STANDARD FORM OF CONTRACTS

INTRODUCTION

A standard form of contract is one in which one of the parties establishes the contract’s terms and conditions, and the other side has very little or no opportunity to negotiate more favourable terms, leaving them in a “take it or leave it” situation. These contracts are also known as “boilerplate contracts”, “contracts of adhesion”, or “take it or leave it”. These types of contracts are not unlawful and can be enforceable by the courts. Generally, these types of contracts are made by the companies because they require the same terms and conditions with many clients. Thus, making a standard of contracts saves their money and time. But there may be chances of exploitation, because the one who signs this contract may not read the terms and conditions as it is too lengthy and they have no chance to discuss and change the terms or conditions in their favour. 

THE LEGAL STATUS OF STANDARD FORM OF CONTRACTS

A standard form of contract is also governed by the provisions under Indian Contract Act[1]. Indian Contract system does not provide any distinction between a standard form of contract and a normal contract. These types of contracts have grown more prevalent as a result of significant industrial expansion, and they are being carried out in huge numbers. This led to a demand for the creation of full-fledged regulations on standard form contracts to protect the interests of the weaker party.[2]

ESSENTIALS OF STANDARD FORM OF CONTRACTS

  • A contractual document should be signed
  • This sign should not be obtained by fraud, coercion, or misrepresentation
  • The person who made contract terms and conditions should notify the other about them.
  • The notice must be made before or during the contract but not after signing the contract
  • The terms and conditions mentioned in the contract should be reasonable in nature

Advantages:

  • A standard form of the contract once made can be useful for multiple purposes. No need to make similar contracts again and again. So, reduces contract coset.
  • Saves time
  • As the terms and conditions of these contracts are hardly changed, people will be familiar with them.

Disadvantages:

  • The terms and conditions of these contracts are framed by one party and the other party has no opportunity to discuss and alter the same.
  • One party has major scope for benefits compared to other
  • These contracts contain complex legal terminology
  • Lengthy documents, it consumes a lot of time to read the entire contract document.
WHY IS A STANDARD FORM OF CONTRACT BEING ACCEPTED BY PEOPLE?
  • Rarely read by the people

A standard form of contract is too lengthy in nature, it takes a lot of time to read and as there is no chance to discuss and alter these terms and conditions, there will be no greater profit by reading it. This discourages reading such a huge document which takes a lot of time. Another disadvantage is that these contracts contain complex legal terminology which cannot be understood by the layman.[3]

  • No access to total terms and conditions without signing

There are some instances that one will get access to only some terms and conditions. They have to sign the contract  to get access to entire terms and conditions. However, these contracts are not enforceable by law as all the terms should be noticed before or during the contract. 

  • Presence of some unimportant things

The price and quality are usually the most significant elements for purchasers of an item, and they are often acknowledged before the signing of the contract. Terms that relate to things with exceptionally low chances of happening or that refer to specific legislation or lawful regulations will not be considered as significant to the one signing the contract. This decreases the probability of such phrases being read, as well as they are being overlooked even if they are read. 

  • Situations demand to sign

There may be various social pressure to finish the deal at that moment. If the purchaser goes through the document or asks the conditions, the other party may state that they are “just something the lawyers want us to do” or reading them amounts to time waste. When a buyer is at the front of a queue, there is extra pressure to sign quickly. (such as, at a ticket counter). 

CASE LAWS

In Parker v. South Eastern Railway Co. Case[4], the plaintiff kept his luggage bag in the railway clock room and collected a ticket in return. On the front side of the ticket, there is a statement printed with bold letters stating see back. On the backside of the ticket, it is mentioned that “the company will not be responsible for any package exceeding the value of ₤ 10” and the same notice is provided inside the clock room too. Unfortunately, the plaintiff’s luggage bag was lost and he filed a suit concerning compensation for the entire worth of his luggage bag which is more than 10 dollars. The exemption provision was used by the firm. The plaintiff contended that although he knows that there was something written on the provided ticket, he didn’t pay attention to the information provided in it as he thought it was just a receipt for the amount paid by him. The honourable court, in this case, held that the railway authorities are not liable to pay damages as a reasonable notice provided by them. 

In Olley v. Marlborough Court Hotel case[5], the plaintiff booked a room to stay for a week with his wife in the defendant’s hotel. There was a notice provided in the hotel room mentioning that the hotel management is not responsible for any valuables lost. Because of the negligent attitude on the part of hospital staff, the belongings of the plaintiff were lost and they claimed damages concerning the same. The defendant contended that they provided notice in the hotel room so that they cannot be held liable. The court in this case found that the notice is provided after the contract is signed. The defendant should notify the same before or during establishing the contract and held that the hotel management was liable to pay damages. 

CONCLUSION

Hence, we can conclude that standard Form Contracts are ones in which the contractual document contains printed terms and conditions that limit or eliminate the chances of discussion between the parties under the contract. This provides a unique chance for one of the parties to obtain the benefit of the individual’s weakness by imposing certain terms on the weaker party that seems like private law and this might shield the company from any liability under the contract. 

As the legal system is progressed, courts have created a variety of procedures to safeguard the rights of the weaker party by using natural law principles and by using several cases as precedents. As a result of development and industrialization, these types of contracts are made in such large numbers daily and a lengthy procedure will not be effective. The best way to solve this problem is to make people aware of the rule such that the parties signing the contracts will read the clauses and try to comprehend the terms, and ask queries about specific parts of the contract which they are unable to acknowledge.

Author(s) Name: Kethana Tamminaina (Student, Damodaram Sanjivayya National Law University, Visakhapatnam)

References:

[1] Indian Contract Act 1872

[2] H.B. Sales, ‘Standard form of contracts’ (1953) 16(3) The Modern Law Review < www.jstor.org/stable/1091838>  accessed 29 July 2021

[3] David Slawson, ‘Standard Form Contracts and Democratic Control of Lawmaking Power’ (1971) 84(3) Harvard Law Review < www.jstor.org/stable/1339552> accessed 29 July 2021

[4] [1877] 2 CPD 416

[5] [1949] 1 KB 532

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