Introduction to Contract Drafting in Nepal
Contracts are the foundation of commercial, employment, real estate, and business relationships in Nepal. A contract is a legally binding agreement that defines the rights, duties, and obligations of two or more parties. Proper contract drafting ensures legal certainty, minimizes disputes, and protects the interests of all parties involved.
In Nepal, contracts are governed primarily by the relevant provisions of the Muluki Civil Code, 2074 (2017). At Onesphere Law Associates, we assist clients in drafting clear, enforceable, and commercially sound contracts in compliance with Nepalese law.
What Is a Contract Under Nepalese Law?
aAcontract is defined as “an agreement enforceable by law.” A contract is deemed to be formed when:
- A lawful offer is made
- The offer is accepted without conditions
- A legal relationship is intended
Once concluded, the contract creates enforceable rights and obligations between the parties.
Essential Elements of a Valid Contract in Nepal
For a contract to be legally enforceable in Nepal, it must include:
- Offer and Acceptance
- Lawful Consideration
- Legal Capacity of Parties
- Free Consent (no fraud, coercion, or misrepresentation)
- Lawful Object
- Certainty of Terms
- Possibility of Performance
- Not Declared Void by Law
Absence of any of these elements may render a contract void or voidable.
Laws Governing Contracts in Nepal
Contractual relationships in Nepal are regulated by:
- Muluki Civil Code, 2074 (2017)
- Electronic Transactions Act, 2063 (2006)
- Arbitration Act, 2055 (1999)
- Foreign Investment and Technology Transfer Act, 2075 (2019)
- Consumer Protection Act, 2075 (2018)
Types of Contracts in Nepal
Void Contracts
Contracts that are illegal, against public policy, impossible to perform, or entered into by incapable parties are void and have no legal effect.
Voidable Contracts
Contracts formed through fraud, coercion, undue influence, or misrepresentation may be declared void by the aggrieved party through court action.
Unenforceable Contracts
Contracts that fail to meet statutory formalities, such as mandatory written form or registration, are unenforceable by courts.
Contract Drafting Process in Nepal
Step 1: Identifying Objectives
- Purpose of the agreement
- Parties involved
- Scope and obligations
Step 2: Negotiation of Terms
- Payment and pricing
- Duration and termination
- Risk allocation and dispute resolution
Step 3: Drafting the Contract
- Clear and precise clauses
- Compliance with Nepalese law
- Inclusion of negotiated terms
Step 4: Review and Revision
- Legal review
- Risk assessment
- Amendments and clarification
Step 5: Execution and Registration
- Signing and witnessing
- Notarization (if required)
- Registration (mandatory for immovable property contracts)
Key Clauses in Nepali Contracts
- Parties and Definitions
- Rights and Obligations
- Payment Terms
- Term and Termination
- Representations and Warranties
- Indemnity and Liability
- Force Majeure
- Governing Law and Jurisdiction
- Dispute Resolution
- Confidentiality
- Severability and Entire Agreement
Contract Drafting Services by Onesphere Law Associates
Onesphere Law Associates provides end-to-end contract drafting and review services in Nepal, including:
- Commercial and corporate contracts
- Employment agreements
- Shareholders’ and joint venture agreements
- FDI and technology transfer agreements
- Real estate and lease contracts
- NDAs and service agreements
- Contract review, negotiation, and compliance advisory
Common Mistakes in Contract Drafting
- Ambiguous language
- Ignoring registration requirements
- Weak dispute resolution clauses
- Failure to address tax and IP issues
- Improper execution
Cost and Time for Contract Drafting in Nepal
The cost and time depend on:
- Complexity and nature of the contract
- Negotiation requirements
- Registration and notarization needs
Simple contracts may take 1–2 weeks, while complex agreements may require 4–6 weeks or more.
Conclusion
Contract drafting in Nepal requires legal precision, regulatory awareness, and commercial insight. Poorly drafted contracts can lead to costly disputes and legal risks. For legally sound and enforceable agreements, professional legal assistance is essential.
Onesphere Law Associates is committed to delivering clear, strategic, and compliant contract drafting solutions that safeguard your interests and support long-term success.