Indian Contract Act, 1872 is a legislation governing some contractual relationship among two or more parties, companies, government or individuals. This deals with all the aspects of the contract like its formation, indemnities, guarantees, performance and enforceability. The large number of contracts has been signed by the parties now-a-days with the growth of business in the current business environment and the relevance of Contract Act has grown manifold because of this.
As a consumer we generally enter in lots of contracts every day. For example each time we purchase something online or book a flight etc, a person enter into a contract. Terms and conditions of such contract reflect the rights and obligations of each party entering into the contract. In industrial society, industries enter into a large number of contracts with individuals, and such contracts are in standard form, it is difficult for large scale organizations which enter into innumerable contract with individuals so it is very difficult to draft a new and separate contract with each individual. In standardized form of contracts, a single will is exclusively pre-dominant, acting as a unilateral will, which dictates its terms not to an individual but to an indeterminate collectivity.
In standard form of contact terms and conditions are formed by one party and accepted by other party on take it or leave it basis. Generally, main favorable terms of big party are printed in large fonts and other qualifications are buried in small print. The other party’s participation is mere adherence and often unknowing. The contract document mainly drafted unilaterally and insisted upon the powerful enterprises. The signing of contract does not represent that the individual is agreed with the terms as it generally creates the fiction that the individual has agreed upon.
The main problems with these contracts are that, it does not comes out with discussion and negotiation , these contracts turn out to be a case of the big business enterprises legislating in a substantially authoritarian manner. Such large scale business concerns get expert advice and inserts terms, in the form, which are most favorable to themselves. They contain many wide exclusion clauses favorable to large enterprises only. The favorable terms are often in small prints which the individual never reads since it is a laborious and profitless task to discover what these terms are.
In the case Indian Airlines Corporation vs. Madhuri Chaudhary court had to deal with a case of a passenger traveling by air inside India. The plane crashed causing death of passenger, and his widow sued for the damages. The air ticket exempted the carrier from liability on account negligence of the carrier or of the pilot or of other staff. There was evidence that the conditions exempting the carrier were duly brought to the notice of the passenger and that he had every opportunity to know them. The High Court held that obligation imposed by the law upon common carriers in India is not founded upon contract, but on the exercise of public employment for reward, that is, by the Common Law of England governing the rights and liabilities of such Common Carriers. It is not affected by the Indian Contract Act, 1872. It is a case, where the carrier said that he was prepared to take passenger by air provided that passenger exempted him from liability due to negligence. The exemption clause in the contract was completely valid and was a complete bar to the plaintiff’s claim.
In another Case Central Inland Water Transport Corporation Limited vs. Brojo Nath Ganguly court held that an unfair or an unreasonable contract entered between the parties of unequal bargaining power was void as unconscionable, u/s 23 of the Contract Act.
Indian Courts have shown a willingness to interfere with those kinds of contract where there is evidence of unequal bargaining power. However barring few attempts, the Indian Contract Act lacks teeth to prevent misuse of printed / standard form of contracts. The existing sections in the Contract Act do not seem to be capable of meeting the mischief. There is a need to review the forms of all these contracts and the provisions of the acts which are favoring them.