liquidated damages meaning

Contract drafting is the quintessential skill needed for a lawyer. It helps to supplement one’s incomes in the initial years of legal career, help build clientele, open more avenues in the legal industry, etc. But there is no practical way to learn this art than to practise and work on it. You can read drafting books, search for sample agreements on the internet, read the bare acts and theoretical books, etc. Or, you could do a contract drafting course instead!

There are a lot of contract drafting courses out there. They give you a hint of what the real-life work might be like. They will give reading material, probably conduct tests and assignments before awarding the certificate or diploma.

The best way to learn according to me is by practice. Just like any sports or art form, training is an inseparable part of becoming an expert. I had devised my own training method ages ago. For almost 4 years or maybe more, I tried drafting using samples from the internet. The free ones were not always great. It had to be reworked a lot! For instance, I found out the hard way that an actual shareholders agreement differs from the four page samples online!

Then there was a time, I had to draft an MoU for a startup. It was a nightmare to find the right sample to convert into a desirable MoU. I hit the books, internet but was distraught to find no decent sample. Then I asked a friend for help. That is how I got it done. But it is the longer route. It took me years to manage drafting the simplest agreements. I knew the essential clauses to be drafted. I knew the legal provisions, safeguards needed, clients briefings, etc. But every time I tried drafting, I froze with apprehension that stems from lack of experience.

How many times have you thought of drafting a contract and just blanked out? I did it a lot!

I sat in front of the screen and my notebook detailing the structure, but I just could not type and second guessed myself constantly. I often wished someone would teach me how to draft one. But I went straight from litigation to an in-house role, so there was no time to learn from scratch. Law firms provide a lot of hands on experience, so maybe the lawyers there did not share my fears. Yet, recently when I asked about this to my peers , superiors and even juniors, it turns out, many were quite at loss like me.

The point is how do you get to learn then? Where do you go to get the practise? Does it have to take years of on the job learning? How does one get the skills prior to entering the legal industry and be still well prepared?

At LawSikho, the course structure is slightly different. We give you hard copies of study materials, weekly classes, 2 assignments per week (over the course of 50 weeks), feedback sessions, coaching for professional networking and more! You can check out the contract drafting course to know more.


Click here for free materials!
contract drafting

To give you the taste of what the exercises one may expect, I am sharing drafting exercises below for you all to try at home. Try it out and let me know with your comments, as to how did you enjoy practicing your drafting skills.

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Sample Drafting Exercise

Suboshish is young and dynamic entrepreneur who has started his own startup based in Delhi, “Ragpicker Pvt. Ltd.” which makes products like a mouse pad, phone covers, bags, laptop covers, specs cover, jewellery boxes, wallets, etc. made out of waste and recycled material. During a conference on Entrepreneurship Administration, he met Mr Dev Anand Goel, owner of “Environ Law firm” and renowned advocate who has appeared before the National Green Tribunal in multiple cases. He has been an advisor to numerous Government project and assisted them in making projects more environment-friendly. He was the mastermind behind the closure of companies near Punsari Village in Gujarat, which was using plastic to make curtains which caused immense pollution and health menace in the nearby villages where these factories were established.

Suboshish has approached Mr. Dev Anand Goel to be an Expert Advisor in his startup which would not only help him expand the product line of the startup but will also enhance his goodwill exponentially instantly. Mr. Dev Anand is also intrigued by the Suboshish’s description of the company and accepts the offer of being the Advisor for the step.

Both have now met to negotiate and settle the terms of Advisors Agreement.

  1. Mr Dev Anand is a lawyer by profession. Suboshish wants Mr. Dev to be available for taking care of the legal complications that might come in the way of business apart from providing Board-level guidance. Mr Dev wants a detailed description of the roles to be expected out of him as an advisor. He suggests that a new schedule should be appended to the contract which clears out his role as an advisor/mentor of the company. At the same time certain room must be left in the agreement so that if the work to be done by the advisor is to be expanded, there would be enough flexibility to do so. Description of the extent of powers that will be given to Mr Dev needs to be clear. Eg: Can Mr Dev enter into contracts binding the company?

