Commercial Agreements in Bangladesh: A 2026 Drafting and Risk-Allocation Guide

Commercial agreements are where a business decision becomes an operating obligation. In Bangladesh, a signed document must do more than describe a deal. It must allocate performance risk in language the parties can administer, fit the Contract Act and any sector-specific law, work with tax and foreign-exchange processes, and preserve a credible route to relief if the relationship fails.

This guide is a practical framework for Bangladesh-facing sale, supply, services, technology, distribution, licensing and project agreements. It focuses on questions that should be resolved before signature: who is bound, what must be delivered, when payment is due, which documents support it, who carries loss, and what happens after a default. It is not a substitute for deal-specific legal, tax, regulatory or banking advice.

Contents

Start with a contract that can be performed and proved

The Contract Act, 1872 remains the starting point for a conventional Bangladesh commercial contract. Its framework addresses communication and acceptance of proposals, competency, consent, lawful consideration and object, performance, breach, indemnity and guarantee. In particular, the Act addresses absolute acceptance, agreements that are contracts, competency, free consent, lawful objects, uncertainty and agreements in restraint of trade or legal proceedings. The drafting consequence is straightforward: do not allow commercial shorthand to substitute for a clear bargain. A purchase order, order acknowledgement, email acceptance, framework agreement and statement of work should tell the same story rather than compete with each other. [1]

Confirm the legal actor and signing authority

The agreement should state each party’s precise legal name, legal form, registration or incorporation details where applicable, registered address, notice address and authorised signatory. The reason is practical as well as legal: a contract cannot reliably allocate risk if the customer, affiliate, branch, project vehicle and payer are used interchangeably.

For a Bangladesh company, diligence should not stop at a trade name or a current business card. The Registrar of Joint Stock Companies and Firms (RJSC) says it is the authority that facilitates company formation and keeps track of ownership-related matters; its service materials also state that anyone may apply for certified copies of an entity’s historical records, subject to the stated limitation for profit-and-loss accounts. Use the appropriate records, constitutional documents and current internal approvals to assess whether the entity exists, who has authority and whether the proposed transaction needs a board or shareholder approval. [2]

A sensible agreement also separates authority from capacity. A corporate party may exist and still require its own approval process before entering into a major guarantee, security package, long-term exclusivity, related-party arrangement or acquisition obligation. Obtain the approving resolution or other evidence where the deal profile warrants it, and make any required approval a condition precedent rather than an assumption.

Turn commercial intent into a complete offer and acceptance record

The Contract Act requires acceptance to be absolute and unqualified. This makes version discipline important. State which document prevails if there is a conflict between a master agreement, statement of work, purchase order, specification, quotation, tender response, change order and invoice. Identify the document version and date in the signature block or schedule. If acceptance is by email, purchase order or commencement of work, specify precisely what conduct creates the contract and whether standard terms are excluded. [1]

This is especially valuable for repeat business. A master agreement can provide the risk allocation, while each order or statement of work identifies the scope, price, timetable and acceptance measures. The master should not leave the operational terms so open that parties later disagree about whether a new order was ever accepted or what terms govern it.

Avoid uncertain promises and unsupported assumptions

Section 29 of the Contract Act addresses agreements void for uncertainty, and the performance provisions also deal with time, place and reciprocal promises. Avoid terms such as “industry-leading,” “promptly,” “best quality,” “as required” or “commercially reasonable” as the only standard for a material obligation. They may have a useful role when paired with objective measures; they are a weak substitute for a measurable requirement. [1]

Instead, use schedules that identify deliverables, quantities, specifications, acceptance tests, service levels, named dependencies, milestone dates, reporting format and a responsible owner on each side. Record assumptions that affect price or timing. State the consequence if an assumption proves wrong: a change order, price adjustment, an extension, a right to suspend, or a termination option. The aim is not more paper. It is fewer disputes about what was promised.

Build the commercial architecture before negotiating clauses

A strong contract begins with a deal map. Before negotiating boilerplate, decide the business model: sale of goods, recurring services, distribution, licence, project delivery, outsourced process, technology subscription, manufacturing arrangement or joint venture. The appropriate risk allocation changes with the model.

For each deal, map four linked flows: money, goods or services, information, and approvals. The money flow asks who invoices, in which currency, when payment is made and what documents the payer needs. The delivery flow asks what is delivered, who accepts it and when title or risk shifts. The information flow addresses confidential data, intellectual property and records. The approvals flow captures internal authority, licences, tax treatment, bank documentation and any sector approval. An agreement is more likely to work when these flows align.

