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Published : June 15, 2012 | Author : nair.shyama
Category : Contracts laws | Total Views : 21137 | Rating :

Shyama Nair, 3rd year B.Com L.L.B (Hons.)Student, Gujarat National Law University, Gujarat

Standard Form Contracts- A Comprehensive Analysis

The Law of Standard Form Contracts rests on intuitions of the common mass. This research paper explores these intuitions and examines intended consumer behavior on common contracting contexts. Firstly, the research paper focuses on the need of Standard Form Contracts and its justification. After the clear explanation of the term and its use in the practical world, the focus shifts to the legal issue, as to what are the problems with the issuance of Standard Form Contracts on a large scale, and how it can prove to be of exploitative nature. Further, the paper discusses the basic tendency of the consumers towards the acceptance of the Standard Form Contracts, the reasons for such acceptance and how the party issuing the Standard Form Contract can take advantage of the consumer’s ignorant behaviour. The next phase discusses about the steps taken by the judiciary in order to prevent the exploitation of the common mass through Standard Form Contracts. Finally, the paper puts forth the recommendations of the 103rd Law Commission of India Report for improvement of relevant provisions and also presents the suggestions of the author to tackle the important issues.

I. Principle Aims And Objectives Of The Study And Method Of Research

A Standard form Contract is a contract between two parties that does allow negotiation.  On one hand they undeniably fulfill an important role of promoting economic efficiency while on the other hand it has turned out to be a tool that leads to exploitation of the common mass. Thus, there is a furious debate whether the court should enforce standard form contracts or not, the important issue being how to avoid the exploitation of the weaker section.
The following project aims:-
·  To facilitate an in depth understanding of the topic ‘Standard Form Contracts’.
·  To address various issues attached to the topic.
·  To analyze each issue with a wholesome view and explain the same with the help of case laws.
·  To give suggestions and opinions regarding the same.
The method of research is a combination of both “Descriptive” and “Analytical method”.
II. Standard Form Contracts : An Introduction
“Standard form Contracts” are ‘take it or leave it’ contracts i.e a contract signed between two parties that has no room for negotiation. The customer is in no position to renegotiate the standard terms of the contract and the company’s representative usually does not have the authority to do so. Such contracts are also known as- “Contracts of adhesion”which means that the individual has no choice ‘but to accept; he does not negotiate, but merely adheres’, “Compulsory Contracts”, they being a kind of imposition; and “Private Legislation”, they being a kind of code of bye-laws on the basis of which the individual can enjoy the services offered.
For large organizations, it is very difficult to draw up a separate contract with every individual. As Kessler puts it Therefore, they keep printed forms of contract i.e SFC’s containing a large number of terms and conditions in “fine-print” which restricts and often excludes the liability of the other party under the contract. Briefly, one can say that the SFC’s have arisen as a result of:

a) The convenience in having a printed form;
b) The fact that one party stands in a position where the terms dictated by it can be imposed upon the other, notwithstanding the will of the other, and since the terms of such bargains are known to the former even prior to the entry into the contract, the former prints it out and keeps it ready, waiting for the persons to come forward and enter into such contracts; and
c) The willingness of the customer to allow the provider and his or her perceptions as to the likelihood of the contract being enforced to the latter.
III. Reasons For Acceptance Of Standard Form Contracts:
There are a number of specific reasons why such terms and conditions laid down in the contract are accepted, which are as follows:
a) SFC’s are rarely read:  Such contracts are always printed in fine print and written in complicated legal language which most of the times seems irrelevant to the common mass. And such contracts are always on “take it or leave it” basis. Coupled with the large amount of time needed to read the terms, the expected payoff from reading the contracts is low and very few people read it.
b) Access to the full terms may be difficult or impossible before an acceptance:  Often the document being signed is not the full contract; the purchaser is told that the rest of the terms are in another location. This reduces the likelihood of the terms being read and in some situations, such as software license agreements, can only be read after they have been notionally accepted by purchasing the good and opening the box.
c) Boilerplate terms are not salient: The most important terms to purchasers of a commodity are the price and quality which is generally understood before the SFC is signed so the other terms which may be exploitative in nature are not read at all.

