Report No. 199

Unfair (Procedural & Substantive) Terms in Contract

Contents
Chapter I	Introductory
	Introductory
	Unfair Terms legislation not an obstacle to foreign investment
Chapter II	The Present State of Law in India and Need for Improvement
	The Present State of Law in India and Need for Improvement
	Section 23 of the Indian Contract Act, 1872: Illegality and public policy
	Section 23 and Public Policy
	Section 27 of the Indian Contract Act
	Section 28 of the Indian Contract Act
	Section 28 saves two types of contracts under the exceptions
	A recent judgment of the Supreme Court requires mention in this context
	Sale of Goods Act, 1930
	Judicial Review of contracts entered by an authority which is a 'State' within Article 12 of the Constitution and application of Art 14
	Monopolies and Restrictive Trade Practices Act, 1969
	Section 2(o) has laid down the principles and basis of determining what is a 'restrictive trade practice' as under
	Consumer Protection Act, 1986
	Competition Act , 2002
	Specific Relief Act, 1963 merely grants discretion to Courts to refuse specific performance
	Usurious Loans Act, 1918: Reopening of transactions
	Industrial Disputes Act, 1947
	Provisions of Indian Contract Act, 1872 and other existing laws referred to above are not sufficient to meet the problems of today
Chapter III	Standard form Contracts and Their Nature
	Standard form Contracts and Their Nature
	The Standard form contracts: original purpose disclosed
	Interpretational issues in standard form contracts
	Supreme Court on Contracts by Government and Public Institutions and Art 14
	Other Contracts
Chapter IV	Judicial Prouncements in India on Unfair Terms
	Judicial Prouncements in India on Unfair Terms
	The Central Inland Water Transport Corporation Limited Case
	Section 208. Unconscionable Contracts Term
	Uptron's case: (AIR 1998 SC 1681)
	Delhi Transport Corporation's case: (AIR 1991 SC 101)
	LIC v. Consumer Education & Research Center: 1995 (5) SCC 482
	Pawan Alloys Case, AIR 1997 SC 3910
	Conclusion
Chapter V	Unfair Terms in Contract - A Comparative Study
	Unfair Terms in Contract - A Comparative Study
	Position in U.S.A.: American Restatement (Second Edition) and UCC: Unconscionability
	Wentz's Case
	New Principles of procedural and Substantive Unconscionability (USA)
	Australia
	The Contract Review Act, 1980 (New South Wales)
	Section 7 which deals with 'principal relief in respect of unjust contracts reads as follows
	Trade Practices Act, 1974 (Australia)
	Uniform Consumer Credit Code (UCCC)
	Fair Trading Act, 1999 (Victoria):
	Fair Trading (Amendment) Act, 2003 (Victoria)
	Amadio's case
	Position in United Kingdom
	Unconscionability and equity jurisdiction of Courts in United Kingdom
	Unconscionability at Common Law in United Kingdom
	Legislation in United Kingdom
	The basic features of Unfair Contract Terms Act, 1977 (UK): (UCTA)
	The basic features of Unfair Terms in Consumer Contracts Regulation, 1999 (UTCCR)
	U.K. Law Commission's Consultation Paper
	U.K. Law Commission: Final Report (No.292)
	European Council Directive (1993) Applicable to UK and the Regulations of 1994, 1999 and 2001
	Canada
	New Zealand
	South African Law Commission
	Discussion Paper 65 on Unreasonable Stipulations in Contracts and the Rectification of Contracts (1996) amd Final Report (1998)
Chapter VI	Common Law: Unfairness in Regard to Specific Performance of Contract Terms
	Unfairness in Regard to Specific Performance of Contract Terms
Chapter VII	Need To Have Procedural and Substantive Divide
	Need To Have Procedural and Substantive Divide
	Prof. Leff starts in his lengthy paper by a criticism of s. 2.302 of the Uniform Commercial Code
	He observed (p. 539)
