Complexities the termination clauses spell

As agreements go, the deal between Antrix and Devas Multimedia would be a Chief Financial Officer's nightmare for more reasons than one.

For instance, the agreement says that when Devas (the party procuring transponder capacity on lease from Antrix) wants to terminate the contract because it is unable to procure some regulatory clearances it can do so without so much as a by your leave and can actually get away from having to pay what it already owes! The relevant clause says that dues still remaining to be paid to Antrix will also be forfeited (Article 7a of the agreement). The full text of the agreement is available at www.thehindu.com.

That one of the contracting parties, for reasons beyond its control, is unable to continue the business relationship and therefore should be freed of future financial obligations is entirely understandable. But should it also be absolved of a payment obligation that it has run up in favour of the other party to the contract for services rendered by the latter? That is what the document says Devas is entitled to.

Opportunity cost?

Similarly, should Antrix find it expedient to terminate the contract because it has not obtained clearances for operating a satellite in space, it simply has to return the money that it had received from Devas and not bother about such niceties as compensating Devas for the opportunity cost implicit in keeping the latter's cash with itself, for a certain length of time.

Indeed even when there is a conscious and voluntary decision to terminate the contract by either of the parties for whatever reason, the terms of settlement speak of just a return of whatever sums of money one party has received from the other. There is no reference to loss of income/punitive damages, etc, from such wilful conduct.

The spirit of the document is perhaps what a Family Court judge would like to see as the terms of settlement between two warring parties — separation by mutual consent; fault on both sides; let's keep in touch with each other as friends, etc.

Even under the Article on indemnities (a commitment where each party undertakes to make good losses suffered by the other on the occurrence of some of some contingent event), the language of the agreement is one of sweet reasonableness.

It says each one will bind the other to what they promised and demand restitution established under the best principles of common law and fairness (equity). However, the same would not apply to termination of the agreement invoked under the relevant clause which, of course, talks only of return of the money collected earlier.

Indeed, this might as well have been an abject case study of how contracts can be structured in Utopia — assuming that people in that land do need to put in words what they have agreed to contract — rather than between a savvy private enterprise in multimedia business and India's nodal agency for space on how they will exploit the scarce radio wave frequency in S-band for mutual benefit.

Unless of course, Deutsche Telekom saw something in the fine print of the contract that a plain reading does not reveal when it chose to invest top dollars in the Devas Multimedia venture.