d) There may be diverse social pressure to sign: SFC’s are signed at a point when the main details of the transactions have either been negotiated or explained. Social pressure to conclude the bargain at that point may come from a number of sources. For eg. If the purchaser is in front of a queue there is additional pressure to sign quickly or the salesperson may imply that the additional terms are “just something that lawyers want us to do”, and in a hurry the purchaser concludes the transaction by signing the SFC.

e) SFC’s may exploit unequal power relations: If the commodity which is being sold using a SFC is an essential one for the purchaser or appeals to the purchaser such as a rental property or a needed medical item, then again the “take it or leave it” condition has an impact and the purchaser in many cases has no choice but to buy that commodity.
IV. The Legal Issues Arising And The Protective Devices:
As explained above with reasoning an individual can easily be exploited through the SFC’s by mere insertion of certain clauses which will completely exclude the seller from the liability. Now, some interesting legal issues arise in these circumstances:
· Generally speaking, what is the legitimacy/validity of such a clause in a SFC?
· What are the limits on its enforceability?

A problem may arise in proving the terms of the agreement where it is sought to be shown that they are contained in a contract in a printed form i.e in some ticket, receipt, or other standard form document. Chitty states that:
“The other party may have signed the document, in which case he is bound by its terms. More often, however, it is simply handed to him at the time of making the contract and the question will then arise whether the printed conditions which it contains have become terms of the contract. The party receiving the document will probably not take trouble to read it, and may even be ignorant that it contains any conditions in at all. Yet standard form contracts very frequently embody clauses which purport to impose obligations on him or to exclude or restrict the liability of the person supplying the document. Thus it becomes important to determine whether these clauses should be given contractual effect.”

The individual therefore deserves to be protected against the possibility of exploitation inherent in such contracts. Stated below are some of the important modes of protection evolved by the courts:

1. Reasonable Notice:
It is the prime duty of the person delivering the document to give proper notice to the offeree of the printed terms and conditions, especially ones which can create a situation of ambiguity. Where this is not done, the acceptor will not be bound by the terms of the contract. The same was laid down in Henderson v Stevenson by the House of Lords:
The plaintiff brought a steamer ticket on the face of which was these words only: “Dublin to Whitehaven”; on the back of the ticket certain conditions were printed which excluded the liability of the company for any loss, injury or delay to the passenger or his luggage. The plaintiff did not see the back of the ticket and was unaware of these conditions and nor were they brought to his notice. The plaintiff’s luggage was lost in shipwreck caused by the company’s fault. He was held entitled to recover the loss inspite of the exemption clauses because the same were not brought to his notice.
The case would have been entirely different if the terms would have been to the notice of the plaintiff eg : through the words “For conditions see back”. This was clearly stated in the subsequent case of Parker v South Eastern Rly Co.-
The plaintiff deposited his bag at the cloakroom at a railway station and received a ticket, on the face of which were printed, among other words, “see back” and on the back there was a notice that “the company would not be responsible for any package exceeding the value of £ 10”. A notice of the same was hung up in the cloakroom. The plaintiff lost his bag and claimed full value of the same. The company relied upon the exemption clause. The plaintiff contended that although he knew that there was something written on the ticket he did not bother to read it. The ticket was a mere receipt for him.
Mellish LJ stated that if the plaintiff “knew there was writing on the ticket, but he did not know or believe that the writing contained conditions, nevertheless he would be bound”, for there was reasonable notice that the writing contained conditions.
2. There Should Be A Contractual Document
Now, the dilemma was that to apply this principle, the courts had to clearly distinguish between contractual documents and receipts. Mellish LJ clearly solves this problem in Parker v. South Eastern Railway Co.  and the conclusion was that a document was said to be contractual if it embodies the contract, that is to say, of the persons to whom it is delivered should know that it is supposed to contain conditions. But if the paper does not express or imply conditions of the contract then it will be regarded as a voucher, receipt etc. In Chapelton v Barry Urban District Council  the same was reiterated. To bring the exemption clause to the notice of the receiver, Lord Denning MR remarked in Thornton v Shoe Lance Parking Ltd  : “In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it, or something equally startling”. If this is not done then the agreement would not form part of the contract. One can clearly distinguish between a contractual document and a receipt from the following passage:
 “The document must be of a class which either the party receiving it knows, or which a reasonable man would expect, to contain contractual conditions. Thus a cheque-book, a ticket for a deck chair, a ticket handed to a person at public bath house, and a parking ticket issued by an automatic machine have been held to be cases where it would be quite reasonable that the party receiving it should assume that the writing contained no conditions and should be put in his pocket unread. ”