Chapter VIII	Procedural Unfairness: Comparative Law
	UCTA (1977): (procedural unfairness)
	UTCCR (1999): (procedural unfairness)
	Fair and Reasonable Test: (procedural)
	South Africa
	Guidelines to Court: Procedural aspects
	Canada (procedural unfairness)
	Australia (procedural unfairness)
	Section 14: Executed Contracts
	New Zealand (procedural unfairness)
Chapter IX	Substantive Unfairness: Comparative Law
	United Kingdom
	UCTA (1977) (substantive unfairness)
	Bill of 2004 prepared by UK and Scottish Law Commissions)
	South Africa: Provisions of the Draft Bill attached to the S.A. Law Commission Report, 1998 (p 47)
	Section 1(3): Preventing unfairness
	Canada: (substantive unfairness)
	Australia: (substantive unfairness)
	New Zealand: (substantive unfairness)
Chapter X	Segregating Procedural and Substantive Provisions of The Indian Contract Act, 1872 and The Specific Relief Act, 1963
	Segregating Procedural and Substantive Provisions of The Indian Contract Act, 1872 and The Specific Relief Act, 1963
(A)	Procedural unfairness: Indian statute law:
	Indian Contract Act, 1872
	Specific Relief Act, 1963
(B)	Substantive unfairness: Indian Statute Law
	Indian Contract Act, 1872
	Specific Relief Act, 1963
Chapter XI	Need To Define 'general Procedural Unfairness' and 'general Substantive Unfairness' Under The Indian Law
	Need To Define 'general Procedural Unfairness' and 'general Substantive Unfairness' Under The Indian Law
	In Irrawady Flotilla Co. vs. ILR 18 Cal. 620 (PC), the Privy Council observed
Chapter XII	Discussion and Recommendations for Draft Bill (2006) on Unfair Terms (Procedural and Substantive)
	Discussion and Recommendations for Draft Bill (2006) on Unfair Terms
	Section 2(i) defines 'voidable contract' as follows
	Our definition of 'contract' in section 2(a) of the Bill will be as follows
	Hence, we propose to define 'Court' in section 2(b) as follows
	Procedural unfairness separately defined in section 5
	Debate whether mere proof of procedural unfairness has to be coupled with some unfair advantage or unfair disadvantage
	learned Judge referred to what Richard A. Lord stated in the Commentary on, Williston on Contracts (4th Ed) (1998)
	Guidelines: for procedural unfairness: section 6
	General substantive fairness: section 12
	Section 62 of the Sale of Goods Act states
	Choice of Law
	Burden of Proof
	Section 15: Act to apply to executed contracts
	Section 17: Reliefs to be granted by Court
	Section 18 applicability of the Act and exemptions
Annexure	Unfair (Procedural and Substantive) Terms in Contract Bill, 2006
Chapter I	Preliminary
1.	Short title, extent and commencement
2.	Definitions
Chapter II	Procedural Provisions and Procedural Unfairness
3.	Procedural provisions of the Indian Contract Act, 1872 (9 of 1872)
4.	Procedural provisions of the Specific Relief Act, 1963 (47 of 1963)
5.	General procedural unfairness
6.	Guidelines for purposes of determining general procedural unfairness under section 5
Chapter III	Substantive Provisions and Substantive Unfairness
7.	Substantive provisions of the Indian Contract Act, 1872
8.	Substantive provisions of the Specific Relief Act, 1963
9.	Exclusion or restriction of certain liabilities to be substantively unfair
10.	Exclusion or restriction of rights, duties or liabilities referred to in section 62 of the Sale of Goods Act, 1930
11.	Choice of law clauses
12.	General substantive unfairness
13.	Guidelines for purposes of determining general substantive unfairness under sections 9 to 12
14.	Burden of proof
15.	Provisions of the Act to apply for executed contracts
16.	Court's power to raise an issue of unfairness of contract or a term thereof
17.	Relief that may be granted by Court
18.	Applicability of the Act and exemptions