Indian Law on Standard Form Contracts

Abstract

A standard form contract is a reality of modern business setup. Its usage has evolved in two forms. First, where equal bargaining powers among parties ensure fairness; and second, where organisations with relatively higher bargaining power exploit this mechanism to include favourable terms. This paper, while elaborating on the evolution of standard form contracts in India, finds that to check this misuse, Indian courts have applied special rules of interpretation ascribing higher value to the purpose of the contract, and have even nullified contracts when their material part was affected by unconscionability. Another difficulty that these contracts face is called the battle of forms. However, the courts in India have failed to employ a uniform rule to unravel this difficulty. After analysing the current legal position on this subject, this paper develops the doctrine of ‘varied standpoints’ and argues that the courts should constantly apply the knock-out rule as it balances the law on consensus ad idem and the principle of acceptance of the contract by performance.