Contract signed by the Acceptor
It was laid down in L’Estrange v Graucob Ltd  that when a party signs a written contract thereby accepting it, he becomes bound by all its terms whether he has read it or not. But in such cases the affected party can be protected by the doctrine of fundamental breach or by finding that the terms are unreasonable or that there was a misrepresentation about them.

3. There Should Be No Fraud Or Misrepresentation:
The leading authority in the case of misrepresentation is Curtis v Chemical Cleaning & Dyeing Co. :
The plaintiff delivered a white satin wedding dress to the defendant for cleaning. She was asked to sign a receipt, which made her responsible for any damage to beads and sequins, which she did without reading the receipt. Now, the receipt contained a clause that excluded the company from any damage to the dress. When the dress was returned there was a stain on it. When plaintiff sought damages the defendants pleaded the exemption clause.

 Even though the acceptor had signed the document, the defendants were held liable and the reasoning was that A party to the contract cannot rely on the exclusion clause to avoid liability or misrepresentation or fraud. The same was held inChau v Van Pelt.  A rule, which is a modern development in this regard, is stated in American RESTATEMENTS OF CONTRACTS.  It stated that when the other party has a reason to believe that the party manifesting written assent would not do so if he knew that the writing contained a particular term; the term is not a part of the agreement.

4. The Notice Should Be Contemporaneous With The Contract:
The reasonable notice of the terms should be given before or at the time of the contract. A subsequent notification would amount to modification of the original contract and will not be binding on the other party unless he has given his assent for the same. Now, when the contract materializes by the issue of a ticket by an automatic machine, the dilemma faced is that whether the notice printed on the ticket has been given contemporaneously with the contract or subsequent to it. Lord Denning MR. considered this matter in Thornton v Shoe Lance Parking Ltd. The theory in case of tickets issued by clerks is that the company makes the offer of the ticket and the customer by paying for the ticket without objection accepts it with all its terms. He has a chance to reject the ticket. But where the ticket is issued by an automatic machine, the customer cannot refuse it. He is committed the moment when puts his money into the machine. The contract is then made. The terms of the offer are contained in the notice placed on the rear of the machine. The customer is bound by its terms if they are sufficiently brought to his notice beforehand, but not otherwise. He is not bound by the terms printed on the ticket if they differ from the notice, because the contract has already been made and the ticket comes too late. The ticket is therefore no more than a receipt for money. Hence, it is the duty of the party relying on the exclusion clause to make the terms and conditions clear to the other party at the time of contract that the same has been  incorporated into the contract.

5. Theory Of Fundamental Breach:
This is another method to protect the weaker section from exploitation. It is a method of controlling unreasonable consequences of wide and sweeping exemption clauses.  Even where adequate notice of the terms and conditions in a document has been given, the party imposing these conditions may not be able to rely on them if he has committed a breach of contract which can be described as “fundamental”. This has been laid down by Lord Denning LJ in J. Spurling Ltd. V Bradshaw.  The Supreme Court of India also emphasized on the same rule in B.V. Nagaraju v Oriental Insurance Co. Ltd. 

