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Report No. 103

3.2 Illustrative cases where relief was given by Courts to the weaker party.-

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. For example, the Madras High Court1 held that a clause in a contract for the supply of jaggery by the appellant to the Railway Administration of the respondent, which empowered the administration to cancel the contract at any stage, was void and unconscionable. The judgment of the High Court was confirmed by the Supreme Court2 on a different ground. The Supreme Court did not pronounce on the validity of the clause in the contract. In another case of the Madras High Court3, the laundry receipt of the appellant contained the condition that in the event of loss of or damage to the article given for washing, the customer would be entitled to claim only 50 per cent. of the market price or value of the article.

The respondent's new saree was lost. The court gave relief to the customer, holding that the condition would place a premium upon dishonesty inasmuch as it would enable the cleaner to purchase new garments at 50 per cent of the price and that would not be in public interest. So also, in a case from Karnataka4 a condition that only 8 times the cost of cleaning the garment would be payable in case of loss was held to be unreasonable. In a case of a contract for supply of kerosene, by the defendant to the plaintiff, the contract reserved a right to the defendant to cancel the plaintiff's dealership at any time without assigning any reason. On cancellation by the defendant, the plaintiff filed a suit and the suit was decreed on the ground that the term was an unfair term of the contract.5

In another case from Madras,6 the petitioner won a prize in a raffle on a ticket purchased by him but could not collect the prize money within three months, due to the negligence of his bankers. The respondent claimed that the money lapsed to the State under I-rule which was made part of the contract. The High Court held that if the terms of a contract are so unconscionable and if one of the terms is in terrorem and without any consideration known to law, it would be against public policy and the party affected can approach the court for relief. But the Court did not lay down any test as to when a term would be unconscionable and opposed to public policy.

For some reason, courts in India are reluctant to extend the heads of public policy, feeling themselves bound by English decisions. It must, at the same time, be admitted that a free extension of the heads of public policy according to the individual notions of the judges is equally fraught with danger. What, then is the remedy of the consumer, or has he no remedy at all? The decisions, where relief was given to the consumer are based on the observations in judgments of the English Courts, but do not seem to be based ca any legal principle of Indian law. The decisions rest on-(a) unconscionable nature of the term ; (b) unfairness of the term; (c) the term not being in public interest; and (d) the term being opposed to public policy.

1. H. Thathaih v. Union of India, AIR 1957 Mad 82.

2. AIR 1966 SC 1724.

3. Lily White v. R. Munuswamy, AIR 1966 Mad 13.

4. H. Siddalingappa v. S. Natrasia, AIR 1970 Hyd 154.

5. International Oil Co. v. Indian Oil Company, AIR 1969 Mad 4.

6. Ramulu v. Director, Tamil Nadu Raffles, (1972) 2 MUJ 237.

Unfair Terms in Contract Back

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