Scope, specifications and acceptance

For a goods contract, the Sale of Goods Act distinguishes conditions from warranties. A condition is essential to the main purpose and its breach may allow the buyer to treat the contract as repudiated; a warranty is collateral and ordinarily gives a damages claim rather than a right to reject. The label selected by the parties is not decisive; construction matters. The Act also contains implied terms on title, quiet possession, correspondence with description, particular-purpose fitness in stated circumstances, merchantable quality in stated circumstances and sale by sample. [3]

The practical drafting response is to identify the obligations that genuinely justify rejection or termination. For example, a food ingredient, regulated component or safety-critical item may need objective compliance specifications, sampling rules, inspection access, batch records, a rejection procedure and traceability. A buyer should not rely on a general label of “warranty” if it needs a contractual right to reject a non-conforming delivery after a specified test. A seller should not accept an open-ended acceptance process if it needs a predictable route to invoice and close a milestone.

For services, replace a bare description with a statement of work that describes inputs, dependencies, deliverables, milestones, acceptance criteria, remedial steps and a process for approved changes. If the customer’s late data, access or decisions can delay work, say so and make the effect on time and price explicit. For a technology or outsourcing deal, identify service levels, maintenance windows, incident reporting, change-management gates, subcontracting rights, exit assistance and data return or deletion requirements appropriate to the service.

Price, payment and credit risk

Price clauses should specify the currency, unit or fixed price, whether the price is tax-inclusive or tax-exclusive, invoice content, payment due date, permitted set-off, withholding treatment and the evidence required for a disputed invoice. If a price can change, identify the trigger, source data, formula, cap or collar, notice period and audit trail. Avoid a unilateral “prices may change” provision in a fixed-scope deal unless the parties have deliberately accepted that exposure.

Cash-flow protection should match the work. A supplier of bespoke equipment may need an advance, staged payments and a retention release after acceptance. A purchaser of recurring services may prefer payment after defined service periods, service credits for missed service levels and a right to withhold only the genuinely disputed amount. Do not confuse a contractual late-payment remedy with a licence to impose a punitive amount. Under section 74 of the Contract Act, where a sum is named as payable on breach or there is a penalty stipulation, the court may award reasonable compensation not exceeding the amount named; section 73 addresses compensation for loss naturally arising in the usual course or known to the parties as likely from breach. [1]

A useful risk-allocation exercise asks: what loss is foreseeable if each important promise fails, what evidence will establish it, and what is the maximum exposure the supplier can price? Then draft the liability architecture around that answer. Consider a general cap, appropriate exclusions from the cap, exclusions of specified categories of indirect or consequential loss where suitable, insurance requirements, and a separate treatment for third-party intellectual-property claims, confidentiality breaches, death or personal injury where relevant, fraud, taxes, or other deliberately allocated risks. The right allocation is commercial and sector-specific; a headline cap without carefully defined claims and exclusions often creates more uncertainty than protection.

Delivery, title, risk and logistics

The Sale of Goods Act says that, unless otherwise agreed, goods remain at the seller’s risk until property transfers; once property transfers, they are at the buyer’s risk whether or not delivery has occurred, subject to the Act’s proviso for loss caused by a party’s delay. The Act also makes the parties’ intention relevant to the time at which property passes for specific or ascertained goods. [3]

Do not leave title and risk to implication where goods move across borders, are stored with a third party, are subject to installation or will be paid in stages. The agreement should state the delivery point, allocation of loading and freight responsibilities, Incoterms® rule and named place if used, insurance responsibility, risk-transfer event, title-transfer event, documentary requirements, inspection timetable, short-delivery process and consequences of delay. Ensure those choices do not contradict the invoice, bill of lading, insurance certificate, letter of credit and customs documentation.

Intellectual property, confidentiality and data

In a services, technology, manufacturing, brand or licensing contract, distinguish pre-existing materials from project outputs. State who owns each category, what licence is granted, whether the licence is exclusive, transferable or sublicensable, and what happens to tools, documentation, source materials and customer data on exit. If ownership transfers only after full payment, say so. If a party can reuse generic know-how, define the boundary so it does not become a route to disclose the other party’s confidential information.