“Every contract contains a ‘core’ or fundamental obligation must be performed. If one party fails to perform this fundamental obligation, he will be guilty of a breach of contract whether or not any exempting clause has been inserted which purports to protect him.”  In Davies v Collins   it was held that the mere fact of the particular limitation clause in the contract was sufficient to exclude any right to the sub-contract the performance of the substance of the contract. Limitation clauses of this kind do not apply where the goods are lost not within the four corners of the contract but while something was being done which was outside the terms of the contract altogether, or when loss takes place in the course of some operation which was never contemplated by the contract at all.

However, in a few cases the court did not find the bailees liable for any fundamental departure from the main purport of the contract. For eg. In Giband v Great Eastern Railway  a cycle deposited at a station of the defendant railway company was not infact taken to the cloakroom but was left in the booking hall itself and from there it was stolen. It was held that the company is protected by the clause in the ticket which exempted the company from liability. The Court of Appeal could  find no fundamental breach as it was no part of the contract that the cycle should be necessarily stored in the cloakroom. In Suisse Atlantique Societe D’ Armement S.A v N.V Rotterdamsche Kolen Centrale Lord Wilberforce observed that the expression ‘fundamental breach’ is used in the cases to denote two quite different things, namely:
· A performance totally different from that which the contract contemplates,
· A breach of contract more serious than the one which would entitle the party merely to damages and which would entitle him to refuse performance or further performance of the contract.
Resort to fundamental Breach is now no longer necessary:
It is now no longer necessary to resort to the theory of Fundamental Breach as the same result can be attained by resorting to the test of reasonableness under Section 11 of the Unfair Contracts Terms Act, 1977 which says that in respect of any loss caused by the breach of contract, any restricting or excluding clause shall be void unless it satisfies the requirement of reasonableness. A term will be regarded as reasonable if it is “a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have t been known to or in the contemplation of the parties when the contract was made.”
Removal of Simpliciter Clauses in Contracts of Employment
If in a contract of employment offered by the Government corporation, a term provides for the removal of a permanent employee without inquiry then it is regarded as unreasonable. The same was laid down by the Supreme Court in Central Inland Water Transport Corpn v B.N Ganguly
Compromise of existing Contract
The Unfair Contract Terms Act, 1977 (English) aims invalidate exclusion clauses in the strict sense, its clauses in a contract which modify prospective liability. The Act does not affect retrospective compromises of existing claims. Section 10 of the Act does not apply to a contract to settle disputes which have arisen concerning the performance of an earlier contract.  And it even does not apply where the parties to the earlier and the subsequent contracts are the same. The same was laid down in Shrilekha Vidayarthi v State of U.P
6. Strict Construction – Contra Proferentem:
The exclusion clauses are construed strictly, especially when a clause is so widely expressed as to be highly unreasonable. If there is any ambiguity in the mode of expressing an exemption clause, then the clause is resolved in the favour of the weaker party, i.e the decision will be against the party who inserted it- contra proferentem.
To explain it in a better manner, one can say that where the words used in an exclusion clause are capable of having two constructions, a wider construction and a limited construction, then the limited construction would be preferred, because the rule of law is that “every exception clause is to be interpreted, in case of ambiguity, Contra Proferentem”. This means that “if there is any doubt as to the meaning and scope of the excluding or limiting term, the ambiguity will be resolved against the party who has inserted it…”
Interpretation of Price Review and Escalation Clauses
In a Supreme Court case, Delhi Cloth and General Mills v Rajasthan State Electricity Board, a clause in a contract for supply of electricity provided:
“The rate of supply as determined in Clause 17 shall be reviewed every fifth year provided that the component of the cost of generation out of the total cost varies by 25% or more”

The consumer contended that this was a price escalation clause and would permit increase from the base price only according to a rise in the cost of production. The Apex Court did not accept this.

Explaining the distinction between an “escalation” clause and a “price” review clause, A.K Sen  J said:
“An escalation clause, according to the accepted legal connotation means a clause which takes care of the rise and fall of the prices in the market, whereas the right to review confers the power to revise the rate of supply. The word ‘review’necessarily implies the power of the board to have a second look and to so adjust from time to time its charges so as to carry on its operation under the Act without sustaining a loss.”

