Standard Form Contracts- The Hegemony of MNC’S

Reading time : 12 minutes

Abstract

Standard form contracts have carved out a niche for them in this superfast world. The paucity of time as well as the humongous number of contracts, a multi- national company has to enter into on a daily basis, has led to the popularity of standard form contracts. The other party has the option either to take them or leave them. Once accepted, they leave no scope of bargain and no scope to sue for the plaintiff. These contracts have acted as the saviors for the service providers and on the other hand taken toll of the consumers. Several innocent people get deprived of their rights to undone the wrong caused to them in lieu of these boiler plate contracts. The e-contracts have also evolved as the modern day standard form contracts, thus increasing the need for more clear laws when it comes to these contracts. Several judgments have been passed by the Indian as well as English court prescribing modes and methods that such a contract should follow. Usage of red ink, an arrow indicating to turn backwards etc. have been laid down by the court. Also a distinction between an e-receipt and a contractual document has been made by the court leaving little scope for ambiguity. Some lacunae are still there and need to be examined.

Introduction

According to Section 2(e) of the Indian contract act 1872, every promise, forming the consideration for each other is an agreement. And that agreement when enforceable by law is called contract. Standard form contracts are a type of such contracts. The consent generally is of two types- express and implied. The consent here is mostly implied. The promisee also gives express consent like when he signs a policy bond. They are time saving but the problem has arisen out of the modern “large scale and widespread practice” of concluding contracts in standardized form. This standardization though useful has led to a lot of problem to the common people who not even take the initiative to read the terms of the contract and unknowingly accept the conditions. Sometimes a term is added later and the weaker part feels deprived of justice. The main aim of law is but administration of justice. Therefore to avoid any injustice, we have come up with certain protective devices to help the weaker part.

Protective Devices

There are five protective devices –

  1. The notice should be contemporaneous in nature

The notice of the terms of contract should be given before or at the time of contract. The notice given after the conclusion of the contract is not acceptable.

Illustration: A booked a car for going to his office. When he boarded the car, the driver told him, I will take one more passenger on the way as this is a shared cab. This was not mentioned when he entered into the contract. The driver could not take the second passenger.

Something similar was held in the case Thornton v. Shoe Lane Parking.[1] The notice of owners risk was put up at the wall inside the parking and no mention of this clause was mentioned on the ticket which acted as the contract. Also nothing was done to attract the other party’s attention towards it. As the clause was not told to him before or at the time of contract, he was not bound by it.

2. Theory of fundamental breach

The stronger party though has adopted all the tactics to inform the weaker one of the terms of contract, he cannot escape liability if he conducts a breach fundamental to the subject matter of the contract. Every contract contains a core without which the contract is of no value. For example, I bought an A.C under a standard form contracts specifically online and instead of a.c, I got something else, then I have the right to sue.

  • Notice shall be contemporaneous in nature

Imagine you bought something and later you find some fault with the thing. You were later told about some weird exemption clause that you were not told before. This would cause a lot of problem to the innocent consumer. To cope up with this problem, the law states that the notice should be contemporaneous. In a case where a couple checked into a hotel room, they found a notice in the room itself stating that the proprietors would not be held liable for the loss of goods if not handed to the manager for safe custody. This notice was found non-contemporaneous. The contract was entered when they booked the room and the clause should be informed to them beforehand. But such was not the case and the plaintiff got the relief.

  • Contra Prefentum

Where a contract contains two terms, a wider and a narrower, then the limited construction would be preferred, this is the rule of contra prefentum.

  • Reasonable notice

It is the duty of the person drafting the document to give notice to the acceptor regarding the terms and conditions. If no such notice is given then the other party is not bound by the contract. It was held in the English case of Henderson v. Stevenson.[2]

These are some of the remedies that come to the rescue of the weaker part in case of standard form contracts. But E-contracts are also standard form contracts, are the remedies same for them? If not then what are the remedies in those cases where a consumer is exploited by the corporate world under the garb of standard form e-contracts? To understand this let us first understand what e-contracts are and how they are take it or leave it contracts.

