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Essential elements of an Agreement

Now a days it is very common that, we all enter into one or more agreements or execute various contracts. However, it is always confusing for most of us that, while writing a contract, what all should be discussed in the same. In other words, how to draft an agreement?

There are various kinds of agreements such as Sale Agreement, Rental Agreement, Employment contract, Memorandum of Understanding (MoU), Non-Disclosure Agreement, Hire-Purchase Agreement, Technology Transfer Agreement, Service Agreement, Transport Agreement, Click-Wrap Agreements, Standard form of Contract etc.

Before dealing with How to draft an agreement, let’s try to understand the essential elements of an agreement OR what all points to be covered in an agreement?

Agreement Title

Title of the Agreement must be specifically mentioned at the very beginning of an Agreement, to understand what the agreement is all about?
For Eg. Sale Agreement, Rental Agreement etc.

Date of the Agreement

It is always recommended to mention the date of execution of the agreement. The same is important because, it will help a person to calculate the tenure of the agreement.

For Eg.

This Agreement is entered on this February 27, 2017 by and between;
This Memorandum of Understanding (hereinafter referred as “MoU”) is entered on this February 27, 2017 by and between;

Unique Identification Number

It is always recommended to provide a Unique Identification Number to each and every agreement we enter into.

Identification of Parties

Identifying Parties along with correct and accurate postal address is an essential element of a contract.

For Eg. M/s ABC Corporation Inc. a company incorporated under the laws of United States of America having its registered office at _______________ (hereinafter referred as “ABC”, which the term shall unless otherwise include all its successors, and permitted assigns) on the FIRST PART 


M/s XYZ Corporation Inc. a company incorporated under the laws of United States of America having its registered office at _______________ (hereinafter referred as “XYZ”, which the term shall unless otherwise include all its successors, and permitted assigns) on the SECOND PART


Recital is something like an introduction about the parties to the agreement. Recitals generally gives a brief info about the parties.

Body of the Agreement

The main part of an agreement is its body. This part generally deals with Scope/Purpose, Material Description, Pricing & Payment Terms, Deliverables, Shipping/Logistics, Insurance/Risk of Lose, Guarantee/Warrantee, Reimbursement, Assignment etc.

Tenure of the Agreement: This section deals with the duration of the agreement.

Entire Agreement: Generally deals with the concept of whole document, that irrespective of whole documents, the contract shall be treated as a whole.

Waiver: Deals with the waiver of rights by either party to an agreement and effect of such waiver.

Termination: Deals with how can one agreement terminated? To whom the notice of termination to be sent? How many days’ notice to be given?

Effect of Termination: Deals with the obligations of the party during the notice period as well as after termination.

Jurisdiction/Compliance with Laws: Deals with the applicable laws governing the terms and conditions of the Agreement.

Dispute Resolution Mechanism/Arbitration Clause: Basically deals with the Arbitration clause, where the parties refers the dispute arising out of specific agreement to the Arbitrator either appointed by mutual consent or through an institution.

Confidentiality/Non-Disclosure: Deals with the confidentiality of the agreement or the obligation on the part of the parties to the contract to keep the secrecy.

Force Majeure: Deals with the Roles and responsibilities of the parties in case of act of god.

Authorized Signatory Details: Must have part of an agreement where the name and designation of the parties executing the agreement/contract to be mentioned before executing the same.

Witnesses: Minimum of two witnesses to be signed specifying the name and address.

Page Number & Numbering of Paragraphs: It is recommended to number all the pages as well as paragraphs of the contract.


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