The court also cited the following passage from CORPUS JURIS SECUNDUM:
“A contract giving one of the parties the right to vary the price is not unenforceable for lack of mutuality  where the right is not an unlimited one, as where its exercise is subject to express or implied limitation, such as that the variation must be in proportion to some objectivity determined base, or must be reasonable, and this rule has been applied to contracts containing so called ‘escalator’ clauses”
7. Liability In Torts:
Even if the exemption clause excludes all sorts of liabilities under the contract, it may not exclude liability in Tort. Consider the following case:
The plaintiff hired a cycle from the defendants. The defendants agreed to maintain the cycle from the defendants. The defendants agreed to maintain the cycle in working order  and a clause in the agreement provided: ‘nothing in this agreement shall render the owners liable for any personal injuries…’ while the plaintiff was riding the cycle the saddle tilted forward and he was thrown and injured’
The court held that even though the clause exempted the defendants, though negligent from their liability in contract, it did not exempt them from liability in negligence.
It is, however, open to the parties to exclude liability even for negligence specific words or necessary implication. The same was laid down in Ruther v Palmer. However, the outcome of such cases would now be different owing to the (English) Unfair Contract Terms Act, 1977, which expressly provides that any clause in a contract which excludes or restricts liability for death or personal injury resulting from negligence shall be absolutely void. The expression “negligence” is defined in the Act to mean the breach of any common law or contractual duty.

8. Exemption Clauses And Third Parties:
The doctrine of privity of contract states that a contract is a contract only between the parties to it and no third party can either enjoy any rights or suffer any liability under it. This should be applied to the SFC’s too. In Haseldine v C.A Daw & Son Ltd, it was laid down that “that the duty to the third party does not arise out of contract, but independently of it.”

Just as a third party is not affected by the terms of a contract, so also a third party cannot claim advantage of them. The only way of conferring the benefit of exception clauses upon employees or sub-contractors, etc seems to be the principle of vicarious immunity or implied contract as suggested by the House of Lords in Elder, Dempster & Co v Paterson Zochonis & Co.

In conclusion, the following statement of Lord Reid regarding the exemption clause in the Suisse Atlantique case may be cited:
“Exemption clauses differ greatly in many respects. Probably the most objectionable are found in the complex standard conditions which are now so common. In the ordinary way the customer has no time to read them and if he did read them, he would probably not understand them. If he did understand and object to any of them, he would generally be told that he could take it or leave it. If he then went to another supplier, the result would be the same. Freedom to contract must strictly imply some choice or room for bargaining.”
V. Unfair Contract Terms Act, 1977 (English)
The (English) Unfair Contract Terms Act, 1977 which came into force on February 1, 1978, tries to improve the condition of Business Contracts, by completely overruling certain types of exemption clauses and subjecting all of them to the test of reasonableness. Following are the important effects of the act:
·  The Act is the pioneer for providing for the very first time, a statutory definition of the term “negligence” which is applicable to both tort and breach of contract. As per the definition, negligence means:
a) Breach of any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract;
b) Breach of any common law duty to take reasonable  care or exercise reasonable skill (but not a stricter duty); or
c) Breach of the duty of care imposed by the Occupiers’ Liability Act, 1957

· The second important effect is that any clause in a contract which exempts or restricts liability for death or personal injury resulting from negligence shall be absolutely void by the virtue of this act.
· The third important effect is that Section 11 of the Unfair Contracts Terms Act, 1977  says that in respect of any loss caused by the breach of contract, any restricting or excluding clause shall be void unless it satisfies the requirement of reasonableness. A term will be regarded as reasonable if it is “a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have t been known to or in the contemplation of the parties when the contract was made.”

· The four provision deals with the protection of the consumer and those who have been subjected to a standard form contract. The Act says that a person, who deals with a consumer on his own terms, will not be allowed to claim protection of any of the clauses restricting or excluding his liability, if he himself commits breach; nor can he claim specific performance. He can take the advantage of such terms only if such terms are reasonable.