 

  1. Suboshish will be using Mr. Dev’s association with the Company to build his brand value in the market and attract more clients. He wants a written consent from Mr. Dev to include his status, his name, his image and profile in various promotional materials including but not limited to executive summaries and Company’s web page.

 

  1. Mr. Dev understands that Ragpicker is a startup and it will be difficult for them to remunerate him in terms of money. He is willing to take equity shares in the company at a price equal to fair market value of the Company’s stock which shall vests according to the following schedule: 30% in the first year, 40% in the second year and rest in the subsequent year. However, Subhoshish wants to stipulate a condition in the agreement which will ensure that the company does not suffer loss in case the advisor leaves/ retires/ dies/ fired before expiry of period of three years from the date of execution of this agreement. He also proposes that resolution of disputes involving Ragpicker (except disputes arising out of this contract) should be outsourced to Environ law firm for which he is ready to prepare another agreement. Suboshish is acceptable of the idea but wants to formulate a clear date by which this agreement will be signed and come into force and wants to formulate a clause in this agreement with respect to that. Mr. Dev on the same hand also wants to know about the timeline of the approvals Suboshish will have to take from the Board of Directors of his company about both the proposals.

 

  1. Suboshish understands that Mr. Dev may have to travel outside Delhi for any third party/ client meetings that Suboshish might want him to attend. The company is ready to bear the expenses for all of that but wants prior written notice describing the nature and maximum amount of such expense. Notice can be made by sending an email.

 

  1. This agreement will be in force until 5 years from the date of signing of this agreement. It can be renewed as well as reviewed after that. It may be terminated by either party with one month prior written notice to the other party.

 

  1. Suboshish is aware of the network of Mr. Dev and the kind of work that he is doing. He does not doubt the integrity of Mr Dev but at the same time is worried about the amount of information that Mr Dev will be exposed to by being a crucial member of the Board meetings. Suboshish thus wants a non-disclosure clause in the Agreement to ensure Advisor does not use confidential information for his own use in any manner which may deprive the company of its due profits. Advisor will agree to take all reasonable measures to protect the secrecy of and avoid disclosure or use of confidential information of the Company in order to prevent it from falling into the public domain or the possession of persons other than agents of the Company or persons to whom the company consents to such disclosure. Upon request by the company, any materials or documents that have been furnished by the Company to Advisor in connection with the services shall be promptly returned by Advisor to the Company.

 

  1. Mr. Dev being an advisor feels that he can contribute in expanding the product line of the business of Ragpicker but he would like to get a share out of the profits earned for the sales of the products that are a direct result of Mr. Dev’s effort. Suboshish is ready to share the profits of the product only if gets Trademark registration and has more than 1000 units of sale. All intellectual property in the product made will lie with the company and Mr. Dev will have no rights over it.

 

  1. Both Suboshish and Mr. Dev are mature enough and ready to resolve their disputes that may arise in future through Arbitration. The seat of arbitration will be in Delhi and parties must send notice of dispute within 30 days from the date the dispute arises. Suboshish is apprehensive about the impartiality and independence of Sole Arbitrator and hence wants a panel of three arbitrators, one appointed by the company, one appointed by Mr. Dev and one will be mutually appointed by the two arbitrators. The rules with respect to procedure, fee, duties of arbitrators and parties shall be governed by ICADR rules. Both parties agree to opt for fast track arbitration as per the amendment in the Arbitration and Conciliation Act, 1996. The award by the panel will be final and binding on the parties and they shall be governed by Arbitration and Conciliation Act, 1996.

TASKS

Prepare an appropriate contract to capture the above relationship. You can download the base draft from the attachment/download panel as a reference point. Your draft should also reflect a reasonable picture so that the agreement is likely to be executed by both parties with minimum negotiation.

Ensure that you include adequate clauses to incorporate the above division of responsibilities and commercial points in the base draft. Identify suitable terms and conditions that need to be inserted/amended keeping in mind the aspirations of both the parties as per the problem.

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