Confidentiality clauses should identify protected information, permitted recipients, security expectations, permitted uses, exceptions, return or destruction obligations and survival period. A generic confidentiality clause cannot cure insecure operational practice. For a data-heavy arrangement, use a separate data and security schedule that identifies systems, locations, access roles, incident escalation, back-up, audit evidence and exit/export format. Consider the regulatory position that applies to the parties and data at the time of execution; sectoral requirements and regulator practice can change.

Guarantees, indemnities and performance security

The Contract Act defines indemnity and guarantee separately, and contains rules affecting guarantees, including the surety’s liability and circumstances in which a variation of the contract may discharge a surety. A guarantee should therefore identify the guaranteed obligations, monetary or other limit, duration, demand mechanics, governing law, expiry and any conditions for call. Amendments to the underlying contract should be managed with the security provider in mind rather than treated as a simple commercial change between principal parties. [1]

An indemnity clause should identify the covered trigger, third-party claim process, control of defence, settlement consent, mitigation, exclusions, financial limit and interaction with insurance and the general liability cap. A broad phrase such as “indemnify against all loss” may obscure the risk rather than allocate it. Performance bonds, repayment guarantees and retention can be useful where the risk is quantifiable and the call process is clear; they should be coordinated with the default and dispute clauses.

Allocate the principal risks with precision

Commercial contracts often fail because three different mechanisms are conflated: a performance obligation, a remedy and a risk transfer. A delivery date is an obligation. Service credits or damages are remedies. Insurance, a parent guarantee or a bank guarantee may transfer or support a particular risk. Draft each mechanism separately, then test whether they work together.

Delay, change and force majeure

State whether time is of the essence for the particular milestone. The Contract Act addresses the effect of failure to perform at a fixed time where time is essential and where it is not. It also addresses a contract to do an act that becomes impossible or unlawful. Those provisions do not replace a transaction-specific delay and force-majeure regime. [1]

A well-designed force-majeure clause should define the events covered, require prompt notice and mitigation, allocate the cost and schedule effect, state which payment obligations continue, distinguish supplier-chain difficulty from a qualifying event where appropriate, and give each party a carefully defined long-stop termination right. For construction, manufacturing and technology projects, add a change-control process that records the requested change, impact assessment, approval authority and revised baseline before work proceeds. This provides a contemporaneous evidence trail as well as a governance mechanism.

Distribution, exclusivity and competition risk

Distribution and agency agreements need a precise territory, product list, channel definition, marketing controls, targets, reporting and exit plan. Exclusivity should never be a label without conditions. Tie it to measurable performance, compliance, forecast quality and termination or conversion rights. Set out whether the principal can sell direct, appoint key-account distributors or respond to unsolicited orders.

The Competition Act, 2012 defines “agreement” broadly enough to include formal and informal arrangements and specifically includes tie-in arrangements, exclusive supply, exclusive distribution, refusal to deal and resale-price maintenance in its definition. Section 15 prohibits agreements or collusion relating to production, supply, distribution, storage or acquisition that adversely affect competition or create monopoly or oligopoly conditions, and identifies several arrangements as anti-competitive if they adversely affect competition. The Act also reaches conduct outside Bangladesh that adversely affects competition in the relevant Bangladesh market. [4]

That does not mean every exclusive arrangement is prohibited. It means exclusivity, territorial allocation, tied selling, refusal-to-deal provisions and resale-price terms merit an early competition assessment. Avoid drafting fixed resale prices as a default. Where a commercial restriction is needed, define its legitimate purpose, scope, duration, audit evidence and review point, and obtain specialist advice for material market-facing arrangements.

Compliance, audit and termination

A general “comply with all laws” clause is not enough for a higher-risk relationship. Identify the laws, licences, policies and approvals material to the contract; allocate who obtains them; require records that demonstrate compliance; and give proportionate audit, suspension and termination rights. In a regulated supply chain, this might include permits, quality documentation, tax records, import documents, safety files and subcontractor controls.

Termination provisions should differentiate between convenience, curable material breach, insolvency-related events where enforceable, repeated breach, illegal performance, extended force majeure and a regulatory prohibition. State the notice, cure period, transition obligation, return of property, final invoice, data handover, warranty survival, confidentiality and dispute process. If termination triggers a buyout, inventory repurchase or repayment, spell out the valuation formula and documents required. Section 75 recognises a right to compensation where a party rightfully rescinds a contract, but a contract should not leave the mechanics of separation to an argument after the relationship has broken down. [1]

Treat tax, foreign exchange and import documentation as deal terms

Tax and payment compliance are not back-office details. They can determine whether a net payment is possible and whether an invoice can be paid without a dispute. Define whether the price includes VAT, supplementary duty or other indirect tax; which party issues a compliant invoice; who must provide tax identification information; and what happens if the law requires withholding.