· The last and important effect of this Act extends to the scope of the Supply of Goods (Implied terms) Act, 1973.  This Act does not permit in reference to the consumer sales the liability for breach of implied conditions and warranties to be excluded, which will now apply to all contracts under which possession of or property in goods passes from one person to another, for example, contracts of renting or leasing of appliances. In non-consumer contracts the exception clauses will be subjected to the test of reasonableness.
VI. The 103rd Report Of The Law Commission Of India On Unfair Terms In Contracts
 · Inadequacy of the Indian Statute Law
The 103rd report of the Law Commission of India which was specially constituted to look into this complex matter of application of Standard Form Contracts analyzed all the issues and the relevant provisions and finally gave certain critical views to improve the provisions of the Indian Contract Act, 1872.

The main issue in the application of SFC’s as inferred from all the above discussed issues is that of exemption clauses, which provides for exclusion of liability.
The 103rd LCI report clearly expressed that the present Indian Statute Law is inadequate to deal with these issues. As early as 1909, Shankaran Nair J, in his dissenting judgement expressed the opinion that Section 23 of the Contract Act hits such exemption clauses; but this view has been rejected by the High Courts in later decisions, already referred to. There are a few cases where the Courts have valiantly tried to come to the rescue of the weaker party. But the legal basis of such decisions is elusive.
· Recommendation of the Commission
The Commission felt that the solution to this problem would be to enact a provision in the Indian Contract Act, 1872, which will combine the advantages of the (English) Unfair Contract Terms Act, 1872 and Section 2.302 of the Uniform Commercial Code of the United States.

The Law Commission therefore recommended the amendment of the Indian Contract Act, 1872, by inserting the following new Chapter and section:-

Chapter IV-‘A’
Section 67A: (1) Where the Court, on the terms of the Contract or on the evidence adduced by the parties, comes to the conclusion that the conclusion that the contract or any part of it is unconscionable, it may refuse to enforce the contract or the part that or holds to be unconscionable.
(2) Without prejudice to the generality of the provisions of this section, a contract or part of it is deemed to be unconscionable if it exempts any party thereto from—(a) the liability for willful breach of contract, or (b) the consequences of negligence.

VII. Suggestions For The Improvement In Law With Regard To Standard Form Contracts
Standard Form Contracts can be utilized as a successful commercial tool if the common mass reads the document properly before entering into the contract. So, the root cause of the problem is the lengthy terms and conditions of the contract, which may include the exemption clause, and which the common mass is not in a habit to read. The following suggestions can help to solve these issues:
1. Any document in the form of a SFC, must have a short summary in the front of a document which the people can read and comprehend before entering into the contract. This summary should include the exemption clause if any, so that the people are aware about it.
2. As it is next to impossible, that the above suggestion will be adhered to in each and every SFC drafted, the Indian Contract Act, 1872 should be amended and a provision for mandatory adherence of the same should be included in the provision.
# The author is a IIIrd year student of Gujarat National Law University (GNLU), Gujarat pursuing B.Com L.L.B (Hons).
# Anson’s LAW OF CONTRACT, 142(23rd Edn by A.G Guest,1971).
# Linhoff, Scope of Compulsory Contracts Proper, (1943) 43 Col LR 586.
# Lord Denning, ROAD TO JUSTICE,93.
# (1943) Columbia Law Review 629: Contracts of adhesion- some thoughts about freedom of contract.
# Chitty on Contracts, (27th Edn,) para 112.007.
# (1875) 32 LT 709
# (1877) 2 CPD 416: (1874-80) All ER Rep166.
# (1877) 2 CPD 416
# (1940) 1 KB 532: (1940) 1 All ER 356, CA.
# (1971) 1 All ER 686, CA.
# CHITTY ON CONTRACTS, 313, para 677, Vol II (24th Edn, 1977).
# Burnett v West Minister Bank, (1966) 1 QB 742.
# Chapelton v Barry UDC, (1940) 1 KB 532.
# Taylor v Glasgow Corpn, (1952) SC 440 (Scotland).
# Thornton v Shoe Lane Parking Ltd, (1971) 2 QB 163.
# (1934) 2 KB 394.
# (1951)  1 All ER 631.
# (1977) 74 DLR (3d) 244 (BCSC).
# Section 11, Part B.
# (1956)  1 WLR 461, 465.
# (1996) 4 SCC 674.
# Per Lord Greene MR in Alderslade v Hendon Laundry  Ltd, (1954) KB 189, 193.
# L.J Montrose, Some Problems about Fundamental Terms, (1964) Camb LJ 60, 64.
# (1945) 1 All ER 247.
# (1921) 2 KB 426, CA.
# (1966) 2 All ER 61 at pp 91-92: (1967) 1 AC 361.
# (1986) 3 SCC 156.
# (1991) 1 SCC 212.
# Professor Brian Coote, Breach and Exception Clauses, (1970) Camb LJ at p.238.
# Cheshire and Fifoot, THE LAW OF CONTRACT, 129 (8th Edn, 1972)
# (1986) 2 SCC 431 at p. 455.
# 406 (Vol 17)

