Drafting, Pleadings and Appearances · Drafting of Commercial Contracts

Essentials of Drafting Commercial Contracts

Updated 11 October 2026 · Fact-checked

Drafting a commercial contract means putting a business deal into clear written terms that meet the tests of Section 10 of the Indian Contract Act, 1872: free consent, competent parties, lawful consideration, lawful object, and no express declaration of voidness. You then arrange it in a standard structure: title, parties, recitals, operative clauses, schedules and execution.

Understand Essentials of Drafting Commercial Contracts

A commercial contract is a written record of a business deal. Your job as drafter is to make sure the record is enforceable and leaves little room for dispute. Enforceability starts with Section 10 of the Indian Contract Act, 1872. It says all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared void.

So before you write a word, check the facts against each element. Who are the parties, and are they competent? Is consent free, or could it be attacked as undue influence under Section 16? Is the consideration real and lawful? Is the object lawful? Section 10 also says that any law requiring a contract to be in writing, to be made before witnesses, or to be registered continues to apply. Your draft must meet those formalities where they apply.

Then comes the drafting craft. Use plain language and short sentences. Define each key term once and use it the same way every time. Avoid vague words and doubtful cross-references. State who must do what, by when, and what follows if they do not. Ambiguity usually gets read against the party who relied on it, so clarity protects your client.

Finally, follow the standard structure. A typical agreement has a title, the date and place, the parties with full description, recitals (background, often starting with WHEREAS), the operative part (definitions, obligations, price, term, termination, remedies, dispute resolution), schedules for details, and an execution clause with signatures and witnesses. Recitals explain the background. The operative clauses create the rights and duties.

Watch the clauses that can make a contract void to the extent. Under Section 28, an agreement that absolutely restricts a party from enforcing rights by the usual legal proceedings, or limits the time to do so, is void to that extent. Arbitration clauses are saved by the exceptions to that section.

Key rules to remember

Valid contract (Section 10): Agreement + free consent + competent parties + lawful consideration + lawful object + not expressly declared void = contract; Writing, witnesses or registration are needed only where another law requires them.
Undue influence (Section 16): Position to dominate the will + use of that position to obtain unfair advantage = undue influence; If the transaction looks unconscionable, the burden of proving no undue influence lies on the dominant party.
Mistake of law (Section 21): Mistake as to a law in force in India does not make a contract voidable; A mistake as to a law not in force in India is treated like a mistake of fact.
Restraint of legal proceedings (Section 28): Absolute restriction on enforcing rights through ordinary tribunals, or limit on time to enforce = void to that extent; Exceptions save arbitration agreements, and certain bank or financial institution guarantee clauses with a period of at least one year.
Restitution (Section 65): Advantage received under a void agreement or a contract that becomes void must be restored or compensated for; Useful when you draft refund and restoration clauses.
Standard structure: Title → date and place → parties → recitals → operative clauses → schedules → execution; Recitals give background. Operative clauses create obligations.

How to solve Essentials of Drafting Commercial Contracts questions

Use this method for any question that asks you to draft, review or advise on a commercial contract.

1Read the facts and list the parties, their legal status and who signs for them.
2Test the deal against Section 10: consent, competence, consideration, object, and any express voidness.
3Note any legal formality required, such as writing, witnesses, registration or stamping.
4Set out the structure: title, date, parties, recitals, operative clauses, schedules, execution.
5Draft the operative clauses in plain language: scope, price, time, duties, termination, remedies, dispute resolution.
6Check risky clauses, such as limits on legal remedies under Section 28, and fix them.
7Close with the execution clause and attestation, then state your conclusion in one line.

Quickest way: Element-then-skeleton method

When to use it: Use it when time is short and the question gives a deal with a few facts.

Write the five Section 10 tests as a one-line checklist and tick each against the facts.
Flag the one defect or risk the facts hint at, such as undue influence or a clause barring court action.
Write the skeleton headings in order and fill only the clauses the facts need.
End with execution and a short conclusion.

