Validity of Oral Contract in India

The Indian Contract Act 1872, segment 2(e), defines an agreement as “each promise and each set of promises, forming the attention for every different is an agreement.” A promise is basically a proposal or a proposal, made through someone or an entity, closer to another. The assent of the different, outcomes within side the reputation of the offer; thereby developing an agreement.

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A Complete Guide on Software License Agreements

Software license agreement is a legal contract that is entered into between the owner or creator of a software and a purchaser (licensee). Since softwares act as services, one cannot ‘sell’ them as such. They will be provided or licensed and the software license agreement makes clear how the said software must be used in such a way that the rights of the owner as well as the purchaser are protected.

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ESSENTIALS OF MoA AND AoA

It is crucial to have the necessary preliminary documents prior to the registration of a company. Memorandum of Association, MoA and Articles of Association, AoA are two such documents. They detail the scope of work, objectives, rules and internal management of the company.

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Non-Disclosure Agreement and It’s essentials

Nevin Clinton,Flywork.io TeamFlywork.io. 

    A non-disclosure agreement (hereinafter referred to as NDA) is an agreement where the parties agree to not disclose content or the information in the agreement. Such agreements can be entered into between two companies, individuals, an individual and a company, and so on. NDAs are customary around the world when information is required to be kept confidential. In India as well, the agreement is quite common. It is governed by the Indian Contract Act, 1872 here and such an agreement becomes valid and enforceable when stamped. 

Why is a non-disclosure agreement signed?

An NDA is signed in order to protect trade secrets while entering into business deals. This becomes extremely important especially in the case of protecting intellectual property rights and more so for modern-day startups. Let’s assume that a company has to hire an adviser from outside the company to help give inputs for a novel product. In such a case, the adviser can be asked to sign an NDA so that he does not disclose information about the product to the company’s competitors or anybody else. 

An NDA could be unilateral, bilateral, or multilateral

An NDA can be both unilateral where just one party agrees not to disclose sensitive information and bilateral where both parties agree to maintain secrecy. There can also be multilateral NDAs that are signed by three or more parties. These help in doing away with the need for multiple agreements. Also, it does not have to be only business deals where an NDA can be signed as it can be signed even between an employee and employer of a company or a non-disclosure clause can be inserted in just about any contract. 

Essentials of a non-disclosure agreement

  • Must be an agreement: First and foremost, an NDA must have all the essentials of an agreement. For this, broadly, there must be an offer, acceptance, creation of a legal relationship, and consideration. 
  • Protected information: With regard to the non-disclosure part of the agreement, it must have the information that is protected. The parts of the agreement to be kept confidential also have to be mentioned. This can be done so by marking certain documents as ‘confidential. Along with the same, a time period must also be mentioned up to which the agreement must be maintained.
  • Imposition of duties: Certain duties can be imposed with regard to the information in the agreement. For example, mentioning how to convey sensitive information and whom to. Consequently, failing to adhere to the said duties must result in punishments and the same must be mentioned as well. Certain exceptions can also be given where sharing the information would not attract consequences. 
  • Dispute resolution: Referencing as to how to settle disputes arising out of the agreement can be provided, though it isn’t of too much importance. Here, a ‘jurisdiction clause’ that mentions the court to have jurisdiction in case of a dispute can also be inserted. There can also be clauses mentioning that disputes must be settled through arbitration only and so on. It is worth noting that such jurisdiction clauses are not ‘essentials’ as such as an NDA can do without them as well, but including them can make things easier if a dispute arises in the future.

Importance of a well-drafted non-disclosure agreement

Firstly, a non-disclosure agreement is important as it helps maintain the confidentiality of information that could be misused. Further, such agreements help in building trust and confidence among the parties thereby further benefiting the business. This is because they help in knowing obligations and adapting to them. If confidentiality is kept, there is bound to be an increase in trust. 

    Due to the importance of NDAs, it is important that they are well-drafted. If such an agreement lacks sharpness, it could result in a lack of clarity leading to the confidentiality being broken or causing a confusing situation. If that happens, it could result in lengthy litigation to resolve the issues. This is exactly why legal personnel should be the ones to draft a Non-Disclosure Agreement. It is an absolute must for the parties concerned to read and understand each and every term in the agreement. If there are terms that are difficult to understand, they must be clarified as this might lead to a number of issues or disputes in the future. 

Let the qualified curated professionals at Flywork.io assist you to resolve any legal and allied issues. For more details visit us at Flywork.io.

 

What is the significance of ‘force majeure’ during Covid crisis ?

 By Simran KaurFlywork.io TeamFlywork.io. 

 Force Majeure is a term used in contracts that essentially frees both parties from certain obligations and duties when an event that is not under the control of both parties occurs unexpectedly. We never know what may happen tomorrow and to provide parties to a contract with remedy/relief for events that were not in their control, the Force Majeure clause is used.
An example could be the present COVID-19 crisis, which has resulted in lockdowns or restricted movements in countries. Parties who suffered losses or any other grievances due to the pandemic can use the Force Majeure for remedy or relief.

