Consider an e-commerce retailer engaging a courier franchisee to carry its consignments across India. The contract they sign is not an ordinary services agreement: the courier is a "common carrier" under the Carriage by Road Act 2007, a statute that caps the carrier's liability, prescribes the consignment paperwork, presumes fault against the carrier and shuts out claims notified late. Around that core sit the Indian Contract Act 1872 rules on lien and indemnity, the MSMED Act 2006 regime on delayed payments, and stamp formalities that decide whether the document can be used in court at all. Each layer leaves specific marks on the draft.
Courier Agencies Are Common Carriers Under the Carriage by Road Act 2007
The Carriage by Road Act 2007, in force since 1 March 2011 in place of the Carriers Act 1865, applies squarely to courier businesses. Section 2(a) defines a "common carrier" as a person engaged in the business of collecting, storing, forwarding or distributing goods to be carried by goods carriages under a goods receipt, or transporting goods for hire by motorised transport on road, for all persons undiscriminatingly, and then puts the point beyond doubt:
...includes a goods booking company, contractor, agent, broker and courier agency engaged in the door-to-door transportation of documents, goods or articles.
Two registration points follow. Under Section 3, a common carrier must register with the designated registering authority within 90 days of commencing business and hold a certificate of registration. The service agreement itself, by contrast, does not require registration under any statute. A well-drafted agreement recites the courier's current registration number, so that the client is not unknowingly contracting with an unregistered carrier.
The Liability Scheme: A Statutory Cap, a Reversed Burden and a 180-Day Bar
Ten times the freight, unless a higher risk rate is agreed
Section 10 fixes the ceiling of the carrier's liability for loss of or damage to a consignment:
The liability of the common carrier for loss of, or damage to any consignment, shall be limited to such amount as may be prescribed having regard to the value, freight and nature of goods, documents or articles of the consignment, unless the consignor or any person duly authorized in that behalf have expressly undertaken to pay higher risk rate fixed by the common carrier under section 11.
The prescribed cap is ten times the freight paid or payable. A consignor who wants fuller cover must expressly undertake to pay a higher risk rate under Section 11, which permits the carrier to charge more and correspondingly increase its liability, provided a written or printed notice of the higher rate is displayed prominently at the carrier's premises. Compliance guidance indicates that the notice should appear in English and in the vernacular language of the state where the business is conducted.
The goods forwarding note and the goods receipt
The Act's documentation is not clerical; the liability scheme hangs off it. Under Section 8, every consignor must execute a goods forwarding note declaring the value and nature of the goods. The consignor is responsible for the correctness of those particulars and must indemnify the carrier for any loss suffered because the note is incomplete or incorrect. Under Section 9, the carrier must issue a goods receipt in triplicate, the original going to the consignor, and the receipt must include an undertaking by the carrier about its liability under Section 10 or Section 11.
Presumed liability, with five statutory exceptions
Section 17 makes the carrier responsible for "the loss, destruction, damage or deterioration in transit or non-delivery of any consignment entrusted to him for carriage, arising from any cause" except five: act of God; act of war or public enemy; riots and civil commotion; arrest, restraint or seizure under legal process; and an order, restriction or prohibition imposed by the Central or a State Government. Even within those exceptions the carrier is not relieved if it could have avoided the loss through the exercise of due diligence and care.
Section 12(2) then reverses the ordinary burden of proof. In a suit against the carrier for loss, damage or non-delivery:
...it shall not be necessary for the plaintiff to prove that such loss, damage or non-delivery was owing to the negligence or criminal act of the common carrier, or any of his servants or agents.
Liability is, in effect, presumed unless the carrier proves the absence of negligence or fault.
Delay, and the 180-day notice bar
For delay, Section 10(2) limits the carrier's liability, including consequential loss or damage, to the amount of the freight charges, so long as the delay falls within the period mutually agreed between consignor and carrier and specifically provided in the goods forwarding note, and the consignment was in the carrier's charge when the loss, damage or delay occurred. Beyond the agreed period, compensation is payable under Section 11, unless the carrier can prove absence of fault or negligence.
Section 16 imposes a procedural bar with real teeth: no suit or other legal proceeding may be instituted against a common carrier for loss of or damage to a consignment unless written notice of the loss or damage has been served on the carrier before the proceeding is instituted, and within 180 days from the date of booking of the consignment. The agreement's claims machinery should be built around that deadline.
The Courier's Lien: Particular, Not General
The Contract Act recognises two liens. Under Section 170, a bailee who has rendered a service involving the exercise of labour or skill in respect of the goods bailed has, "in the absence of a contract to the contrary", a right to retain the goods until he receives due remuneration for those services. The statutory illustrations draw the line: a jeweller who cuts and polishes a rough diamond may hold the stone until paid for the work, but a tailor who has promised three months' credit cannot later retain the coat for payment. A courier, which exercises labour and skill in transporting and handling consignments, is a bailee with a particular lien over the goods until paid for the carriage, unless the contract says otherwise.
