November 6, 2023
November 6, 2023
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4.4 - 4 votes
After successfully drafting a contract, it is important to ensure that the document is legally sound and properly executed. This guide outlines the necessary steps to take after drafting a contract in India, focusing on proofreading, stamp duty, registration requirements, signatures, witnesses, notarization, and document retention.
Once the contract is prepared, thoroughly check the contract to avoid any typographical errors, ambiguities, or contradictions. A properly drafted contract should be free from mistakes that could lead to misinterpretations and disputes. Always recheck the numerical figures, such as monetary amounts, dates, and percentages, to ensure consistency. The use of clear and precise language is essential to avoid confusion. If possible, it is better to provide a copy of the contract to all parties signing this agreement beforehand to proofread and verify the content.
Once the contract is ready, you need to determine the applicable stamp duty. Stamp duty is a type of tax payable on execution of the contract. The rate may vary across states subject to the nature of the contract.
In India, stamp duty is a state subject, which means each state has its own stamp duty laws and regulations. Stamp duty is levied on various types of documents, including but not limited to sale deeds, lease deeds, agreements and more. It is not applicable to all contracts, instead, it is applicable to certain types of contracts and documents.
To find the list of contracts/documents on which stamp duty should be paid, the state-specific stamp duty laws and regulations should be checked. These schedules outline the stamp duty and documents for which the stamp duty is mandatory. The schedules and details about stamp duty are often available on the official websites of the state revenue department or can be directly obtained from the local registrar's office where the deed or document is executed. These are the examples of stamp duty for Karnataka and Delhi.
The stamp duty can be paid in the following manners:
Certain contracts, such as leases and property sale agreements must be registered with the concerned sub-registrar to be legally valid and admissible as evidence in court.
There is the exhaustive list of legal documents, which registration is mandatory:
The registration process involves presenting the contract before the sub-registrar where the property or subject matter is located. You may require prior booking to register your document. All parties signing the contract with a valid government-issued ID shall be present along with two witnesses. Also, check the rules regarding the timeline for registering contracts as some jurisdictions impose strict deadlines for registration.
Contracts can be executed either through physical signatures or using digital signatures, in accordance with the provisions of the Information Technology Act, 2000. You can choose either method considering the convenience of the parties and the nature of the transaction.
The contract can be signed by an individual party to the contract in person. Under this scenario, the persons signing the contract and two independent witnesses will sign the contract.
In the case of a legal entity such as a company, LLP, or partnership, an authorized representative signs the contract on behalf of the entity through a Power of Attorney.
Physical signatures are the traditional and widely recognized method of executing contracts. It involves parties physically signing the document either using signatures or thumb impressions. You need to write the date of signature and full name while signing the document physically. While signing physically, it is better to sign in the presence of two impartial witnesses to support the authenticity of the signature in future.
With the advent of technology and the global nature of business transactions, a new method of signing contracts using digital signatures has emerged. Digital signatures are recognized as legally valid under the Information Technology Act, of 2000. Using this method is the most convenient and secure way to sign contracts without the need for physical presence. A digital signature uses encryption technology to ensure the authenticity and integrity of the signed document. The parties signing the contract are first required to obtain a Digital Signature Certificate (DSC) from a licensed certifying authority. The list of authorized Certifying Authorities is listed on the website of the Ministry of Corporate Affairs. You can also use online digital signature services provided by third parties such as wonder.legal, DocuSign, etc. Under this method, you are not required to acquire DSC to sign a document.
When additional appendices or addendums are included in a contract, their details shall be explicitly stated in the contract. These attachments must also be signed, witnessed, and stamped as if they were part of the main contract.
The contracts executed in the presence of two or more witnesses increase the authenticity of a contract. While the presence and signature of the witnesses are not mandatory, having them will help you to support your stance in case of a legal dispute. Choosing an independent, competent individual who can testify in court will be an added advantage and will make the contract more authentic. To be a valid witness, the witness should:
Notarization involves getting the contract certified by a notary public or other authorized personnel confirming the authenticity of the signatures and the willingness of the parties to enter into the agreement. Even though the Notarization is not mandatory for all contracts, it will add the authenticity of the documents. A detailed guide on when and how to notarize a document is available on this website.
Once signed and executed, both parties should retain a copy of the contract. This is important for reference and future course of action including for defending in case of any legal disputes. Maintaining both the digital and physical copies is recommended for future reference and integrity.
After drafting a contract, following these steps play a critical role in ensuring its legal validity and enforceability in India. Adhering to these procedures can prevent future disputes and legal complications, providing a solid foundation for a successful contractual relationship.