Standard Form of Contract and Public Service Delivery
Introduction The legal systems have their roots in the past rules but now laws are framed keeping in mind the growing needs that necessitate the framing of such law. This evolution of law has provided a remedy to tackle the problems but at the same time has also led to the utterance of a dilemma in the existing… Read More »
The legal systems have their roots in the past rules but now laws are framed keeping in mind the growing needs that necessitate the framing of such law. This evolution of law has provided a remedy to tackle the problems but at the same time has also led to the utterance of a dilemma in the existing legal system. Visualizing within the ambit of a standard form of contract, the same problem is raised as a corollary to this evolution and framing of the laws.
In the present scenario, where the standard form of contracts has become an inevitable part of contracts, on the other hand, difficulties with regard to the same are increasing. Such are the problems connected with the Standard Form of Contracts(hereinafter referred to as ‘SFC’), where it has become difficult even for the courts to come at the rescue to the weaker party of such a contract.
In general, where a consumer like you and me enters into various contracts every day or so, we generally sign the SFC and do not read all the terms and conditions mentioned in such a contract. Even if we do so, we are not in a position to understand it from word to word, so it becomes difficult to protect the weaker party to a contract i.e. consumer. But it becomes of paramount importance to solve such problems wisely for better evolution or framing of the laws.
What is a Standard Form of Contracts?
A Standard Form of Contracts is a standardized contract where the terms and conditions are pre-decided by the drafting party. It disables the signing party to change the clauses made in the contract as per its wishes and hence gives no bargaining power to such a party. This puts the signing party in a weaker position, as it has no say and has to still sign such a contract to enjoy the benefits of the services, as it does not affect the drafting party, it is also known as “take it or leave it” contract.
Thus the fundamental right to negotiate is affected and is in dispute with this type of arrangement. Popularly this type of contract is known as adhesion or boilerplate kind of contract. Most common instances of this type of contract are, signing up for your e-mail, social networking sites, insurance contracts, each time a person travels by air, bus or train, buys a car, takes clothes to a dry cleaner, buys household goods, or even in some cases, takes the lease of a house or flat, a standard form contract, devised by the supplier, will be provided which the individual must either accept in whole or, go without.
Therefore, it would be more rational to regard the relationship which arises not as one of contract but as one of status, as the contracting party has the status of a consumer and no rights as a contracting party.
Legality of Standard form of Contracts
SFC is not differentiated from general contracts under the Indian Contract system as they both are governed by the same set of laws. But is the law justified in doing so is the bone of contention.
Major points in dispute are with regard to:
Sec 13 of the Indian Contract Act mentions that two or more persons are said to consent when they agree upon the same thing in the same sense. Also, sec 14 highlights the importance of free consent to make a contract valid. But both the conditions are not being satisfied to a great extent and hence SFC shouldn’t be treated as same as that of general contracts.
Unfair forms of contract
The terms of SFC are unfair as they provide no room for bargaining and thus both the parties are not at par. The essence of contractual terms is not satisfied and hence such contracts are not to be treated equally to general contracts.
To enjoy the benefits of the services being rendered, the consumer has no other option but to accept the contracts as they are. Their option is either to accept the unreasonableness or unfair terms or forego the services forever. With a view to having the services of the goods, the party enters into a contract with unreasonable or unfair terms contained therein and he would be left with no option but to sign the contract.
Constitutionality of Standard form of Contracts
The basic and the most important aim of the state is to give protection to its citizens. But it too sometimes fails to do so and on the other hand, continues to exploit its citizens by making them sign SFC to gain access to its services and thereby escaping from its liability.
There are certain public services delivered which clearly highlights that all the liabilities incurring hereafter are to be borne by the consumer availing such services and the state is not bound in any sense.
The protection granted under Art 14 is also given against the action of the state. Several courts have ruled in this regard saying that the action of the state in a contractual field also must be fair and reasonable. The need for article 14 of the Constitution should extend even in the matters of contractual matters for regulating the conduct of the state activity.
If the applicability of article 14 to all executive actions of the state is settled, the state cannot exercise its unrestricted power by requirements of article 14 in contractual matters and claim to be governed therein only by privacy laws which will flow from the terms of the contract.
Rule of laws won’t permit the exclusion of article 14 for state actions in the contractual field. And especially in modern times, where the public is so dependent on the state for its services, it is inevitable to put a check on the state while entering into such contracts.
The SFC is the pre-printed contract that has fixed terms and conditions and provides no scope for bargaining to the party signing it or the one trying to avail the benefits of the services.
An essential ingredient of any contract is that the acceptance received must be free but the case is not the same in SFC contacts because if not directly but indirectly it pressurizes the consumer as it takes it or leaves the contract. The consumers have no other option but to accept such contracts and hence are exploited.
As the general contracts and SFC are not differentiated in the law of contracts, therefore the courts too considered both to be the same. However, in recent times, with the changing trends in the legal system, the courts had found different kinds of tools to protect the basic right of the weaker section but to no rescue.
The right to bargain or negotiate is the most basic fundamental right of an individual which is not explicitly mentioned in the constitution but is carved in the constitution and hence steps in this direction are must to do economic justice, avoid hardship to consumers and for certainty and symmetry of the law.