Section 171 confers the wider general lien, a right to hold goods bailed as security for any general balance of account, only on bankers, factors, wharfingers, attorneys of a High Court and policy brokers. Couriers and transport operators are not on the list. A courier can therefore retain goods only for unpaid charges relating to those very services, never as security for unrelated debts.
Both provisions yield to contract. Parties may waive the lien entirely, restrict it to specific amounts or periods, or attach conditions to its exercise. The case law surveyed in the commentary on liens confirms the point: in M. Shanthi v. Bank of Baroda (2017) the Orissa High Court held that the banker's lien under Section 171 applies unless there is an express contract excluding it, and Vijay Kumar v. Jullundur Body Builders holds that the statutory lien can be overridden by a specific contract between the parties.
Even where retained, the lien is not absolute. The bailee may hold the goods only until the specific remuneration for the services is paid, must exercise the lien in good faith rather than as a coercive lever for unrelated demands, and loses it on voluntarily relinquishing possession.
The drafting decision is binary. If the courier's lien is retained, confine it: the carrier may retain goods for unpaid freight charges only, not for other debts, for a defined period and with written notice to the consignor before any sale. If commercial fluidity matters more, waive it expressly, accepting that the carrier then bears the credit risk of unpaid invoices while goods keep moving.
Indemnities Under Sections 124 and 125 of the Contract Act
Section 124 defines a contract of indemnity as one "by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or the conduct of any other person." Section 125 gives the indemnity holder the right to recover damages he is compelled to pay within the scope of the indemnity, the costs of proceedings, and sums paid under a compromise of such proceedings.
Two interpretive tendencies matter to drafters. First, unless specifically excluded, indemnities have been read to reach consequential, indirect and remote losses as well as third-party claims, with ambiguity construed in favour of the indemnity holder. Second, the statute is not exhaustive: in Gajanan Moreshwar Parelkar v. Moreshwar Madan Mantri, the court held that Sections 124 and 125 do not displace common law principles, and that an indemnity holder may call on the indemnifier before actually suffering the loss, once the liability incurred is absolute.
The statutory trigger also limits the promise. Section 124 covers loss caused by the conduct of the promisor or of any other person; losses caused by the claimant's own conduct, such as a packaging failure never disclosed to the carrier, fall outside the indemnity.
Drafting follows from the doctrine:
- Use broad connectors ("arising out of", "including but not limited to") where wide cover is intended; courts read narrow connectors such as "as a result of" restrictively.
- State expressly that the indemnifier must defend the indemnified party against third-party claims.
- Exclude wilful misconduct, fraud and gross negligence from any indemnity cap unless they are genuinely meant to be covered.
- Condition the indemnity on timely notice of claims, cooperation in the defence and, for the indemnifier, control of defence and settlement.
- Cap the indemnity by reference to contract value, and consider a basket or deductible, for instance no claims below ₹50,000.
In a courier agreement the indemnities should run both ways: the client indemnifies the courier against third-party claims arising from undeclared goods or prohibited items, and the courier indemnifies the client for loss or damage arising out of the courier's negligence or breach, not merely "during transit". The courier's indemnity is sensibly capped at the Section 10 liability limit, with written notice required within the same 180-day window the statute imposes.
Interest on Delayed Payments: Agreed Rates and the MSMED Override
The Contract Act neither fixes nor caps interest for delayed payment. Parties may agree any rate, subject to the outer boundary that a rate so excessive as to be unconscionable risks unenforceability on public policy grounds under Section 23. In business-to-business practice, 12% per annum is widely used and has been upheld by courts as a reasonable commercial rate. The Interest Act 1978 is not the operative framework for delayed payments under commercial service agreements; the Contract Act and, where it applies, the MSMED Act govern.
The MSMED Act 2006 changes the analysis entirely where the supplier under the contract qualifies as a micro or small enterprise. Section 15 caps the credit period at 45 days from acceptance of the goods or services, or 15 days where no period is agreed. Section 16 then imposes compound interest at three times the Reserve Bank of India's bank rate, compounded monthly, on payments delayed beyond the due date. On the bank rate of 6.5% prevailing at the research date, that works out to 19.5% per annum. The statutory rate is non-waivable: a no-interest clause or a lower contractual rate cannot override it. Section 22 requires buyer companies with dues outstanding to MSME suppliers beyond the permitted period to disclose them in their annual financial statements, and Section 23 of the MSMED Act makes the interest non-deductible as a business expense for income tax purposes, which sharpens the real cost of delay.
