Corporate and Commercial Agreements Drafting Guidelines, Forms and Precedents RODNEY D. RYDER Detailed Contents vii GENERAL CONTENTS • Preface v • Detailed Contents ix • Table of Cases xvii 1. DRAFTS, FORMS, PRECEDENTS—A PRELIMINARY NOTE 2 2. COMPANY LAW: FORMS AND PRECEDENTS 41 3. GENERAL COMMERCIAL AGREEMENTS 101 4. INTELLECTUAL PROPERTY 369 5. FRANCHISE AGREEMENTS 515 6. PROJECT FINANCE 539 7. DEEDS 660 8. BONDS 679 9. PLEDGES 704 10. ARBITRATION 715 11. LEASE 727 12. TRUST 764 13. SOCIETY 794 14. POWER OF ATTORNEY 808 • Subject Index 812 vii DETAILED CONTENTS • Preface v • General Contents vii • Table of Cases xvii CHAPTER 1 DRAFTS, FORMS, PRECEDENTS— A PRELIMINARY NOTE DEED DRAFTING AND CONVEYANCING IN INDIA 2 FORMS OF CONVEYANCE 3 Deeds poll 3 Indentures bilateral 3 Simple words 3 PARAGRAPHS, PUNCTUATION AND CAPITALS 4 FIGURES AND WORDS 4 General requirements of deed of transfer 4 DIVISION OF DEED 5 (a) Description of the deed 5 (b) Date 5 (c) Parties to the deed 6 (d) Recitals 13 Caution 14 ORDER OF RECITALS 14 FORM OF RECITALS 15 (e) Testatum 15 (f) Consideration 15 (g) Receipt 15 (h) Operative words 16 (i) Parcels 16 (j) Exceptions and reservations 19 (k) Habendum 19 (l) Covenants and undertakings 19 (m) Testimonium 20 (n) Signatures and attestation 20 Sign 21 FORMS OF ATTESTATION 22 Illiterate persons 22 Delivery 22 ERRORS AND OMISSIONS 23 POSTSCRIPT 23 ENDORSEMENT AND SUPPLEMENTAL DEEDS 23 FORM OF ENDORSEMENT 23 FORM OF SUPPLEMENTAL DEED 24 ix x Corporate and Commercial Agreements STAMP DUTY BY WHOM PAYABLE 24 STAMP DUTY ON ENDORSEMENTS AND SUPPLEMENTAL DEEDS 24 REGISTRATION 25 PRECAUTIONS 25 Rules of Construction Deeds 26 NOTES ON THE INDIAN LAW OF CONTRACT 27 Introduction 27 General Concepts 28 Breach 29 Excuses for non-performance 30 Indemnity and Guarantee 30 Bailments and Pledges 30 Bona fide Purchases 31 Interpretation of Contracts and Applicable Law 31 Capacity to Contract 32 Formal Requirements 32 Written Agreements 32 Commencement 34 CONTRACT DRAFTING AND CONTRACT MANAGEMENT 34 Engagement Phase 35 Analytical Phase 35 Drafting Phase 35 Execution Phase 36 Contract Administration Phase 36 TYPES OF CONTRACTS 36 CONTRACTS 36 DATA COLLECTION DURING THE ENGAGEMENT PHASE 36 Check-list 36 STANDARD CLAUSES CHECKLIST 37 CHAPTER 2 COMPANY LAW: FORMS AND PRECEDENTS TYPES OF COMPANIES 41 Public and Private Companies 41 Formation procedure (private limited company) 41 PRECEDENTS • Application Form for availability of names 44 • Memorandum of Association 45 • Articles of Association 59 • Legal Due Diligence 70 • Due Diligence Report 74 CHAPTER 3 GENERAL COMMERCIAL AGREEMENTS PRECEDENTS • Contract of Employment—(For A Junior Level Employee) 101 • Contract of Employment—(For A Senior Level Employee) 104 Detailed Contents xi • Employee Innovation And Proprietary Information Agreement 109 • Consultancy Agreement 111 • Consulting Services Agreement 115 • Termination Clause 154 • Consultant’s Non-disclosure & Non-compete Agreement 159 • Agency Agreement 163 • Supply Contract 165 • Software Services Supply Agreement 171 • ERC Facilities Agreement 181 • Facilities Sharing Agreement 191 • Financial Collaboration Agreement 196 • Marketing Assistance Agreement 206 • Office Refurbishment Agreement 218 • Research And Development Agreement 239 • Agreement for sale made by a vendor in favour of purchaser, the purchaser to execute a mortgage deed for balance of purchase money 251 • Agreement extending the time for completion of a purchase and otherwise modifying terms of the contract supplemental to the original contract 252 • Agreement for sale of property with usual provisions 253 • Exclusive Reseller Agreement 254 A GUIDE TO DRAFTING JOINT VENTURE DOCUMENTATION 271 • Joint Venture Agreement 275 • Company, Management and Project 285 • Shareholders’ Agreement 295 • Shareholders’ Agreements and the Articles of Association 316 • Share Transfer Agreement 319 • Transfer of Shares (Specimen Clause) 331 • Share Acquisition and Reconstruction