LEGAL ASPECTS OF BUSINESS

STANDARD FORM
CONTRACT

Submitted To: Submitted By:

Dr. Harpal Singh
Group 7
Sharad
Mithirani 038
Sushil Duggal 039
Saurabh Kohli 040
Gunmeet
Kaur 041
Shubham
Garg 042
 ACKNOWLEDGEMENT

We would like to express our gratitude to Dr. Harpal Singh, Professor of Legal
Aspects of Business, who gave us this golden opportunity to do this project.
We sincerely thank him for being our mentor and for guiding us throughout
the making of our project report. This project would not have been
successfully completed if it were not for his constant feedback and support.

Thanking You.

TABLE OF CONTENT
 INTRODUCTION
CURRENT ISSUES
NEED FOR STANDARD FORM CONTRACTS

ARGUMENTS IN FAVOR OF STANDARD

CONTRACTS

ARGUMENTS AGAINST OF STANDARD

CONTRACTS

CASES

BIBLIOGRAPHY
 INTRODUCTION

A standard form contract (sometimes referred to as a contract of

adhesion, a leonine contract, or a take-it-or-leave-it contract) is
a contract between two parties, where the terms and conditions of
the contract are set by one of the parties, and the other party has little
or no ability to negotiate more favourable.

These are agreements that employ standardized, non-negotiated

provisions, usually in pre-printed forms. These are sometimes referred
to as boilerplate contracts also the terms, often portrayed in fine
print, are drafted by or on behalf of one party to the transaction the
party with superior bargaining power who routinely engages in such
transactions. With few exceptions, the terms are not negotiable by the
consumer.

For example, where a standard form contract is entered between an

ordinary consumer and the salesperson of a multinational corporation,
the consumer typically is in no position to negotiate the standard
terms; indeed, the companys representative often does not have the
authority to alter the terms, even if either side to the transaction can
understand all the terms in the fine print. These contracts are typically
drafted by corporate lawyers far away from where the underlying
consumer and vendor transaction takes place.
 CURRENT ISSUES

The law of contract has in recent time to face a problem, which is

assuming new dimensions. The problem has arisen out of the modern
large scale and widespread practice of concluding contracts in
standardized form. People upon whom such exemption clauses or
standard form contracts are imposed hardly have any choice or
alternative but to adhere. This gives a unique opportunity to the giant
company to exploit the weakness of the individual by imposing upon
him terms, which may go to the extent of exempting the company from
all liability under contract. It is necessary and proper that their
interests should be protected.
NEED FOR STANDARD FORM
CONTRACTS

People enter contractual relations with one another all the time. It
is not practically possible to negotiate the terms and conditions of
each one of these contracts. Commercial and business sense
dictates that people spend only so much time on negotiation as
would be warranted having regard to the nature and the value of
the contract being entered.

Men of commerce have found that certain conditions are implicit

in every contract, having regard to the trade usages or customary
practices in existence. Yet, to avoid needless disputes or
litigation, they prefer these spelt out in writing. This has given
rise to the printed form.
 Purchasers of insurance, for example, normally agree only on the
price, the term, the monetary limits of coverage, and in a very
rough sense, the risks to be covered. All the other provisions are
left for the insurer to set unilaterally in the form of a policy. Such
contracts gain their legitimacy from the fact that the rules
underlying them have evolved out of long practice and have
gained binding force by being valid trade usages and/or
customary practices

ARGUMENTS IN FAVOR OF
STANDARD CONTRACTS

Honoring the Contract

The first and primal argument in favor of the enforcement of

standard form contracts is that a standard form contract must be
respected and honored by the parties to it, just as any other
contract. To refuse to do so, would be to introduce an element of
 uncertainty in mercantile relations, which is to be avoided at all
costs. One of the earliest decisions requiring strict enforcement of
a standard form contract was that of the Court of Exchequer in
1860, in Lewis v. Great Western Rly. In this case, the Court of
Exchequer rejected a plea of the plaintiff that a printed form in a
contract was not binding on him since he could not be expected
to have read so lengthy a document, which was presented to him
in printed form. Speaking for the Court, Baron Bramwell said: A
person who signs a paper like this must know that he signs it for
some purpose, and when he gives it to the Company must
understand that it is to regulate the rights which it explains.

Reduction in Costs

A standard form contract leaves no room for negotiation between

parties and speeds up the process of tendering a bid by reducing
costs and encouraging future commerce (O'Reilly).