Even though the term ‘Force Majeure’ has neither been defined nor specifically dealt with in Indian statutes, its references are to be found in Section 32 of the Indian Contract Act which contemplates if a contract is contingent on the happening of an event and if the event becomes impossible, the contract becomes void. In simple terms, this clause provides reprieve to a party from performing its obligations under a contract upon the occurrence of a Force Majeure event.

The essential ingredients of Force Majeure clauses are as follows:

  • Occurrence of an unexpected event
  • Parties to the agreement assumed that such an event will not occur
  • Such an event has made the performance of the obligations under the contract impossible.
  • The parties have taken all such measures to perform the obligations under the agreement.
  • The affected party by force majeure asking for relief will have the burden of proof that the force majeure event has affected such party's performance in the contract.

This Force Majeure clause is also widely found in certain business agreements such as purchase, supply, and manufacturing contracts as it relieves the parties from performing their respective obligations which are to be undertaken under the contract and consequential liabilities, during the period that force majeure events continue.

Force Majeure has been brought to light way more than before, due to the present pandemic of COVID-19 that has been incurred upon us. Companies who are unable to provide services or products promised to other parties due to the pandemic are using this clause to get relief from these obligations. They can use the clause to protect their business interests and the contract. With legal help, they can also retain the contract and obtain temporary relief from performing their obligations. If one has entered into long-term contracts, one can consider the terms of the contract for the impacted period of maybe, 6 months. This can help protect one’s contract and business. And, in contracts/agreements where supply or distribution is involved, one can increase the supply of goods (or services) later on, as demand picks up and makes up for any non-performance.

Thus, in cases such as the COVID-19 crisis, war, etc, FORCE MAJEURE has been a lifesaver for the people, and for the common good – providing protection from obligations that couldn’t be fulfilled due to unforeseen and unexpected consequences.

Let the qualified curated professionals at Flywork.io assist you to resolve any legal and allied issues. For more details visit us at Flywork.io.

What can you do if someone owes you money and does not pay you back?

Before legal action is taken against a debtor,the claim should be brought to his or her notice to make sure that the debtor is aware of the fact that the debt has not been paid back. A letter should be sent to the debtor containing important details and specifics. This should include information concerning the debt, for instance, how the debt was incurred, the original amount of the debt, when the last payment was made, and the current amount that is due to be paid back. The letter should also mention information regarding the paymentarrangement, providing the debtor with a phone number or an address in order to get back to the creditor.Most importantly, a due date should be provided to the debtor mentioning by which date he or she must make payment arrangements in totality. The idea is to choose a reasonable date and allow the debtor some time after he or she reads the letter to repay the debt. Also time must be given for the debtor to respond. At this stage, it is better to motivate the debtor rather than throw him/her into panic. A copy of this correspondence should be saved.

If this date passes without any payment of the debt being made or any indication of it being paid in the near future, one could send a letter of demand from a lawyer’s office, before commencing any legal action. The problem may be solved by way of negotiation[1].

If this too fails, either by way of the debtor not responding or refusing to make the payments, it may be necessary to institute legal proceedings against the debtor. Relevant papers in one’s possession that are related to the amount due (debt)debt or any documents of a similar sort including a copy of the correspondence between oneself and the debtor should be kept.

The limitation period for filing a civil recovery suit in India is 3 years. After that the claim is barred by time. It is imperative to decide which Court of law one should file their suit for recovery. In India, according to the Civil Procedure Jurisdiction, the pecuniary or monetary jurisdiction of the Courts depends on the state in which the cause of action arises. The pecuniary jurisdiction of the Court divides the Court on a vertical basis, which means that depending on the valuation of the suit filed, there are different levels of Courts with different monetary jurisdictions, and the suit will have to be instituted in the Court which has the required jurisdiction.  For example, the pecuniary jurisdiction of the Courts in Delhi areas follows:

  • Suits amounting to Rs.1 – Rs.20, 00,000/- lie before District Courts.
  • Suits over and above Rs. 20,00,000/- lie before the High Court.

It is essential to remember that the amount of pecuniary jurisdiction is different for all High Courts in India. This limit is decided by respective High Court Rules and in many states the High Court has no pecuniary jurisdiction. All civil suits go before the District Courts, and only appeals lie before the High Court.  The creditor, that is the one who owes the will have to determine in which Court the claim can be filed, which in turn shall be determined in accordance with the amount claimed. If the Court finds that it has no jurisdiction to entertain the, it shall transfer the suit to the Court having jurisdiction. In order to verify the pecuniary jurisdiction of the Courts in a particular state, one must refer to the rules determining the pecuniary jurisdiction of the district courts which have original jurisdiction[2].

