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Report No. 103

Chapter 2

The Problem Arising from such Contracts

2.1 Possibility of misuse of standard forms.-

Apart from the fact that the abstract legal theory of a contract as an agreement arrived at through discussion and negotiation is completely given the go-by, 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 introduce terms, in the printed forms, which are most favourable to themselves. They contain many wide exclusion and exemption clauses favourable to the large enterprise.

The clauses are introduced, not always with the idea of imposing harsh terms as a- result of superior bargaining power, but because, (a) as the executive of one commercial enterprise remarked, 'we trust our lawyers to get us out of a jam, but we don't trust them not to get us into one'; (b) when liquidated damages clauses are used, the enterprise feels it is a genuine attempt to pre-estimate damages; (c) there is a desire to avoid proceedings in court; and (d) because every one else does it. These favourable terms are often in small print which the individual never reads. That is because, it is a laborious and profitless task to discover what these terms are.

The individual cannot bargain for a change in any of the terms, since he has to accept the giant organisation's offer, whether he likes the terms or not. They are there for him to take or leave. Because of the monopolistic or near monopolistic position of big business, and even if there is no monopoly, all similar commercial enterprises introduce similar exclusion clauses in their standard form contracts, and because the individual has no option to go elsewhere, the individual customer has no choice or freedom in the matter but has to accept whatever terms are offered since he cannot negotiate them. And this gives an opportunity to the organisation to exploit the helplessness of the individual and impose on him clauses which may, and often do, go to the extent of exempting the organisation from all liability under the contract.

Unfair Terms in Contract Back

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