The Value Added Tax and Supplementary Duty Act, 2012 provides, among other things, that a person supplying goods or services against an agreement, tender or work order is eligible for VAT registration, and section 49 contains withholding rules for supplies to a withholding entity. It also ties payment by a withholding entity to registration or enlistment and issuance of the stipulated tax invoice, subject to the statutory wording. The Income Tax Act, 2023 contains the current statutory framework for tax deduction or collection from taxable payments to non-residents, and defines royalty broadly for the Act’s purposes. [5] [6]

The drafting point is to agree the commercial allocation without pretending that the contract overrides tax law. State who bears a tax economically, who deducts and remits any amount required by law, whether a gross-up applies, which certificates or proof of deposit must be delivered, and how the parties cooperate if the classification changes. Do not hard-code a tax rate into a long-term agreement unless the deal requires it and the text includes a law-change mechanism. Rates, exemptions, prescribed forms and withholding practice can change.

Cross-border payments, imports and remittances

A cross-border contract needs a payment clause that works through an authorised dealer (AD) bank and its documentary requirements. Bangladesh Bank’s Guidelines for Foreign Exchange Transactions (GFET), 2018 include chapters for imports, letters of credit and remittances against imports, foreign investment and commercial remittances other than imports. The guidelines should be read with applicable Bangladesh Bank circulars and the bank’s current compliance requirements. [7]

For imports, the GFET states that an AD may not issue, advise, notify or confirm an LC, authority to purchase, guarantee or similar undertaking involving the relevant foreign-currency or non-resident payment except in accordance with the prescribed instructions. It says import LCs and similar undertakings must be documentary credits and specifies document expectations, while advance remittance rules require the purchase contract to call for advance payment and ordinarily require a repayment guarantee acceptable to the AD, subject to the stated exceptions and conditions. It also addresses IMP applications and the submission of the authenticated bill of entry within the stated period. [8]

Build these realities into the contract. Align payment milestones with the documents a bank will expect, such as signed invoices, certificates of origin, transport documents, import forms, customs evidence or a repayment guarantee. Do not promise an advance payment, a revolving facility or a particular remittance route before confirming that the bank can process it under the current rules. The Bangladesh Trade Portal’s official import procedure guidance also states that import transactions through a bank generally require an LCA form, and lists the documents required with an LCA form for opening an LC; its limits and exceptions are policy-sensitive and should be checked at the time of transaction. [9]

For foreign royalties, technical-knowledge, technical-assistance and franchise payments, GFET chapter 10 refers to the Bangladesh Investment Development Authority Act, 2016 and says that private-sector industrial enterprises within the specified scope require BIDA approval for the described remittances. It also directs ADs to review the applicable BIDA approval, tax payment and genuineness of documents before remittance. The same chapter addresses certain training, consultancy and software support remittances. Do not assume that a contractual payment label determines the regulatory or tax treatment; confirm the actual service, counterparty, recipient, approval path and documents before execution. [10]

Complete Bangladesh formalities and counterparty diligence

Stamping and registration

The Stamp Act, 1899 provides that chargeable instruments executed in Bangladesh must be stamped before or at execution. An instrument chargeable with duty and executed outside Bangladesh may be stamped within three months after first receipt in Bangladesh, subject to the Act. Stamping analysis depends on the instrument and transaction, so do not treat a scanned signature process as a reason to postpone it. [11]

Some transactions also require registration. Under the Registration Act, 1908, documents creating, declaring, assigning, limiting or extinguishing an interest in immovable property and leases from year to year, for a term exceeding one year, or reserving yearly rent are among the documents that must be registered. Section 49 states that a document required to be registered cannot operate to create, declare, assign, limit or extinguish the specified interest unless registered. A lease, land right, security document or property-linked commercial arrangement should therefore be reviewed for the proper stamping and registration path before parties rely on it. [12]

Evidence and records

Contract administration is part of risk allocation. Retain the executed agreement, schedules, approving resolutions, delegated authority, purchase orders, acceptance records, invoices, payment evidence, delivery documents, change orders, notices and compliance records in an accessible repository. Set the formal notice addresses and methods in the contract, but also identify working-level contacts and escalation owners. A party may have a strong claim on paper yet struggle to establish the relevant chronology if acceptance, changes and notices were never recorded.