E-Contracts

E-contracts or electronic contracts in a layman’s language are the contracts entered into by us and the companies via an electronic medium like through e-commerce websites. These contracts are of three types depending on the way we enter into them-

  1. Click wrap agreements

We all have play store on our mobile phones and we love to download apps over it. Whenever we click on install, a pop up emerges. There is a whole list of instructions, terms and conditions. After that extensive list, there is an ‘I Agree’ button. As soon as we choose that option, we automatically enter into a contract. This is also a leading example of boiler plate contracts where we can either accept the terms or leave it. But how many of us read those terms thoroughly? And even if we read, how many of us are able to comprehend it to the fullest?  In a recent discussion, when a plea was filed against whatsapp’s new policy in the Delhi High Court, the honorable court aptly brought out this crucial issue in the public domain. It said we accept numerous such things whether knowingly or unknowingly with these parties[3] .We are not even aware how much of our data is being shared and whether we can held those  data thieves liable or not.

  • Browse wrap agreements

Whenever we browse through a website we automatically accept some terms of the site just through browsing. Though the terms are not so biased and dominating but still there seems hegemony as the customers ‘accept’ the contract just by browsing through. Section 4 of the Indian contract act which illustrates offer and acceptance do not apply here.

  • Shrink wrap agreements

As the name suggests, these agreements are entered into when we buy a product. When we unpack the product, we get a paper stating terms and conditions, these are shrink wrap agreements. Agreement is imprinted on the software box, CD-ROM case, or other materials included inside the package. Buyers are supposed to return the software package to the retailer if they elect not to abide by the agreement. Courts are similarly concerned about buyers actually receiving notice of the sale, consciously agreeing to the sale, and conditioning the sale on acceptance of the license.

Difference between contractual documents and receipt

Very often during parking our car in the parking zone, we get a receipt. We slip it into our pocket and never pay heed to it. Similarly when we take something on rent, we get a receipt. Are all these paper contractual documents?  A paper is said to be a contractual document when it contains some terms and conditions and the other party should have the knowledge of it. On the other hand, a document with no such writings is are voucher or a receipt. An English case law Chapelton v. Barry UDC[4]explains the difference between a contractual document and a receipt. So, every time we are not entering into a contract whenever we perform our daily activities. A lot of paper that we receive on a daily basis while shopping etc. is a mere paper and the customer need not pay attention to it.

The problem

The main problem with standard form contracts whether electronic or not is lack of awareness. The general public is not aware of their duties and rights and just accepts the terms and conditions. In this fast moving world no one has the time to read these exhaustive clauses and if one do want to read them, they find the language complicated to read. After all not all are avid readers. One more problem that India faces is the problem of illiteracy. Those who do not know to read, often end up entering into these contracts submissively.

Conclusion

Though the court come to the rescue when the terms are so as to oppose the public policy. Also in case of breach of contract section 73 and 74 of the Indian contract act comes to the rescue. Section 73 talks about damages when there is a breach of cony\tract. In section 74 an amount is already stipulated as the way of liquidated damages whenever there is a breach of contact. But only there are specific remedies in case of breach. What if there is no breach but the weaker suffers an injury? At times the damages are not quantifiable and the plaintiff does not get the relief. We can say that we have the consumer protection acts as well as the cyber laws but still there is a loophole when it comes to standard form contracts. The multinational companies are the dominant players and the whole market is manipulated by them. We might feel that we are not being injured but still somewhere we are being deprived of our rights. Awareness should be spread among people as much as possible. We have advertisements telling us to follow road safety rules, to avoid fraud calls etc. On the same lines we can have an advertisement warning us and advising us to read the terms and conditions when we enter into a standard form contract. Special attention is needed towards e-contracts. Not only the companies have the duty to inform us adequately about the terms and conditions be it by highlighting them or by following some other procedure, we also have a duty to be diligent and read the terms. The courts are always to our rescue but it would be great if we can avoid such circumstances. We have the protective devices but as rightly said “Prevention is better than cure.”


[1] [1971] 1 All ER 686

[2] 1875 32 (LT) 709 (HL)

[3] Available at- https://timesofindia.indiatimes.com/city/delhi/accepting-whatsapp-terms-voluntary-dont-use-if-you-feel-data-is-at-risk-delhi-hc/articleshow/80338419.cms

[4] (1940)1 KB 532 (CA)

Author: Anushka Singhal

Editor: Kanishka VaishSenior Editor, LexLife India.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s