Protective Measures

In one line

Protective measures against unfair standard terms come from three different authors, the courts by construction and unconscionability, the legislature by non-excludable rights, and the regulator by prescribed terms, and each has characteristic strengths and characteristic failures.

The judicial measures

Four, and they were taken in [Exemption Clauses]; the point here is what they can and cannot do.

Contra proferentem construction; the requirement of reasonable notice for an onerous term; reading a clause against the main purpose of the contract; and section 23 unconscionability.

What the judicial measures do well. They are available immediately, without waiting for a legislature; they adapt to a new form of abuse without amendment; and they operate on the particular term in its particular setting, which a general rule cannot.

What they do badly, and there are three failures.

They are retrospective. The parties contracted on one understanding and the court supplies another after the event.

They reach only the litigant. Every other customer holding the same printed form is unaffected until they sue, and most never will, because the amount at stake is smaller than the cost of suing.

And they are unavailable to the person who most needs them. The consumer with a small claim does not litigate; the party who does litigate is usually a business with a large claim, which is exactly the party section 23 does not protect.

The legislative measures

The technique that works is the non-excludable right, and it is worth naming as a technique.

A statute confers an entitlement and provides that any agreement to the contrary is void. The parties may write what they like; the entitlement survives the writing.

Three examples.

Minimum wages, where an agreement by a worker to accept less is void and consent does not cure it.

Consumer remedies, where section 2(46) of the Consumer Protection Act, 2019 defines an unfair contract to include a term imposing on the consumer an unreasonable charge, obligation or condition which puts him at a disadvantage, and the commissions may declare such a term null and void.

And rent control, where standard rent and the grounds of eviction are fixed whatever the lease says.

Why non-excludability is the strongest technique. It requires no regulator to police the document, no litigant to challenge the term, and no court to construe it. The term is simply of no effect, and the party relying on it gains nothing by including it.

Its limits. It operates only where the legislature has acted, and it defines its beneficiaries narrowly: consumer legislation protects a person who buys for a personal purpose and not a small business, which is the gap this subject keeps returning to.