General Principles of Drafting and Relevant Substantive Rules

CHAPTER - 1

GENERAL PRINCIPLES OF DRAFTING AND RELEVANT SUBSTANTIVE RULES

CONCEPT 1 DRAFTING (MUST DO)

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.

CONCEPT 2 CONVEYANCING (CS STUDY)

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.

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

Drafting Conveyancing
Drafting in general means preparation of Conveyancing is preparation of documents for
documents which included all types of legal the purpose of transfer of property only.
document including for transfer of property.
It is a broader concept as it includes Conveyancing is a part of drafting thus it has
conveyance. narrower scope than drafting.

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

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 General Principles of Drafting and Relevant Substantive Rules

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

Conveyancing Contract

Conveyancing is preparation of documents for Contract is a part of drafting/conveyancing

the purpose of transfer of property only. which demands specific performance from
any party.
Conveyancing doesn’t create any right of action It may or mayn’t create a right of action.
but alters the ownership of existing right.
It is governed by Transfer of Property Act It is governed by Indian Contract Act
1882 1872.

CONCEPT 5 DOCUMENT vs. DEED (CS STUDY)

Document Deed

As per General Clauses Act, 1894- Document Deed is an instrument by which 2 or

means any matter expressed or described upon any more person agrees to affect any right
substance by means of letters, figures or marks, or or liability.
by the more than one of those means, intended to
be used, or which may be used, for the purpose of
recording that matter.
It provides information & acts as a proof or Deeds are in writing, signed, sealed and
evidence of anything. delivered.
E.g. A writing, a map or plan, words printed, E.g. Partnership Deed, Deed of family,
photographed etc. 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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 General Principles of Drafting and Relevant Substantive Rules

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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 General Principles of Drafting and Relevant Substantive Rules

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

 Avoid the use of words of same sound.

 Reduce the group of words to single  Draftsman should avoid the use of words
word; “less than” or “more than”, instead, he
 Use simple verb for a group of words;
must use “not exceeding”.
 Avoid round-about construction;
 Negative in successive phrases would be
 Avoid unnecessary repetition;
 Write shorter sentences; very carefully employed.
 Express the ideas in fewer words;  When the clause in the document is
 Prefer the active to the passive voice numbered, it is convenient to refer to any
sentences; one clause by using single number for it.
 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.

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.

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

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 General Principles of Drafting and Relevant Substantive Rules

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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 General Principles of Drafting and Relevant Substantive Rules

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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 General Principles of Drafting and Relevant Substantive Rules

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.

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 General Principles of Drafting and Relevant Substantive Rules

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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 General Principles of Drafting and Relevant Substantive Rules

Pre-requisites of Arbitration:-

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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 General Principles of Drafting and Relevant Substantive Rules

(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 Pledge is a bailment of goods as
property in goods. Hypothecation security for payment of debt.
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.
Governing It is not regulated in India by any It is governed by Section 172-176
Act statute. of Indian Contract Act 1872.
Possession Here goods remains in possession of Possession is transferred to money
of Goods borrower lender.
Parties Hypothecator & Hypothecatee Pawnor & Pawnee
Example A working capital loan given by bank on Mr. A delivers his goods to Mr. B as
the basis of goods 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 Licenses can be revoked at the will of licensee.
leasers.
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 In case of breach- aggrieved party can only
for the specific performance. 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
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 Employment of Manager of a Business Concern
 Leave & License Agreement
 General Principles of Drafting and Relevant Substantive Rules

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