Primary Clauses in a Service Agreement executed between a Foreign Individual or a Foreign Corporation with an Indian Company: Legal Advice by FDI Attorney in India

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When a foreign individual or a foreign corporation enters into a service agreement with an Indian company, it is important to include certain primary clauses in the agreement to protect the rights and interests of all parties involved. These clauses define the rights, obligations, and expectations of the parties, and provide a framework for the smooth execution of the agreement. This article outlines the top ten clauses that should be included in a service agreement between a foreign individual or corporation and an Indian company before they enter into commercial transactions.
1. Parties to the Agreement: The service agreement should clearly identify the parties involved in the contract. It should include the full legal names, addresses, and contact details of the foreign individual or corporation and the Indian company. This clause ensures that the agreement is binding on the correct parties and provides a basis for communication and legal recourse if necessary.

2. Scope of Services: This clause defines the specific services to be provided by the Indian company to the foreign individual or corporation. It should outline the nature, extent, and quality of the services, including any specifications, deliverables, or milestones. Clear and detailed descriptions help avoid misunderstandings and disputes regarding the scope of work.

3. Duration and Termination: The agreement should specify the duration of the contract, including the start and end dates. It should also include provisions for early termination or renewal of the agreement. Clearly defining the conditions and procedures for termination helps both parties understand their rights and obligations in case either party wishes to end the contract prematurely.

4. Payment Terms: This clause outlines the payment terms and conditions for the services rendered by the Indian company. It should specify the amount, currency, and frequency of payments, as well as any additional charges, taxes, or expenses to be borne by the foreign individual or corporation. The clause may also include provisions for invoicing, payment methods, and late payment penalties, if applicable.

5. Intellectual Property Rights: In service agreements, intellectual property (IP) rights are often a crucial consideration. This clause addresses the ownership and use of intellectual property created or utilized during the provision of services. It should specify whether the IP rights remain with the Indian company or are transferred to the foreign individual or corporation. The clause may also cover confidentiality obligations, non-disclosure agreements, and restrictions on the use or dissemination of proprietary information.

6. Confidentiality and Non-Disclosure: Confidentiality provisions protect sensitive information shared between the parties during the course of the agreement. This clause ensures that both parties maintain the confidentiality of proprietary or confidential information and refrain from disclosing it to third parties without proper authorization. It may also specify the duration of the confidentiality obligations and the circumstances under which disclosure may be permitted (e.g., with written consent or for legal or regulatory compliance).

7. Liability and Indemnification: This clause allocates liability between the parties and outlines the indemnification obligations in case of any claims, damages, or losses arising from the provision of services. It clarifies the extent to which each party is responsible for their actions, including any liabilities arising from third-party claims. Indemnification provisions protect the foreign individual or corporation from bearing the consequences of the Indian company’s actions or negligence.

8. Dispute Resolution: The service agreement should include a clause specifying the mechanism for resolving disputes that may arise during the term of the contract. This can include options such as negotiation, mediation, arbitration, or litigation. The clause may also specify the governing law and jurisdiction for the resolution of disputes.

9. Force Majeure: A force majeure clause addresses unforeseen events or circumstances that may prevent one or both parties from fulfilling their obligations under the agreement. It outlines the rights and obligations of the parties in such situations, including the possibility of suspending or terminating the agreement without liability. Force majeure events typically include acts of God, natural disasters, war, terrorism, or pandemic etc.

10. Arbitration & Jurisdiction: This includes putting a clause for the parties whereby they agree to initiate arbitration process (in case of a dispute) before going ahead with the lawsuit. Further, it is imperative to determine the jurisdiction of the Courts including the country which shall have the power to decide a lawsuit when a dispute arises (if any).
Authored By: Adv Anant Sharma

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