Use contract models that match the transaction

A sale or supply agreement should focus on specification, forecast, price, delivery, title and risk, inspection, warranty, rejection, recall, payment and import documents. The Sale of Goods Act’s implied-title, description, quality and sample provisions make it particularly important to state when any contractual warranty is additional to, or intended to address, the statutory framework. [3]

A master services agreement should contain the durable risk allocation: confidentiality, ownership, liability, compliance, audit, dispute resolution and termination. Each statement of work then describes measurable scope, price, milestones, acceptance, dependencies and change control. This model reduces the need to renegotiate foundational terms for each work order, while preserving a clear record of what was purchased.

A software, SaaS or data agreement should distinguish a licence from a service, set out the permitted users and usage restrictions, define support and uptime measures, allocate responsibility for customer data and integrations, and include a practical exit plan. If the service is hosted or supported outside Bangladesh, payment, tax, data and regulatory analysis should be considered early rather than after the commercial terms are fixed.

A distribution, franchise or brand licence agreement needs a brand-use regime, quality controls, territory or channel limits, reporting, audit, marketing approval, intellectual-property protection, stock and customer-data treatment on exit, and a competition-law check for market-facing restrictions. A shareholder or joint-venture agreement needs a separate corporate-governance map: funding, reserved matters, appointment rights, transfer restrictions, information rights, deadlock process and exit mechanics should be consistent with the entity’s constitutional documents and applicable approvals.

Make dispute provisions operational

Choose dispute resolution after identifying the likely remedy and asset location, not by copying the last contract. A court clause should identify jurisdiction and service mechanics. An arbitration clause should identify the seat, rules or administering institution, number and method of appointment of arbitrators, language, scope, confidentiality where desired, interim-relief position and governing law. Avoid confusing the seat of arbitration with the hearing venue, or the arbitration law with the substantive law governing the contract.

The Arbitration Act, 2001 provides that an arbitration agreement may be an arbitration clause in a contract or a separate agreement. It must be in writing; the statutory definition includes a signed document and specified exchanges including letters, telex, telegram, fax and email. The Act also provides for interim protective orders, domestic award enforcement and the recognition and enforcement framework for foreign awards, subject to the Act’s requirements. [13]

This makes precision valuable. Use one coherent written clause, identify the documents incorporated into it, and retain the executed or exchanged record. For high-value or cross-border arrangements, consider in advance whether urgent preservation of goods, assets, evidence or confidentiality could be needed, and make sure the contract does not inadvertently narrow access to available interim measures.

A practical pre-signing checklist

Use this as a working checklist, not as a substitute for transaction-specific review:

• Confirm the legal identity, authority, approval route and notice details of every contracting party; obtain appropriate RJSC records and internal approvals where relevant.
• Define the deal in schedules: scope, technical specifications, milestone dates, acceptance tests, dependencies, change-control process and record owner.
• Reconcile the commercial documents. The master agreement, order, statement of work, invoice, shipping documents and bank-facing documents should not allocate price, quantity, delivery or risk differently.
• State currency, invoicing, payment date, tax treatment, required withholding evidence, price-adjustment formula, permitted set-off and credit support.
• For goods, specify delivery point, risk and title transfer, inspection, rejection, insurance, Incoterms® rule if used and documentary requirements.
• For services and technology, allocate ownership, licence scope, confidentiality, security, subcontracting, service levels, audit rights and exit/data-return obligations.
• Test indemnities, liability caps, insurance, guarantees, retention and termination payments together against realistic loss scenarios.
• Review exclusivity, territory, tied-selling, refusal-to-deal and resale-price provisions for competition risk.
• Confirm stamping, registration, tax, foreign-exchange, import, sectoral and bank requirements before signing or performance; recheck current circulars, forms and regulator practice.
• Choose governing law and a dispute clause that names the seat or court, procedure, notice mechanics and interim-relief position.

Frequently asked questions

Contact TRW

TRW can help businesses structure, draft and review Bangladesh-facing commercial agreements, including supply, services, technology, distribution, licensing, project and cross-border payment arrangements. To start a discussion, contact TRW with a high-level description of the transaction, parties, sector and intended timetable. Please do not send confidential documents, personal data or commercially sensitive information until an appropriate engagement and secure sharing process has been agreed.