Criteria – Essential Requirements are to be mentioned in the tender document.
• Necessary Forms and Documents – Formats such as of Technical Bids, Financial bids, past experience of the bidder, Tender Acceptance Letter, Standard Terms and Condition of Agreement may be mentioned in the tender document. Further, a list of document required to be attached in the tender document may also be provided in the document.

• Letter of Credit (‘LC’), also known as a documentary credit is a payment mechanism used specially in international trade. In an LC, buyer’s bank undertakes to make payment to seller on production of documents stipulated in the document of LC.
• LC play an important role in the trade of a country, especially in its international trade.
• In most of the cases, the exporters (sellers) are personally not acquainted with the importers (buyers) in foreign countries. In such cases the exporters bear great risk, if they draw bills on importers, after having dispatched the goods as per their orders, because if the latter default in accepting the bills or making the payment, the exporter will suffer heavy losses. To avoid such risks, the exporters ask the importers to arrange a letter of credit from their banker in favour of themselves, on the basis of which goods may be exported to the foreign importers.

Parties to Letter of Credit (LC):

There are following four main parties to LC transaction:

• Applicant Bank – Applicant or he is also called as Opener of LC. The bank opens LC on behalf of the applicant customer who is buyer/importer of goods.
• Issuing Bank – Issuing bank is a bank which opens LC and undertakes to make payment to the beneficiary (seller/exporter) on submission of document as per the terms of LC.
• Beneficiary – Beneficiary is the seller/exporter of goods in whose favour LC is opened.
• Advising Bank – Advising Bank is the bank through whom LC is advised to the beneficiary. Normally it is located in seller’s location/country.

1. Documentary LC and Clean LC – When the LC contains a clause that the payment is conditional on submission of document of title to goods such as bill of lading (evidence of dispatch of good), it is called Documentary LC. If no such clause is in the LC, it is called a clean LC.
2. Fixed Credit and Revolving Credit – Fixed credit is where LC specifies the amount up to which one or more bills can be drawn by the beneficiary within the specified time. The LC remains effective till the specified amount is exhausted within specified time. In Revolving Credit, the LC opening bank does not specify the total amount up to which bills may be drawn, but mentions total amount up to which the bills may remain outstanding at a time.
3. Revocable and Irrevocable LC – In case of revocable LC, the opening bank reserves the right to cancel or modify the credit at any moment without prior notice to beneficiary. Irrevocable credit constitutes a definite undertaking of the issuing bank. Such a LC once established and advised cannot be cancelled or amended except with the consent of interested parties – beneficiary and negotiating bank.
4. Confirmed and Unconfirmed LCs – When the opening bank requests the advising bank in the exporter’s country to add its confirmation to an irrevocable LC and the advising bank does so, the LC is “irrevocable and confirmed”. The advising bank is then called as ‘confirming bank’ and its liability then becomes similar to the issuing bank. The confirmation cannot be cancelled or amended unless agreed by all the parties. A confirmed irrevocable LC provides absolute security to the beneficiary. If the advising bank does not add its confirmation, the LC remains as unconfirmed. In such case there will be no such obligation on the advising bank.
5. ‘With’ and ‘Without Recourse’ Credit – In case of “with Recourse” bills, the banker as a holder of the bill, can recover the amount of the bill from the drawer, in case the drawee of the bill fails to pay it. In order to avoid such liability, the seller/exporter/drawer asks the importer/buyer to arrange credit “Without Recourse” to the drawer. In such a credit the issuing bank will have no recourse to the drawer (exporter) if the drawee (importer) fails to honour the bill. The liability of such a bill ends as soon as the bill is negotiated.
6. Transferable LCs – Ordinarily the beneficiary is authorized to draw bills of exchange under LC. But if the beneficiary is an intermediary in the transaction and the goods are actually to be supplied by someone else, the beneficiary may request the opener to arrange a transferable credit.