Standard Form of Contract and Quasi-Contract

Meaning: a contract whose terms are drafted in advance by one party (usually the stronger, such as a corporation, bank, insurer, airline, telecom operator or website) and offered on a ‘take it or leave it’ basis. The other party can only adhere and has no real chance to negotiate. Examples: railway tickets, insurance policies, bank loan forms, bills of lading, airline tickets, software licences, app terms and conditions.

Features: pre-printed or digital; uniform; non-negotiable; often contain exemption/exclusion clauses; unequal bargaining power; efficient for mass transactions.

Advantages: saves time and cost, uniformity, certainty, ease of administration, standard risk allocation.

Disadvantages: unfair and one-sided terms, hidden clauses, limitation of liability, unequal bargaining power, no meaningful consent.

Judicial control:

• Notice rule: the terms must be brought to the notice of the other party before or at the time of contract (Parker v South Eastern Railway; Thornton v Shoe Lane Parking; Olley v Marlborough Court).

• Signature rule: a person who signs is bound, even if he has not read (L’Estrange v Graucob), unless there is fraud or misrepresentation (Curtis v Chemical Cleaning).

• Contra proferentem: ambiguities are construed against the party who drafted them.

• Doctrine of fundamental breach: attempted by Lord Denning, but the House of Lords held in Suisse Atlantique (1967) and Photo Production v Securicor (1980) that it is a rule of construction, not of law.

• Unreasonable and unconscionable terms: Central Inland Water Transport Corp. v Brojo Nath Ganguly (1986) applied Article 14 to a standard-form service rule and declared it unconscionable and void under s.23 as against public policy. Also Delhi Transport Corporation v DTC Mazdoor Congress (1991) and LIC of India v Consumer Education and Research Centre (1995).

• Bharathi Knitting Co. v DHL Worldwide Express Courier (1996): a party who signs a standard form is bound by its terms.

• Lily White v Munuswami (Madras HC, 1966): a laundry’s limitation of liability on a ticket was held reasonable.

Statutory control in India:

• Indian Contract Act: ss.16, 23, 28 and 74.

• Consumer Protection Act, 2019 (in force 20 July 2020): s.2(46) defines ‘unfair contract’ (terms causing significant change in the rights of consumers, such as excessive security deposits, disproportionate penalty, refusing to accept early repayment, unilateral termination without reasonable cause, or assignment to a third party to the consumer’s detriment). The State Commission and National Commission may declare unfair terms null and void (ss.49(2) and 59(2)).

• Unfair trade practice (s.2(47)) and Consumer Protection (E-Commerce) Rules, 2020.

• Law Commission of India, 199th Report (2006) on ‘Unfair (Procedural and Substantive) Terms in Contract’ recommended a separate statute (not enacted).

Concept: a quasi-contract is not a real contract. There is no offer, acceptance or agreement; the law imposes an obligation to prevent unjust enrichment (no person should be enriched at the expense of another). The Act places it in Chapter V.

Section 70, conditions (very frequently tested):

1. A person must lawfully do something for another or deliver something to him.

2. He must not do so gratuitously.

3. The other person must enjoy the benefit of it.

Cases: State of West Bengal v B.K. Mondal & Sons (1962: the benefit must be accepted voluntarily, not forced); Mulamchand v State of Madhya Pradesh (1968); Damodara Mudaliar v Secretary of State; Alopi Parshad.

Section 72 cases: Sales Tax Officer v Kanhaiya Lal Makund Lal Saraf (1959: tax paid under mistake of law is recoverable, and the State can be made to refund); Mafatlal Industries v Union of India (1997: refund of excise duty is subject to the principle of unjust enrichment, and where the burden has been passed on to consumers the claim fails).

s.71 (finder of goods): the finder takes on a bailee’s obligations (ss.151–152, 154). He may retain the goods against the owner until lawful charges are paid, and may sue for a reward if one was publicly offered (s.168). If the owner cannot be found, the finder may sell only if the goods are perishable or the lawful charges amount to two-thirds of their value (s.169).

Contract vs quasi-contract:

• A contract arises from consent; a quasi-contract arises by operation of law.

• A contract requires competent parties and an agreement; a quasi-contract does not.

• In a contract, damages are measured by the loss; in a quasi-contract the claim is limited to the value of the benefit conferred.

Related doctrines: unjust enrichment (Lipkin Gorman v Karpnale Ltd.), quantum meruit (reasonable payment for work done), and total failure of consideration (Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd., 1943).