Agreement 337 • Transfer of Undertaking Agreement 347 • Subscription Agreement 354 CHAPTER 4 INTELLECTUAL PROPERTY ASSIGNMENT OF COPYRIGHT 369 Disputes as to Assignment 371 Infringement 371 “PASSING OFF” ACTIONS UNDER INDIAN LAW 374 The history of passing off actions under English Common Law 374 Modern formulation of the law of passing off 375 Remedies 376 Proof of damage 376 Means adopted for passing off 377 Passing off in professional practice 377 “Passing off” in Indian Courts: Remedies available 378 Mareva Injunctions in India 379 PRECEDENTS 380 On Trademark and Brand Protection • Trademark License Agreement 380 xii Corporate and Commercial Agreements • Trade Name License Agreement 386 • Deed of Assignment 392 On Copyright (Media Entertainment) • Writer Employment Agreement 394 • Sound Recording and Distribution License Agreement 398 • Co-production Agreement 405 • Deed of Assignment of Copyright 409 • Dialogue and Vocal Replacement Agreement 411 • Actor Employment Agreement 425 • Memorandum of understanding between two Media Companies 430 • Patent Agreement for Employees 442 • Patents, Patent Licensing and Protection in India 443 • Technology Transfer and License Agreement 446 • Technology and Marketing Collaboration Agreement 460 • Assignment of Rights in Invention 483 • Technology Assignment Agreement 484 On Confidentiality and non-disclosure • Know-How Assignment Agreement 487 • Confidentiality Agreement (Between A Company and an individual) 492 • Confidentiality Agreement - Both party obligations 496 • Consultancy Agreement 499 • Confidentiality and Non-discloser Agreement 503 • Employees non-disclosure and non-compete agreeement 506 • Non-disclosure and non-compete agreeement 509 CHAPTER 5 FRANCHISE AGREEMENTS OUTLINING THE SPHERE OF LAW RELATING TO FRANCHISE 515 Direct Franchising 515 Franchising through Subsidiary or Branch Office 516 Area Development Agreement 516 Master Franchising Agreement 516 Franchising through Joint Venture 516 PRECEDENTS • Franchise Agreement 517 • Draft Version of Franchise Agreement 521 • Franchising Agreement 526 CHAPTER 6 PROJECT FINANCE THE RISK MATRIX 539 DUE DIGILENCE 542 SECURITY 542 FORCE MAJEURE 543 WHEN THINGS GO WRONG 544 Contract Damages 544 Liquidated Damages 544 Detailed Contents xiii CONCLUSION 545 POWER PURCHASE AGREEMENTS - PITFALLS AND REMEDIES 545 Definitions 546 Tariff 546 Counter Guarantee 547 Financing 547 Price Mechanism 548 Pricing Risk 548 Payment Risk 548 Third Party Sale 549 Tax Holidays 549 Judicial Inquiry 549 Force Majeure 549 Conclusion 550 FUEL SUPPLY AGREEMENT - BANKABLE OFFTAKES 550 Infrastructure 551 Pricing 551 Payment 551 Force Majeure 551 Dispute Resolution 551 Transportation 552 Scheduling; Metering and Weighing 552 Quality and Rejection 552 Default 552 Remedies for Breach 553 DUE DILIGENCE 553 TYPICAL DUE DILIGENCE DELIBERATIONS IN A PROJECT FINANCING STRUCTURE 554 The Project Sponsor 554 The Site of The Project 554 Political, Economical & Legal Considerations 554 Financial Parameters 554 Construction Commitments 554 Input Agreements 555 Off-take Agreements 555 General Contract Review 555 Environmental Considerations 555 Critique 555 PRECEDENTS 556 CHAPTER 7 DEEDS PRECEDENTS • Assignment of Business with Goodwill and Tenancy Rights 660 • Assignment of Simple Contract Debts 663 • General Power of Attorney 664 • Special Power of Attorney in respect of entering into and concluding one Transaction 670 xiv Corporate and Commercial Agreements • Special Power of Attorney for Admitting Execution before Sub Registrar of Document already executed 672 • Release and Indemnities 673 • Guarantees 673 • Guarantee, Deposit and Charge as Security for Advances to a Third Person 674 • Agreement of Reference – To Arbitration 676 CHAPTER 8 BONDS FORM 679 USE OF BONDS 679 HEIRS AND REPRESENTATIVES 680 TWO RATES OF INTEREST 680 STAMP DUTY 681 REGISTRATION 681 PRECEDENTS • Simple Money Bond for money borrowed 681 • Simple Money Bond, for Money due with Recitals 681 • Instalment Bond 682 • Equated Instalments Bond 682 • Bond by a Debtor and his Surety for a Loan 683 • Bond by a Debtor and his Surety for an Existing Liability 683 • Instalment Bond, with Surety, for an Existing Liability (in the form of a deed) 683 • Bond with Sureties for a Loan Repayable in Equated Instalment with Hypothecation of Property (in the form of a deed) 684 • Bond with Sureties for Loan (in the form of a deed) with Provision for lower Rate of Interest in case of Punctual Payments 685 • Administration Bond by a Person Obtaining Letters of Administration (section 291, Succession Act) 686 • Security Bond given for the Grant of a Succession Certificate (section 375, Succession Act) 687 • Administration Bond by Guardian Appointed under the Guardians and Wards Act 687 • Security Bond by a Debtor (under section 21, Provincial Insolvency Act) 688 • Security Bond by a Receiver Appointed in a Suit: Order 40, Rule 3(a), C.P.C. 688 • Cash Security Bond by an Employee of Government (in the Form of Agreement) 689 • Personal Security Bond by an Employee, with Sureties, Pending the Execution of a Hypothecation Bond 690 • Security Bond by Sureties on behalf of a Claimant to Money due from Government to his Deceased Ancestor 691 • Security Bond by Surety of the Manager of an Estate (Hypothecating Property) 692 • Security given by a Legatee under a Lost Will to a Purchaser of Bequeathed Property (with Hypothecation) 693 • Security Bond with two Sureties, the Principal Agreeing to Deposit Cash Security by Monthly Deduction from Pay 694 • Bond by Sureties of a Student Admitted to a College to Secure the Performance of an Agreement 695 • Bond by Surety for Due Observance by Another of Terms of Partnership Deed 696 • Bond by a Trainee (if minor, by his Guardian) with Sureties 697 Detailed Contents xv • Performance Guarantee Bond 697 • Deed of Indemnity 699 • Indemnity Bond 700 CHAPTER 9 PLEDGES “PLEDGE”, “PAWNOR AND “PAWNEE” DEFINED 704 DOCUMENTS AND SECURITIES 704 PRECEDENTS • Pledge Deed 705 • Pledge of Term Deposit as Additional Security for NCDs subscribed by Beta Bank 713 CHAPTER 10 ARBITRATION DISPUTE SETTLEMENT: ALTERNATE DISPUTE RESOLUTION 715 DRAFTING AN ARBITRATION AGREEMENT/CLAUSE 715 Arbitration Agreement 716 Judicial Analysis 717 Halsbury’s Laws 719 A brief epilogue 719 INTERNATIONAL COMMERCIAL ARBITRATION 719 Advantages of alternative dispute resolution 720 Disadvantages of alternative dispute resolution 720 ENFORCEMENT OF ARBITRAL AWARDS 721 Detrimental Reliance 721 ARBITRATION CLAUSE 722 DAMAGES IN ARBITRATION 725 CHAPTER 11 LEASE PARTIES 727 CONSIDERATION 727 COVENANTS ENTERED INTO BY THE LESSEE 727 COVENANTS BY THE LESSOR 728 PROVISO FOR RE-ENTRY 728 AGREEMENT OF LEASE 728 PRECEDENTS • Agreement of Lease 731 CHAPTER 12 TRUST THE GOVERNING LEGISLATION 764 The Nature of an Indian Trust 764 Requirements of a Trust 765 xvi Corporate and Commercial Agreements Trust deed 766 Complete constitution of a trust 766 Legislation relating to trusts 766 Trustees 767 Trustees’ Duties 768 REGULATORY ENVIRONMENT AND LIMITATION ON TRUSTS 770 Courts 770 Breach of Trust 772 Limitation on trusts 773 Perpetuities and accumulations 773 Remuneration 773 Exoneration clauses 774 Public policy 774 Who can act as a trustee? 775 REASONS FOR THE CREATION OF TRUSTS AND THEIR USES 775 Personal or Private Trusts 775 Pension and employee benefits 776 Collective investment schemes 776 Charities 776 Non-Charitable Purpose Trusts 777 CONCLUSION 777 PRECEDENTS • Agenda of meeting of Board of Trustees 777 • Appointment of additional members to Board of Trustees 778 • Deed of Family Trust Settlement 779 • Rules and Regulations Governing the Management of “Nature For Children” 784 • Trust Deed 788 • Alteration of A Trust Deed 793 CHAPTER 13 SOCIETY 794 CHAPTER 14 POWER OF ATTORNEY DEFINITION 808 ELEMENTS OF POWER OF ATTORNEY 808 PRECEDENTS 809 • Irrevocable Power of Attorney 809 • Power of Attorney – 1 810 • Power of Attorney – 2 811 • Subject Index 812