The parties can appear in Court on their own, but it is not uncommon to be represented by a lawyer. If one does not appear, the Court or Tribunal can dismiss or adjourn the case. If either party does not appear, the other may obtain the judgment by default. Any promissory note, contract made, or any other documentary evidence of the debt should be provided to the Courtby the debtor, or his or her attorney. One should make such copies of any evidence to be submitted. Both parties will be given the opportunity to explain their stands before the court. If the court gives judgment against the debtor the amount that the debtor has to pay, including court costs becomes payable immediately from the date of judgment. This judgment could be obtained following the hearing of the case,or in the situation of the non-appearance of one of the parties, on default. If one is dissatisfied with the judgment, one can always appeal to the High Court. In case one finds the proceedings to be long winded or elaborate, it is best to consider hiring a lawyer, who are well-versed in the procedures of Courts and Tribunals.

[1] :“Contracts. Illegal Contracts. Recovery of Money Paid”, Virginia Law Review, Vol. 4, No. 8 (May, 1917

[2] Civil Procedure with Limitation Act, 1963 by C.K. Takwani (Thakker), 7th Edition, 2013, Reprinted 2015, along with Sanjiva Row’s The Limitation Act, 1963, II Vols. 9th Edition

Procedure for Selling a Flat

Every owner of a property has three basic rights in his property which are, firstly, the right of ownership which means that he has the title to the property, secondly, that he has the exclusive right to possess and enjoy the property in any lawful manner he wishes and thirdly, he has the exclusive right to alienate the property, i.e. he can part with the property whenever he wishes in any manner that he likes. Thus, with all these rights, a person becomes the “absolute owner” of the property.

Selling a flat has become an uphill task for many sellers and owners. The very first thing to consider, while selling a property in the real estate market, is to make a proper valuation of the flat to be sold. A seller can either self-assess his property or resort to an external source for determining its worth. The prevailing market rate in the locality where the flat is located can be informally enquired about in the vicinity.The important step, while selling a flat is to find a prospective buyer. It is important at this stage to check the credentials of the buyer in terms of his background, financial capabilities and reliability.

Another important step is to obtain, the consent and /or permission, i.e. the No Objection Certificate (NOC) of various authorities such as the, (a)Society (b)the income tax authority (c)Municipal Corporation (d)the competent authority under the Urban Land Ceiling and Regulation Act (e)any other authority.[i]

After these steps comes a vital stage which is that of documentation of the various necessary legal documents. It is extremely important these days, given the fact that many disputes with regard to fraudulent transactions that have started to arise, that both the sellers and the buyers have the necessary legal documents before they complete their dealing.

The following documents are necessary to be there in order to sell a flat/property:

 Letter of allotmentIt confers the allotment of the property to the seller who had originally purchased the property from the relevant society or authority.

 Previous Sale DeedsThe original sale deed from the previous owners of the property is needed. This traces the ownership of the property that is being sold/ bought. A property with clear documentation and title commands a higher price in the market. The chain of previous agreements with past owners in original with original receipts of registration or the original letter of allotment issued to the first owner by the development authority is important. Flat seller should have an original sale deed while selling the property. The seller needs to register the original deed from the registrar (i.e. the original deed that had been registered by the registrar) and give out a copy of the sale and the receipt from the sub-registrar.Giving a copy of this will trace the ownership of the property and in case there are few documents missing, the property seller can be alerted instantly. It is mandatory under law that the current owner should have the previous agreements with him as well.

Sanctioned planA copy of the approved building plan and occupation certificate issued by the competent authority, which is essentially the local body/ municipal authority of the particular state or city [for e.g. In Delhi, it would be either the DDA (Delhi Development Authority) or NDMC (New Delhi Municipal Council), depending on the area where the flat is located] is another relevant document.

 Encumbrance[ii] certificateThe encumbrance certificate is used in property transactions as an evidence of free title. A seller must ensure that the property he intends to sell has a clear and marketable title, so that it can fetch him a higher market price.

Sale Deed/ Agreement

Once the documentation is cleared, the parties can then enter into an agreement to sell and confirm the terms and conditions. After this, they can start preparing the sale deed. Agreement to sell precedes execution of a sale deed. The subsequent sale deed is based on the agreement to sell. This agreement is also signed and executed between the seller and buyer on a non-judicial stamp paper.[iii] After the complete documentation clearance, the buyer and the seller should sign an agreement stating the sale and confirmation of the property along with terms and conditions. This document also mentions the terms and conditions and the sellers intentions of selling away his property.[iv]

[i]Checklist for selling property, whether residential or Commercial, available at: http://www.propmart.com/faqs/faqs.asp?FAQNum=177, last accessed on 6th January, 2015.

[ii]The word “encumbrance” essentially means and sort of burden or impediment that flows with the flat/property. For example, it could either be a mortgage on the flat or any legal dispute that is going on with regard to the flat/property. An encumbrance certificate thus ensures that the property/ flat is free from any sort of monetary or legal liabilities and the title and ownership can be passed to the buyer.

[iii]Documents you need to have in order while selling property, available at: http://articles.economictimes.indiatimes.com/2012-04-07/news/31304922_1_sale-deed-encumbrance-certificate-sale-agreement, last accessed on 7th January, 2015.

[iv]What are the main documents to sell a property, available at: http://www.commonfloor.com/guide/apartment-society-what-are-the-main-documents-required-to-sell-a-property-17413.html, last accessed on 7th January, 2015.