With the growth and development of business both domestic as well as cross-border, drafting a contract remains the prerequisite for strengthening and giving a legally binding effect to the business.
A contract should be drafted in a manner which makes it legally binding. A legally binding contract makes gives more strength and direction to the business which helps in solving issues that commonly arise during transactions including disputes.
It is important to set out the details of the business and the rights and obligations of the parties including the rights of any third parties.
The terms and conditions in the contract give a clear understanding of the conditions of the business transaction and clears any ambiguities, if any, between the parties. A written contract gives ample protection on the parties involved when the agreed terms or conditions are breached.
A very important aspect of a written contract is confidentiality and non-disclosure provisions which gives a contract the privacy it requires as well as protection from interference of any other party. The parties also decide mutually various clauses like Termination, Indemnity, exclusivity which gives credence and balance to the business deals. It also provides protection to rights under IP.
For cross border business, contracts assume a much greater importance due to the existence of various international Acts and regulations which governs such business which includes but is not limited to taxation issues, jurisdiction issues, execution of foreign awards issues.
A written contract also gives an opportunity to the parties to choose their own dispute resolution mechanism, be it litigation in the courts or Ad Hoc or institutional arbitration. Parties can, during the commencement of their business make an assessment pf the costs involved and accordingly decide the dispute resolution mechanism.
Lastly, a contract between the parties gives shape and confirmation to the consideration to be exchanged between the parties, thus fructifying the business transaction