ARTICLE
28 July 2025

Contract Smart: Five Dos And Don'ts For Contractors

KC
Kochhar & Co.

Contributor

With more than 200 lawyers, Kochhar & Co. is one of the leading and largest corporate law firms in India (""Firm”) . Kochhar & Co. enjoys the distinction of being the only law firm with a full-service presence in the six (6) prominent cities of India namely: New Delhi, Mumbai, Bangalore, Chennai, Gurgaon and Hyderabad and four (4) overseas offices: Dubai, Singapore, Atlanta, Jeddah. The Firm offers a wide range of legal services in the area of Corporate & Commercial Laws, Dispute Resolution, Tax and Intellectual Property (IPR) and specializes in representing major foreign corporations with diverse business interests in India.
We sign contracts routinely, often undervaluing their significance until conflicts occur. Here are five crucial do's and don'ts every contractor must consider.
India Corporate/Commercial Law

We sign contracts routinely, often undervaluing their significance until conflicts occur. Here are five crucial do's and don'ts every contractor must consider.

Pre-signing

Dos

  • Review and understand each project element together, considering their mutual impact.
  • Draft with a "what-if" mindset – anticipate worst-case scenarios, not just ideal conditions.
  • Conduct due diligence, including tax structures and implications.
  • Include a list of pre-approved subcontractors.

Don'ts

  • Accept strict, onerous obligations and unrealistic timelines. Factor in local conditions.
  • Rely on present cordial relationships or project scale to accept arbitrary terms.
  • Accept unrealistic timelines or deliverables, tied to third-party actions, such as regulatory approvals.

Payment terms

Dos

  • Set out payment milestones clearly. Require front-loaded payments to maintain cash flow.
  • Specify supporting documents for invoices and require timely payment within the due date.
  • Define indices/methodologies for variable obligations in non-fixed price contracts.
  • Require bank guarantees to be reduced proportionately with milestone completion.
  • Provide performance bank guarantees post-handover. Insist on deeming provisions.
  • Include default interest and right to suspend or terminate for payment delays.

Don'ts

  • Agree to set-off rights for outstanding amounts.
  • Agree to onerous bank guarantee terms.
  • Allow high retention amounts for punch list items.
  • Link significant payments to uncertain regulatory or right-of-way approvals.

Scope

Dos

  • Clearly delineate scope and responsibilities. Use scope matrices, setting timelines and penalties.
  • Insist on flexibility for third-party obligations, like regulatory approvals.
  • Detail project owner responsibilities and obligations. Avoid limiting to payment defaults alone.

Don'ts

  • Agree to broad, onerous obligations. Do not commit to unrealistic goals.
  • Leave key project owner obligations open-ended – set long-stop dates with penalties.

Termination

Dos

  • Set absolute (not relative) termination fees covering actual losses, including vendor cancellation fees, demobilisation costs and lost profit.
  • Aim for equal termination rights – grounds should mirror those for the owner, not be confined to payment default alone.
  • Incorporate obligation-specific remedies for breach to compartmentalise risk. For instance, specify delay liquidated damages as the sole remedy for delays, excluding any other relief.

Don'ts

  • Agree to immediate termination. Insist on a default cure period.
  • Agree to reimbursement of government penalties on termination
  • Incorporate termination clauses unrelated to contractor's scope.
  • Limitation of liability

Dos

  • Cap liability and delay damages. Include standard exceptions such as fraud, gross negligence and personal injury.
  • Exclude consequential damage.
  • Provide for clear, time-bound and cost-effective (institutional) arbitration clauses.

Don'ts

  • Agree to liability exceeding 100% of contract value.
  • Agree to delay liquidated damages for the entire scope of obligations.
  • Accept overly complex, multi-tiered dispute resolution processes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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