Familiarity with Terms

The major advantage of using a standard contractual form is that

by repetitive use of the document one becomes familiar with its
content, and hence is conscious of both its strengths and
drawbacks (Broome & Hayes, 1997). The contractual complexities
associated with any type of contract are often rather typical to
understand. The use of standard contractual documents aids in
familiarizing the various contractual clauses and provisions to the
users. In the scenario when a disputed project is taken to court,
the standard contracts enable the lawyers to advice their clients
regarding the probable result of the case, as judges are bound to
follow the previous decisions
 Time Saving
These forms lead to saving in time as drawing up of contracts
from scratch is a tedious task.

Ease of compliance
The rights and obligations of both parties are set out clearly and
to the required degree of detail (fair risk. It gives certainty in
terms of the compliance with country law. All-important terms
and conditions of contract have been written down in the contract
which will give a higher chance in avoiding unwanted disputed for
both parties (minimize possible claims and disputes) In a case of
dispute, the Court can make a fair decision based on their
interpretation of standard form of contract (certainty in meaning).

ARGUMENTS AGAINST OF
STANDARD CONTRACTS

Length and Complexity

Almost all standard form of contracts is considered too long
and covered too many things in one form. The purpose of using
standard form to ensure everything is covered in the conditions
will become a boomerang since not everyone want to read the
standard form due to its length and complexity. Besides,
sometime it is considered too complex for both parties.
 The Need to be Up to date
Since the market is very dynamic, unique and always
changing , there can be some changes and revisions of standard
form of contract to be made.. Each time there is a revision, users
must study the new edition or revisions carefully to see whether
it should be used and if changes need to be made. These actions
will cause another cost. Another point is that the previous court
decisions may become irrelevant with the new revisions of
standard form. Frequent revisions of standard form can also
create distrust in the competence of the entity that makes the
standard contract.
Use of Legal Language
Often drafted by trade associations and highly qualified legal
professionals on behalf of manufacturer and suppliers,
consumers are not able to understand the language and are
befooled
Misuse of Power
The party with superior power -- the corporate entity that
drafts the contract -- can use fine print, coupled with the
knowledge that the consumer rarely, if ever, reads the terms, to
take advantage of the unsuspecting consumer in the underlying
transaction. Consumers often make purchases based on price
and quality, but there are several other factors in the fine print of
these transactions that merit consumer attention: These
provisions may, and often do, work against consumer interests.

CASES

In Henderson v. Stevenson, the plaintiff bought a steamer ticket

on the face of which was these words only: Dublin to
 Whitehaven; on the back were printed certain conditions one of
which excluded the liability of the company for loss, injury or
delay to the passenger or his luggage. The plaintiff did not see
the back of the ticket, nor was there any indication on the face
about the conditions on the back. The plaintiffs luggage was lost
in the shipwreck caused by the fault of the companys servants.
This was laid down by the House of Lords that the plaintiff is
entitled to recover the loss which he suffered from the company
despite the exemption clauses.

In Central Inland Water Transport Corp. Ltd v. Brojo Nath13, the

Supreme Court struck down a clause in service agreement
whereby the service of a permanent employee could be
terminated by giving him a 3 months notice or 3 months salary.
It was held that such clause was unreasonable and against public
policy and void under section 23 of Indian Contract Act.

The Supreme Court has also held that standard form contracts
drawn up even by the Government must be fair, and that these
contracts are open to judicial review on grounds of
unreasonableness or unfairness. The Supreme Court has upheld a
plea that a printed form contract was void on grounds of
coercion, where the parties had unequal bargaining power. A
printed form in a dry-cleaning contract, exempting the dry-
cleaner from any liability in the event of loss or damage to the
clothes concerned has been held to be contrary to public policy
and therefore void. The Bombay High Court has followed this view
of the Madras High Court. The National Consumer Disputes
Redressed Commission after referring to copious case- law,
refused to enforce an onerous clause in a printed form contract
and accordingly relieved a consumer from the terms found
thereon.
 In one case, the Calcutta High Court held to be binding, the
conditions of carriage applicable to an air ticket, which were
printed in small font, on the inside of the air ticket. The High
Court was of the view that sufficient steps were taken by the
airline company to bring these conditions of carriage to the notice
of the customers Similarly, the Madras High Court held to be
binding, certain conditions limiting the liability of a carrier, which
were printed on the consignment note. The High Court was of the
view that these were the conditions that the customer could
reasonably expect to be bound by during such transactions.
 BIBLIOGRAPHY
1 http://shodhganga.inflibnet.ac.in/bitstream/10603/52359/9/09_chapter%201.pdf
2 http://www.legalservicesindia.com/article/article/standard-form-of-contract-286-1.html
3 http://www.legalservicesindia.com/article/article/standard-form-contract-1161-1.html
4 https://indiankanoon.org/doc/683431/