Common mistakes in Essentials of Drafting Commercial Contracts

Starting to draft without checking the Section 10 elements.
Students rush to the clauses and treat validity as a theory topic.
Fix: Spend the first two lines of your answer checking parties, consent, consideration and object.
Confusing recitals with operative clauses.
Both appear near the start and both describe the deal.
Fix: Keep recitals for background only. Put every binding duty in the operative part.
Writing a clause that bars all court action.
Students want a strong dispute clause and forget Section 28.
Fix: Use an arbitration clause, which Section 28 saves, rather than a clause absolutely barring legal proceedings.
Treating a mistake of Indian law as a ground to avoid the contract.
Students mix it up with mistake of fact.
Fix: Remember Section 21: a mistake as to a law in force in India does not make a contract voidable.
Using loose, undefined terms and inconsistent names for parties.
Students copy phrases from memory and write long sentences.
Fix: Define terms once, use short sentences and keep the same label for each party throughout.
Leaving out execution details.
The question seems to end with the last clause.
Fix: Add the signing block, witnesses, date and place, and mention stamping or registration if the law requires it.

Worked examples

Example 1

Mehta Textiles Pvt. Ltd., Surat, agrees to supply fabric to Kapoor Garments LLP, Delhi, for ₹12,50,000. Kapoor Garments has threatened to withdraw unless Mehta Textiles accepts a clause that it can never go to court for any breach. Advise on the clause and the validity of the contract.

Show the solution

Test Section 10: both parties are a company and an LLP, which can contract. Consent appears free. Consideration is the price and the supply of fabric. The object is lawful.
Examine the clause. It restricts Mehta Textiles absolutely from enforcing its rights through the usual legal proceedings in the ordinary tribunals.
Under Section 28, such an agreement is void to that extent. The rest of the contract can stand.
Suggest a replacement: refer any dispute to arbitration. Section 28 saves a contract to refer future disputes to arbitration, with only the awarded amount recoverable.
Draft the clause in plain words naming the seat and the number of arbitrators.

Answer: The contract is valid under Section 10, but the clause barring all court action is void to that extent under Section 28. Replace it with an arbitration clause, which Section 28 saves.

Example 2

Draft the outline of a supply agreement between Sharma Agro Ltd. (seller) and Rao Foods Pvt. Ltd. (buyer) for 500 tonnes of rice at ₹32,000 per tonne, and state what each part does.

Show the solution

Title: Supply Agreement. Add the date and place of signing.
Parties: give the full name, registered office and signatory of Sharma Agro Ltd. as Seller and Rao Foods Pvt. Ltd. as Buyer.
Recitals: Seller trades in rice. Buyer wishes to buy 500 tonnes. The parties have agreed on the terms below. These give background only.
Operative clauses: definitions, quantity, price of ₹32,000 per tonne (total ₹1,60,00,000, since 500 × 32,000 = 1,60,00,000), delivery, payment, term, termination, remedies, arbitration.
Schedules: quality specification and delivery timetable.
Execution: signatures of authorised persons, witnesses, date and place, with stamping as the law requires.

Answer: The outline has title, date, parties, recitals, operative clauses (price total ₹1,60,00,000), schedules and execution. Recitals give background. Operative clauses create the binding duties.

Exam tips

Open every drafting answer with a short Section 10 check. It shows the examiner you tested validity first.
Follow the order: provision, analysis of facts, conclusion. Then add the draft clauses.
Quote Section numbers only where you are sure, such as Sections 10, 16, 21, 28 and 65.
Show the structure with clear labels, so the examiner can find recitals, operative clauses and execution quickly.
Keep clause wording short and specific. Name the parties, amounts and dates given in the question.

Practice questions from Drafting of Commercial Contracts

Essentials of Drafting Commercial Contracts in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Essentials of Drafting Commercial Contracts: frequently asked questions

What are the essentials of a valid commercial contract in India?

Section 10 of the Indian Contract Act, 1872 requires free consent of competent parties, lawful consideration and a lawful object, and that the agreement is not expressly declared void. Where another law requires writing, witnesses or registration, you must also meet that.

What is the difference between recitals and operative clauses?

Recitals set out the background and the reason for the agreement. Operative clauses create the rights and duties of the parties. Put binding promises only in the operative part.

Can a contract stop a party from going to court?

Not absolutely. Under Section 28, a term that absolutely restricts enforcing rights by the usual legal proceedings, or limits the time to do so, is void to that extent. A contract to refer disputes to arbitration is saved by the exceptions.

Does a mistake about Indian law make a contract voidable?

No. Section 21 says a contract is not voidable because of a mistake as to any law in force in India. A mistake as to a law not in force in India has the same effect as a mistake of fact.