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Report No. 103

Unfair Terms in Contract

Chapter 1

Standard Form Contracts and their Nature

1.1 Origin of Standard Contracts.-

In an industrial society, whether advanced or developing, the individual craftsman, catering to the tastes of individual customers, slowly fades out, giving place to mass production of standardised products. Such standardisation leads to standardised dealings with customers, that is, to standardised contracts with customers. They are found in all areas where operations are on a large scale. In the case of such large scale organisations, which enter into innumerable contracts with individuals, it is very difficult for them to draw up a separate contract with each individual.

For example, the Life Insurance Corporation of India has to issue thousands of covers every day. Similarly, the Railway Administration has to enter into several contracts of carriage. Therefore, they have standardised printed forms of contracts, with blank spaces to be filled in by each individual; and when the form is filled in and signed, a completed contract comes into existence between the organisation and the individual. The advantages of such contracts are economy and certainty. As Kessler puts it,1 "in so far as the reduction of costs of production and distribution thus achieved is reflected in reduced prices, society as a whole ultimately benefits from the use of standard contracts".

1. 1943 Columbia Law Review 629: Contracts of adhesion-some thoughts about freedom of contract.

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