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Report No. 199

Chapter XI

Need To Define 'general Procedural Unfairness' and 'general Substantive Unfairness' Under The Indian Law

No country in its legislation has so far enacted procedural and substantive aspects of unfairness distinctively in its statutes. Several writers have stated that legislations have to focus on these aspects separately than to make a "mish mash" of both in each section. We have referred to these views in Chapter VII.

We shall first give a brief sketch of how we want to go about such segregation in the proposed Bill.

(a) Existing "procedural" provisions of the Contract Act, 1872 and of the Specific Relief Act, 1963 to be "listed" in the Bill:

Several sections of the Indian Contract Act, 1872 deal with 'voidable contracts' (procedural unfairness) as referred to in Chapter X are as follows:

(a) section 15 which deals with coercion,

(b) section 16 which deals with undue influence,

(c) section 17 which deals with fraud,

(d) section 18 which deals with misrepresentation,

(e) section 19A which deals with undue influence.

Similarly, so far as procedural provisions are concerned, the Specific Relief Act, 1963, contains some provisions which refer to the manner of enforcement of voidable contracts in

(a) second part of clause (a) of subsection (2) of section 20,

(b) clause (6) of subsection (2) of section 20

(c) clause (a) of subsection (1) of section 27.

We have deliberately used the word 'listed' because we propose just to highlight the 'procedural' or 'substantive' nature of the provisions of these two statutes. We do not propose to interfere with them or involve them in the 'unfairness' principle. We merely propose to refer to these as 'procedural provisions'.

(b) Existing provisions of Contract Act, 1872 and Specific Relief Act, 1963 are not exhaustive:

In our view, there can be other situations than those in these acts where, due to the conduct of the parties or the circumstances under which the terms of the contract are arrived at or the contract is entered into which may have resulted in some unfair advantage or unfair disadvantage to one of the parties. This we propose to describe as 'general procedural unfairness' in the Bill.

(a) Several such circumstances have been referred to in Chapter VIII "Comparative Law - Procedural Unfairness" and Chapter IX 'Comparative Law - Substantive Unfairness'. We do not want to repeat all those circumstances referred to in Chapter V, namely, the statutes or Bills in UK, Canada, Australia, New Zealand and South Africa and so on. Such circumstances are equally in existence in India. As stated in Mulla's commentary on the Indian Contract Act, 1872 and Specific Relief Act, 1963, in the Preliminary Chapter,

"The Contract Act does not profess to be a complete Code dealing with the law relating to contracts. As appears from the preamble, the Act purports to do no more than define and amend certain parts of that law. It treats some particular contracts in separate chapters, but there is nothing to show that the Legislature intended to deal exhaustively with any particular chapter or subdivision of the law relating to contracts."

Unfair (Procedural and Substantive) Terms in Contract Back

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