>> > that you pay a certain amount of money to get that stamp. >> So a contract isn't "official" unless it's on stamp paper? >> It sounds like a way for the guvmint to account for fee >> payment, and to extract money for "blessing" contracts >> and agreements of any kind. I can now see why it's a >> big deal to forge it. Thanks! > > Bingo! Stamp papers are a way for the government to earn money through > taxation of contracts / transactions. They ensure their revenue stream > by insisting that contracts are only legal and abiding when they are > typed up and signed on a stamp paper. There is, of course, no way for > the government to know the language of the contract (on stamp paper > stationary) that parties are entering into and whether that contract > is legit and enforceable. The government gets around this pesky little > detail by insisting that the government will only consider the > legitimacy of contracts typed up on stamp paper.
Well..more or less. Contracts are legal, valid and enforceable in every way, whether they are on stamp paper or the back of a napkin (or even oral, in most cases). A minority of contracts (land transfers are the most important example) need to be written to be valid (of course this depends on the jurisdiction - I am most familiar with England and India). The use of stamp paper is (typically) not a requirement for the *validity* of the contract. It is a requirement (as Thaths says) for the document to be used as evidence in court, or (sometimes) to be recognized by a third party. This is not a meaningless technical distinction. For example, it is common to charge stamp duty on transfers of shares, by requiring that the instrument of transfer be stamped paper. If you sell your shares in a company to someone, using a contract on unstamped paper, the sale is *still valid*. It will usually mean that the company will refuse to register the buyer as the new owner of the shares in *their* books, and will keep paying dividends to you - but the buyer *is* the new owner and you will be obligated to hold the dividends for him. It's the same thing in court - an unstamped contract may not be admissible as evidence (it usually will be, except in a few situations), but the effect of the contract is real enough - if you can prove that the transaction took place, without using the contract (very difficult for a number of reasons I won't go into), then court will enforce the contract. But yes, it is a tax on transactions by the government - big revenue earner too. The use of stamp duty is decreasing though - as I recall, only two things (under English law) are still subject to it - sales of land/immovable property, and sales of shares. B
