The Standard-form Contract

In one line

A standard-form contract is a document whose terms one party has settled in advance and the other may take or leave, and Indian law responds to it by construction, by section 16, by section 23's unconscionability head, and by statute.

What the form is and why it exists

Three features define it.

The terms are drafted in advance by one party, before the other party exists as a customer.

They are not negotiable, and an attempt to negotiate is met with refusal to deal.

And the transaction is repeated at volume, which is the commercial reason for the form.

The efficiency case for it is real and must be conceded. Negotiating the terms of every ticket, policy, account or licence individually would make mass supply impossible, and the cost of negotiation would be paid by the customer. The standard form is not an abuse; it is the only way a mass market can contract, and the abuse is in the terms, not in the form.

Why consent is a fiction in it

This is the analytical heart of the topic, and there are four reasons.

The signer has not read the terms, and both parties know it.

Reading them would not help, because they cannot be changed.

The alternative is not available, since competitors use materially identical forms, so refusing does not produce a better bargain but no bargain.

And the terms are drafted by a specialist for one side, so the customer could not evaluate them even if he read them.

Apply section 13 to that and the result is stark. Section 13 requires the parties to agree upon the same thing in the same sense. On any subjective test there is no consensus ad idem about the exemption clause on the back of the ticket, and the contract should be void. The law does not so hold, and the reason is that it applies an objective test: the signer is taken to have assented to what a reasonable person would understand the document to mean.

The four techniques of control

Naming them as four and in this order is what makes the answer.

One, notice. A term is part of the contract only if reasonable notice of it was given before or at the time of contracting. A term on the back of a ticket, or on a notice inside a room the customer has already paid for, may fail this test; and the more unusual or onerous the term, the greater the notice required.

Two, construction. The document is read strictly against the party who drafted it, which is contra proferentem, and an exemption clause is confined to what its words plainly cover. Taken in full in [Exemption Clauses].