Contract Drafting Rules (Part 2)

In the previous post, we discussed why a contract writer should follow certain rules (i.e. Contract Drafting Rules) amid drafting a commercial agreement. Also, we briefly discussed first 2 rules from the total 6 as mentioned below;

  1. Use appropriate language
  2. Avoid Contradiction
  3. Avoid Duplication
  4. Use Reference and Cross-references
  5. Write mutually explanatory & complementary clauses
  6. Maintain Uniformity and consistency

In this post, we will cover balance 4 rules (3, 4, 5 & 6) with brief explanation;

6 Contract Drafting Rules (Part 2)

3) Avoid Duplication

Duplication means repetition of certain provisions in the Contract again and again. It could be either in the same document or across different documents.

Duplication is a serious and commonly observed problem. One could easily find few provisions getting repeated at many places in the Contract with slight changes in the wording

As a general practice, contract department prepare a DRAFT Contract. The DRAFT is then reviewed by cross functional team. So, each reviewer start modifying certain clauses pertaining to his domain. He/she generally does NOT look at other part of the contract.  Accordingly, he fails to notice that the clauses added by him already exists in other part the contract

The above result in repetition of certain provisions in a particular document or across contract documents. Consequently, this duplication with slight change of wording may invite contractual disputes. Hence the contract writer to ensure that there is no/minimum repartition of any provision in any contract document. Similarly, no duplication of same intent/liability across various documents, which are part of the contract

4) Use References and Cross-references:

We know that a contract is not a collection of independent statements. Actually it is accumulation of various interdependent clauses which are linked to each other. The real test of contract writer is how well it can link various clauses thereby avoiding duplication and contradiction. This is achieved by using references and cross-references rather that repeating a provision each time (or starting afresh)

5) Write mutually explanatory & complementary clauses:

Each contract clause is drafted with specific purpose & intent. Also, each document, forming part of contract, covers the set of promises and counter-promises of particular nature or type. Therefore, an individual clause/document may not cover all aspects of the transaction or requirements.

For examples, Conditions of Contract covers mainly the commercial and legal aspects of the transaction. Technical specification more specifically mentions the technical attributes or operational requirements of the product or service. A drawing gives blue print of finally delivered product or projects or a facility.

Hence, it is necessary that various clauses and different documents should further explain each other and fill the gaps between them. The ultimate goal is to write a contract where various clauses and different documents explains/complement each other. This will ensure that all documents put-together represent a complete agreement between parties

6) Maintain Uniformity and consistency

This is one of the golden rules among all contract drafting rules.

As per this rule, let us first define the key terms then use the same words and phrases uniformly throughout the contract. This will bring convenience in better knowing the intent. Also, this will avoid un-necessary confusion or misunderstanding. The confusion normally arises because a party may draw a different meaning because of use of another term/word

Moreover, since the team forming a contract and administrating it are generally not same, the use of same words and phrases ensure quick understanding and smooth execution of contract. Further, in the event of dispute, it is easy for the third party to quickly understand the context with the se of same words & phrases throughout the contract

For example:

  • if we use the term Program to define project schedule, then, please use this term everywhere throughout the contract. Please avoid using other terms such as Schedule, Completion Schedule or Execution Schedule even through these terms have same meaning.
  • Similarly, if we use the terms Employer to define the owner of the facility, then, please do not use other terms such as Owner or Purchaser

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8-behavioural traits of Corporate Leaders

Corporate leaders and leadership qualities is a favourite subject of everyone in business world. Corporate employees of all levels spend considerable time in discussing their managers and debating about the qualities of a right leader. The topic is as old as one can thing and as new & fresh as you feel. So much has been said and done by academicians, writers and working practitioners for the last many decades on the subject and huge contents available on this subject. And above all, organizations have been spending large amount every year in leadership development training programs

There is a genuine attempt by reputed organization to allocate such position to those who are having right leadership skills. However, despite all such efforts, it is not difficult to find out person sitting on top positions, who are not a so fit for the role. Also, one may see that such persons are sustaining the chair/position for a long time

There may be many reasons and constraints for this role/person mismatch. And one reason could be “whether organizations are fixing right selection criteria” before on-boarding a person for top roles. If the answer is yes, whether recruiters are complying with this criteria while shortlisting, interviewing and evaluating the candidate for the same.

We agree that leadership qualities are more closely associated with a person’s thoughts, beliefs, attitude, values or personality traits. And such attributes are different from aptitude, individual competency, subject knowledge and work related experiences

In view of the above, an organization should appoint its leaders carefully, by giving due important to the behavioural traits and moral values. This is necessary to ensure long term success of the organization by providing healthy work environment for its workforce.

So, now the questions arise:  what are those behavioural traits which make a person fit for corporate leadership position? The purpose of this post is to discuss such traits.

Based on my understanding & experience, I have identified 8 key behavioural traits as mentioned below. This is purely based on my understanding & exposure and I may be totally or partly wrong

8 Behavioural Traits of Corporate Leaders

  1. Secure Person
  2. Humble and Decent
  3. Big Thinker and Macro Manager
  4. Observer and understanding
  5. A Genuine Person
  6. Lead By Example
  7. Fair and Transparent
  8. Inspiring and Motivating

In this post, we will cover two such traits (Secure Person and A Genuine Person). Balance 6 traits shall be discussed in subsequent blogs. However, first, let us see why behavioural traits are important

Why behavioural traits are important

Corporate world is world of orders which flows from top to bottom as per the set organization structure. Accordingly, persons sitting on top positions by default have a right to direct & instruct the persons below. The team is supposed to act the way boss expects. Organization culture generally does not allow team member to counter his/her manager when it is necessary. Consequently, people afraid to put forward a different view even if it could be in the best interest of organization.

