Contract Drafting for Indian Businesses: Employment, Vendor, and Service Agreements Explained

Expanding into one of the fastest-growing economies is an exciting time for an international company. But expansion into India comes with its own challenges. From signing the first vendor or consultant to onboarding the first employee, each step is determined by contracts. And the reality is that what works back home will not work in India.

Many foreign companies rely on generic contract templates or verbal agreements and risk facing non-compliance, penalties, scope of work disputes, and intellectual property rights complexities in the future.

Given the complex nature of Indian regulatory guidelines, contract drafting is your company’s shield against uncertainty, disputes, and leverage in negotiations. This blog breaks down the three important agreements every global company needs while expanding into India. Let us understand these and find tips to avoid expensive errors from the first day:

Employment Contracts

These contracts are fundamental and outline the terms of the relationship between the company and its employees. These documents set the stage for working relationships, responsibilities, rights, and protections. Some common types of employment contracts are:

Permanent Contracts: Do not have an end date and include benefits like health insurance and pension to offer job stability 

Fixed-Term Contracts: Set for a specific duration and clearly define the end date, and offer flexibility for companies to manage personnel based on requirements

Freelance Contracts: Entered into with independent or self-employed professionals and provide access to special skills without long-term commitment

Remote Contracts: Personnel working from outside office locations offering flexibility and the access to a broader talent pool

Let us explore the best practices for drafting employment contracts:

• Alignment between company requirements and job role
• Clear articulation of terms and conditions to avoid ambiguity and disputes
• Regular review and update to ensure compliance and relevance

Service Contracts

These agreements are a foundation of successful partnerships and provide a framework for both parties. Such contracts are important for: 

• Clear communication of the scope of work, payment terms, and timelines 
• Identify and allocate risks between both parties
• Provide protection by defining the obligations and rights of each party

Let us explore some important clauses to be included in service agreements:

• Confidentiality and non-disclosure
• Dispute resolution and termination
• Intellectual property rights 
• Payment terms and conditions
• Scope of work

Vendor Contracts

Well-managed vendor relationships help businesses to scale operations. Vendor contracts are formal agreements that specify delivery terms for an agreed-upon payment. It defines the responsibilities of each party and determines the partnership terms. Some types of vendor agreements include cash reimbursement, time and materials, letter subcontract, and distribution contracts.

Here are some things that must be outlined in such intercompany contracts:

• Clear description of products or services outlining quality and other terms and conditions
• Define the start and end dates and deadlines for key milestones
• Detailed cost of products or services and payment structure
• Process to address potential disputes

Ignoring domestic legal guidelines or repurposing templates is convenient, but it may result in severe pitfalls, which include non-compliance or prolonged delays. Whether you are setting up a new subsidiary or scaling operations, it is important to invest in customized and robust contracts.

At Greenvissage, our experts help global businesses navigate the Indian regulatory framework. Reach out for a consultation to ensure contracts work for you and not against you; call on +91 8237857853 or drop us a mail at info@greenvissage.com.