Article VII - Legal Awareness Series

 Formal Documentation – Minimum requirements/ parameters- Missing links.


As seen above when the entrepreneur is moving from individual-based to society-based customers, we need to have “formal documentation” – but as articulated in the previous Article VI, they cover more or less all areas which are related to the “commercial “part of the transaction.

When we scrutinize the formal documentation done by various upcoming business entrepreneurs, we find that, while they cover commercial details as given in the previous Article, there are still some gaps in the commercial terms which expose the entrepreneur to certain risks.  

As seen in all previous Articles the journey of business moves from Individual-based customers to society-based customers, still many times the customer base is always associated with some individual and not any “Business Entity”. This makes a lot of difference in dealings with these parties.

As observed, although there is a transition from individual-based to society-based customers –  the documentation is limited to commercial documentation only, and wherever any documentation is entered into from a legal angle – then it is often in the form of an exchange of emails or proposals, or letters or in some cases purchase orders  and rarely  through execution of Letter of Intents (LOI) / Memorandum of Understanding(MOU) or Agreement.

So, the question is, whether such emails/proposals/  letters or in some cases purchase orders to form a valid contract or not? The answer is YES. However, often such emails/proposals/letters/POs are incomplete and do not include certain legal as well as commercial terms: “Missing link”. This leaves the parties involved in the contract exposed to unknown commercial & legal risks.

So, it is in the interest of the parties that firstly they should have “formal documentation” for any deal, and more importantly, such documentation must be properly drafted to take care of all the commercial as well as legal aspects.


Cont...


For any query feel free to contact me.


Mahesh Vaidya
M.Com, LLM, ACS, DFM, CAIIB  
Legal Adviser
Cell Number 9769949701 / 9223173695
Email ID maheshvaidya2706@gmail.com

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