# White v John Warwick & Co Ltd (1953) 1 WLR 1285
# See, Gower, Exemption Clauses: Contractual and Tortious Liability, (1959) 17 MLR 155.
# (1922) All ER Rep 367.
# (1941) 2 KB 343, at p. 379.
# Alder v Dickson, (1955) 1 QB 158.
# (1924) AC 522.
# (1967) 1 AC 406.
# Daniel v Parry,(1980) 20 Estate Gazette 92.
# Section 23 of the Indian Contract Act, 1872 is as follows:
What considerations and objects are lawful and what not
The consideration or object of an agreement is lawful, unless-
It is forbidden by law; or
Is of such a nature that, if permitted, it would defeat the provisions of any law; or
is fraudulent; or
involves or implies injury to the person or property of another; or
the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

 # Section 2.302 of the Uniform Commercial Code of the United States provides (i) If the Court as a matter of law finds the Contract or any clause of the Contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract or it may enforce the remainder of the contract without the unconscionable clause or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(ii) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable, the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect, to aid the court in making the determination.

The  author can be reached at: nair.shyama@legalserviceindia.com

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Article Comments

Posted by shailendra rao. K on July 05, 2012
My father owned a private junior and degree college by name sri balaji vidya vihar junior and degree college in Hindupur town, anantapur district, A.P.The junior and degree college is recognized by government of AP and has been running successfully since 1996 with all affiliation orders. Due to deliver few financial obligations he decided to dispose the collage property.

The purchasers informed us that they will first register the 3.15 acres of land and then register the uildings worth crores of rupees standing on the above said land, as they do not have the total amount at a time. Having believed it, my father registered only the open land. No buildings, structures, laboratories, staff rooms, directors chambers, computer labs and other immovable assets were not mentioned in the sale deeds.

The sale deeds concede only the sale of open land or sites, the way they have registered. Now the purchasers are saying that my father has no right over the huge RCC buildings and they are running the collage throwing out my father. My father received the land consideration sum as fixed by government.

Does mere sale of the land makes them the owner of the immovable assets such as buildings? The buildings are not at all mentioned in the sale deeds nor the collage/ enterprise being conducted in the scheduled land. Without registering buildings, the purchasers even evaded stamp duty. The stamp duty itself accounts for nearly 30 lakh according to government valuation.

They have not paid the stamp duty too. Does my father has his claim and ownership over the buildings as no sale deed testifies the sale of buildings or even presence of buildings. We have the entire record of the building approved plans from the municipal authorities, affiliation orders from board of intermediate education, AP, affiliation orders from S.K. University, current bills, tax receipts for the buildings before the sale, outgoing student records and can undoubtedly prove that we are the owners of the buildings.

They have not registered the buildings, cheated revenue department evading lakhs of registration fee. Please clarify whether my father has legal ownership of the buildings which we have not sold till date.can we approach court to protect our rights and ask for direction to register the buildings and provide us the worth of the immovable assets as per government fixed value. Kindly mail back and help me legally.

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