Signing a contract in Nepal? You should meet these criteria to make it legally binding

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In your regular businesses and regular life, you enter into various forms of agreements ranging from an agreement for any rental services to an agreement for the sale of moveable or immovable property and an agreement for providing services to list a few.

The Civil Code, 2017, has expressly listed execution formalities while signing agreements. This article intends to inform the reader to have a basic knowledge of formalities to be followed while signing any agreement.

Transactions that shall have a written agreement

Following mentioned are the transactions which shall be in written form in any context.

  1. A house rent agreement in which the rent amount is more than Rs 20,000 a month
  2. An agreement relating to sales of goods
  3. An agreement relating to guarantee (i.e. personal guarantee)
  4. An agreement related to undertaking agencies (The commission should be included)
  5. Agreement relating to lease
  6. An agreement relating to hire and purchase of goods
  7. An agreement relating to the transaction of money

Transactions not required to have a written agreement

  1. House rent agreement: As per section 386 (2) of Civil Code, 2017, it is not compulsory to sign an agreement for a house rent if the rent amount is below Rs 20,000 a month.
  2. Donation of movable goods: According to section 414(4), it is not required to execute an agreement to donate or gift any movable property or cash amounting up to Rs 100,000.
  3. The sale of movable goods with consideration below Rs 50,000
  4. A service agreement with consideration below Rs 50,000
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Transactions that shall be registered with a government body

Following mentioned are the transactions that shall be registered with a government office for receiving validity:

  1. As per section 464 of Civil Code, 2017, the following mentioned agreements are to be registered with a government body:
    • A deed/agreement transferring the right in immovable property in any manner
    • A deed/agreement of mortgage with possession, mortgage without possession or re-mortgage
    • A deed/agreement on donation or gift of immovable property in testament
    • A deed/agreement on the exchange of immovable property
    • A deed/agreement on partition or relinquishment of partition share of property in common
    • A deed/agreement on the separation of the board and bread (accommodation and meals) or unification of board and bread
    • A deed/agreement on the establishment of a trust
    • A deed/agreement on the house renting with a monthly rent of more than Rs 100,000
    • A deed/agreement on the usufruct in an immovable property
  2. According to section 620 of the Civil Code, 2017, a lease agreement with a duration of more than 10 years shall be registered with a concerned government body.
  3. Section 644(3) of Civil Code, 2017, states that any person who employs any person as a domestic helper shall notify the local authority within one month after the date of such employment.
  4. A personal loan above Rs 50,000 should also be registered with a government agency.

Details of signatories required

In a majority of cases, an agreement is signed by individuals and corporate bodies with other individuals or corporate bodies. The Civil Code, 2017, has listed the details that shall be mentioned in the agreement while signing it.

The details are mentioned below:

  • For individual signing: Name, father/mother, grandfather/grandmother, spouses, citizenship number, age, date of issuance of citizenship, district issuing citizenship, permanent address, temporary address, address, email, and phone.
  •  For corporate signing: Name, registration numbers, address. It should be signed by a person authorised by the directors’ decision. A stamp should be included when signing on behalf of corporates.

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Regmi is an advocate associated with Associates Hub Law Firm.

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