Curious Case of Confusing Clause – Why you need an expert to draft a simple agreement?

Curious Case of Confusing Clause – Why you need an expert to draft a simple agreement?

By Drafting Chambers Co-Founder MAHIM DUBEY

Our eyes tend to miss the things which our mind doesn’t know. There are numerous laws and it becomes difficult even for the legal enthusiasts to know all the laws completely. For a layman a fact which may not be pertinent, may turn out to be extremely important legal issue.

A rent agreement entered between two parties didn’t mention the term of the lease specifically. However, one of the clauses said that every year the rent shall be increased by 10%. This agreement was not registered. The dispute arose when landlord claimed the rent from tenant and demanded increased rent according to the said clause of the agreement. Tenant denied to give the rent at the claimed rate of interest and alleged that the agreement does not bind him as it was not registered.

The issue which arose was whether the agreement needed to be registered? S 17 Registration Act, 1908 provides that agreement for lease for a period of more than year or year to year basis shall be compulsory registered. Otherwise they can’t be used as evidence.

In the present case the dispute arose as no time period for lease was mentioned in the agreement. But one of the clauses said that rent has to be increased by 10% every year. On the basis of this clause tenant argued that the lease was for year to year basis and hence compulsorily registrable. The argument of the tenant was accepted by the first appellate Court. Revision application was dismissed and landlord had to finally approach the Supreme Court of India.

Supreme Court finally held that, “a contingent clause which binds the tenant to increase the rent by 10% each year, which was contingent on tenancy to continue for more than a year, cannot be read to mean that the tenancy was for a period of more than one year.”

Finally, it was concluded that the rent note was not of such a kind which required compulsory registration. This dispute which took a long period of time and energy of the litigants for settlement could have been easily avoided by a simple clause which fixed the time period of lease.

You may think that agreement can be drafted by anyone and why do I need an expert to express my views? You aren’t completely wrong. Agreements can be drafted by anyone and role of lawyers actually begin after the agreements are entered and disputes arise.

Mahim Dubey is a graduate of National Law University, Delhi, and specializes in corporate and contract law. As the co-founder of Drafting Chambers, he brings extensive expertise in legal drafting and has delivered lectures on the art of drafting contracts and agreements. His deep knowledge and experience in corporate law ensure that every document drafted by his team meets the highest standards of precision and professionalism.