Though every employee harp on that he/she works for the organization, but, unfortunately, people works for his/her manager. In reality, your manager is your employer. Therefore, for leading the team effectively, a leader must use his/her authority wisely and only in relation to his/her role for organization. This is possible when leader possess emotional maturity and strong personal/professional values. This explains why to discuss Behavioural Traits of Corporate Leaders

Behavioural Traits of Corporate Leaders

1) A secure person:

Sense of security is vital for a person to remains peaceful & calm. This is one of the essential ingredients to maintain harmony in personal and professional life. A secure person has full confidence and faith in his skills, experiences and abilities. Consequently, he/she does not live in a fear of losing a position or job. He/she maintains healthy relationship with colleagues at all levels and trusts his/her team members and other people in the organization.

On the contrary, insecurity is mother of poor inter-personal relationships. Insecure person easily perceives threats from people and situations. Accordingly, he/she doubts the motives of others and feels jealous when somebody is rewarded. As a result, she/he takes the things personally most of the time and could behaves rudely out of his/her own fears

Leadership role is all about communication, interactions, managing people, motivating and direction the team. Accordingly, a leader must possess a deep rooted sense of security so that she remains focused on the organizational goals without fear. A secure person does not get disturbed easily and never take the criticism personally. Consequently, he is the first one to appreciate others for good work and achievements and last one to criticize them for mistakes and failure. Insecure person is just the opposite. As a result, this is most desirable trait for leadership position

2) A genuine person

A genuine person is sincere and honest in all his dealing whether personal or professional. She is having a deep desire to honour the promises made. Accordingly, she never commits what she cannot deliver. In view of this a genuine person always present factual picture to top management and team members. Such persons do not mislead the team or manipulate things for survival or personal growth

A genuine person enjoys highest credibility and trust in the eye of team above and below. Accordingly, he gets the full support from top management and whole hearted efforts from his team member. This result in superior organization performance because team put extra effort in meeting the set targets

Disclaimer Statements

Difference among Supply, Service and Works Contract (2)

Hi Readers In the last post we discussed briefly the types of contracts under the broad category called Nature of Transaction. We discussed that based on the Nature of Transactions; contracts are classified as Supply, Service and Works Contracts. Also we further explained supply contracts and their key characteristics.  To read the post again, please click:

In this post, we are going to discuss other two types: Service Contracts and Works Contracts. Eventually two posts together will bring out the underlying differences among Supply, Service and Works Contracts

Service Contracts

These are the contracts for PROVISION and RECEIPT of SERVICES between the parties. The party who provides the SERVICES is known as Service Provider. Party who receive the services is known as Service Receiver.

The Finance Bill provides the Definition of “Service” under Service Tax Act as follows: Service means any activity carried out by one person for another for consideration but does not includes: a) an activities which constitute merely: 1) transfer of title in GOODS or IMMOVEABLE PROPERTY by way of sale, gift or in any other manner; or 2) a transaction in money or actionable claims; b) a provision of service by an employee to the employer in the course of or in relation to his employment; c) a fee taken by any court or tribunal established under any law for the time being in force

Now the Service Tax Act has been replaced with GST Act

Under service contacts, service provider does something of some value, benefit or advantages to service receiver for money consideration and transaction between them is known as Provision of Services. The key differentiator is that in Service Contracts nothing moves physical from one party to another and there is no transfer of property between the parties.

Services are intangible products rather than physical goods. Services include all such actions, deeds and effort performed by one person for another to satisfy a need/desire (of another person) in the course of business or commerce. Service Contracts involves only the exchange of services between the parties without any involvement of sale or purchase of goods between them

Examples of Service Contracts

We deal with Service Contracts daily sometime consciously or sometime even not know that we are doing so. Few examples of Service Contracts are as follows;

  • Receiving transport facility such as cab, bus, train and flight for moving one place from another; requesting someone for installation of AC, rectification of electrical fault or cleaning our house are typical examples of a service contracts in our personal life.
  • In our work life, we engage design consultants, manpower consultants, legal advisors, Installation Contractors and Transport Agencies as required. These are good examples of service contracts in work life
  • All above examples are pure service contracts which do not involve physical possession or transfer of anything between the parties

Works Contract

Works contracts are nothing but integrated contracts of supply plus services. These are called composite contracts wherein scope involves the supply of goods and provision of services. This is not a third category, but, a combination of supply and services. In certain situation, it may not be possible to divide the scope of work into goods and services. Moreover, sometime one does not intend to break the scope into supply and services. So Works Contract seems ideal type for such situation

Under Work Contracts, the contractor supplies the materials and also render the services to the Owner for money consideration and transaction between the parties is knows as Execution/Performance of Work

Examples of Works Contracts:

We deal with Works Contracts daily sometime consciously or sometime even not know that we are doing so. Few examples of Works Contracts are as follows;

  • Repair of a computer along with supply of damaged parts; repair of house-hold electric fault including supply of damaged item; painting the house with supply of required paint are typical examples of Works Contract in personal life.
  • Design, supply & installation of a Power Plant on Turnkey Basis and Construction of a Residential Building with supply of all materials and permanent plant are typical examples of Works Contract in our work life
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