The drafting consequence: state the payment term plainly ("net 30 days from invoice date"), fix the contractual rate for non-MSME scenarios, and acknowledge that if the supplier is an MSME the statutory regime applies automatically. Whether a party in fact qualifies as an MSME turns on registration and periodically revised turnover thresholds, and should be confirmed before the interest clause is settled.
Formalities: Writing, Stamping and Execution
No statute prescribes mandatory clauses for a courier or other service agreement. Validity turns on the ordinary requirements of Section 10 of the Contract Act: free consent, parties competent to contract, lawful consideration and a lawful object. An oral agreement satisfying those elements would be valid, but proving it is another matter; commercial carriage terms belong in writing. In practice the agreement should identify the parties and their legal status, describe the services, frequency and delivery timelines, fix payment terms, and address liability, indemnity, termination, dispute resolution, confidentiality where needed, and force majeure.
On stamping, service agreements of this kind are not specifically enumerated as compulsorily stampable instruments in the Schedule to the Indian Stamp Act 1899, so the agreement can be executed on plain paper and remain valid. The catch is evidentiary: an instrument that is not duly stamped is inadmissible in evidence until the deficit duty and penalty are paid. The pragmatic course in Delhi is to execute on low-value stamp paper; stamp duty on commercial agreements there typically falls in the ₹100-500 range depending on classification, and ₹100-200 is generally treated as a sufficient precaution.
Delhi's stamp framework extends to electronic instruments, so an e-signed agreement may attract the same duty as its paper equivalent. Digital signatures are valid under the Information Technology Act 2000 and recognised in Delhi courts; where the agreement is executed electronically, recognised digital signature certificates should be used. A governing law and forum clause completes the framework: Indian law, with arbitration seated in Delhi, is the natural formulation for a Delhi-executed agreement.
Three practical verifications sit outside the four corners of the draft. The prescribed forms of the goods forwarding note and goods receipt under the 2007 Act's rules should be obtained from the Ministry of Road Transport and Highways to ensure full compliance. Stamp duty positions vary by state, so pan-India operations should not assume the Delhi analysis travels. And mandatory insurance and third-party liability arrangements are a separate exercise not covered by the framework above.
Practical Takeaways
- Build the statutory paperwork into the contract: a goods forwarding note template declaring the value and nature of goods, and goods receipts carrying the Section 10/11 liability undertaking.
- State the liability cap of ten times the freight; if higher cover is wanted, price a Section 11 higher risk rate and ensure the carrier displays the required notice.
- Agree delivery timelines in the goods forwarding note; within the agreed period, delay liability is capped at the freight charges.
- Mirror Section 16 in the claims clause: written notice of loss or damage within 180 days of booking, as a precondition to proceedings.
- Decide the lien question expressly: either a narrow particular lien for unpaid freight only, with notice before sale, or a clean waiver.
- Draft mutual indemnities with defined scope, exclusions for the claimant's own defaults, notice and cooperation conditions, and a cap aligned to the statutory liability limit.
- Fix payment terms and interest: 12% per annum is a defensible commercial rate, but if the supplier is an MSME, interest at three times the RBI bank rate, compounded monthly, applies regardless of the contract.
- Execute on low-value stamp paper for evidentiary safety, recite the courier's registration under the 2007 Act, and use recognised digital signature certificates for electronic execution.
Key Authorities
- Carriage by Road Act 2007, Sections 2(a), 3, 8-12, 16 and 17 — courier agencies are common carriers; liability capped at ten times the freight; goods forwarding note and goods receipt mandatory; liability presumed against the carrier; 180-day written notice before suit. Source
- Indian Contract Act 1872, Sections 170 and 171 — particular lien for bailees who exercise labour or skill; general lien confined to bankers, factors, wharfingers, High Court attorneys and policy brokers.
- M. Shanthi v. Bank of Baroda (2017) — the statutory lien applies unless an express contract excludes it. Source
- Vijay Kumar v. Jullundur Body Builders — a statutory lien can be overridden by a specific contract between the parties.
- Gajanan Moreshwar Parelkar v. Moreshwar Madan Mantri — Sections 124 and 125 are not exhaustive; an indemnity holder may enforce the indemnity before actual loss once the liability is absolute.
- Micro, Small and Medium Enterprises Development Act 2006, Sections 15, 16, 22 and 23 — 45-day outer credit period; non-waivable compound interest at three times the RBI bank rate; disclosure in financial statements; interest non-deductible for tax.
- Indian Stamp Act 1899 — instruments not duly stamped are inadmissible in evidence until the deficit duty and penalty are paid.
This analysis reflects the law as at June 2026. It is published for general information and does not constitute legal advice.