Standard Form Contracts

STANDARD FORM
CONTRACTS &
PROMISSORY
ESTOPPEL
STANDARD FORM CONTRACTS
 Due to enormous increase in the volume and
complexities in trade and business, a
business concern may have to enter into a
large number of contracts.
 For the sake of convenience a standard form
of agreement may be used.
 The contracts with standard terms may be
drafted by one party and on the same terms
he may enter into contracts with numerous
persons.
EXAMPLES
 Insurance companies may draft insurance
contracts with standard terms.
 Terms and conditions printed on any railway
ticket.
 Terms printed on receipts issued by dry
cleaner etc.
EXCLUSION OR LIMITATION OF
LIABILITY BY ONE PARTY
 In standard form contracts one party who
drafted the terms, generally occupies greater
bargaining position.
 And usually this party drafts the terms which
suits him most.
 They usually tried to limit or exclude their
liability.
 To protect the interest of weaker party in
these kind of contracts certain rules are there.
Cont......
1. SIGNATURE
 A person who signs a documents which
contains contractual terms is normally
bound by them, even though that person
has not read them.
 Without signature terms may not be
binding on the party.
2. THERE SHOULD BE NO MISREPRESENTATION
 Even if a person signs any document he is not bound if there exits any
kind of misrepresentation.
 In Curtis v. Chemical Cleaning and dyeing co. (1951)
 Mrs. Curtis delivered her white satin wedding dress to the defendants for
cleaning.
 She was asked to sign a receipt, and she was orally told that receipt
contains defendants did not take any responsibility for damage to beads
and sequins.
 In fact there was one exemption clause that defendant were not liable
for any kind of damages to articles.
 When Mrs. Curtis received her dress it was badly stained
 Whether defendants are liable to Pay damages?
DECISION
 Court held that there is misrepresentation
from defendants. So they cannot plead
exception on the basis of exemption clause
and are liable to pay damages.
3. THERE SHOULD BE A REASONABLE
NOTICE OF THE CONTRACTUAL TERMS
 In order that the terms of a contract become
binding, all that is necessary to draw the
attention of the other party to those
conditions.
 If attention of the party has been drawn
towards the conditions it constitutes a valid
contract.
PARKER SOUTH EASTERN
RAILWAY CO.’S CASE (1951)
 A deposited his bag in a cloakroom managed
by B.
 In return he got a receipt on face of which it
was stated “ See Back”
 One of the condition on the receipt was that
B’s liability is restricted to only £10.
 A’s bag which was of value of £24.10 was
lost.
 A demanded £24.10 from B and B offered
£10.
 Determine B’s liability.
DECISION
 As proper notice has been given by the
cloakroom’s owner, his liability is limited to
£10 only.
4. NOTICE SHOULD BE
CONTEMPORANEOUS WITH THE CONTRACT
 Notice should be given while the contract is being entered
into and not afterwards.
 Olley v. Marlborough Court Ltd. (1949)
 The plaintiff and her husband hired a room in defendant’s
hotel.
 They paid for one weeks boarding and lodging in advance.
 When they entered into the room they found one notice
which stated: “the proprietors will not hold themselves
responsible for the articles lost or stolen, unless handed
to the manageress for safe custody”
 Plaintiff’s property got stolen from the room.
 When sued, defendant sought exemption from liability on
the basis of notice.
 Whether defendants are liable?
DECISION
 Court held that notice was not
contemporaneous with the contract, so
defendant cant claim exemption on the
behalf of said notice. Court held them liable
to pay compensation to plaintiff.
5. THE TERMS OF CONTRACT
SHOULD BE REASONABLE
 It is not enough that the terms of the
contract have been brought to the notice or
knowledge of the other party.
 Terms of contract should also be reasonable.
 If the terms are against the public policy or
unreasonable, they will not be enforced
merely because they were printed on the
bill.
LILLY WHITE V. MUNUSWAMI
(1966)
 Munuswami gives one saree for dry clean to
M/s Lilly White firm.
 The same has been lost by the firm.
 There was one exception clause that firm
will be liable to pay only 50% of the article in
case the article is lost.
 Plaintiff claimed Rs. 220 and firm agreed to
pay Rs. 110.
 What will be the fate of this case?
DECISION
 Court held that this exemption clause is
against public policy, so Munuswami is
entitled for Rs. 220.
6. STRICT INTERPRETATION OF
THE EXEMPTION CLAUSE
 Wallis v. Pratt (1911)
 There was a sale of seeds by sample and described
as “ English Sainfoin”
 One exemption clause was there stated: “ the
sellers give no warranty, express or implied as to
growth and description, or any other matter”
 The seeds were actually “Gaint Sainfoin”
 The appellants who sold the seeds further forced to
pay compensation and they demanded same from
respondents.
 Respondent claimed exemption on the basis of
clause.
 What will the fate of this case?
DECISION
 Court held that respondent can claim
exemption from warranty but not from the
condition. Seeds must be according to the
description also. So they are liable to pay
compensation.
7. FUNDAMENTAL BREACH OF
CONTRACT
 Enforcement of terms and conditions of a
standard form contract must not result in
fundamental breach of contract i.e. Main
obligation of the party.
 Eg: “ we promise to do a thing, but in case

we failed to do so there will be no liability of
the same.”
ALEXANDER V. RAILWAY
EXECUTIVE (1951)
 Plaintiff deposited his luggage in defendant's
cloakroom.
 In return he got a receipt with exemption
clause exempting defendant from liability.
 Luggage of plaintiff was handed over to some
other person even without the production of
receipt.
 Defendant pleaded exemption on the basis of
exemption clause.
 Determine defendant’s liability.
DECISION
 It was held that non delivery of luggage to
plaintiff amounts to fundamental breach of
contract so he can not plead exemption and
is liable to pay damages to plaintiff.
8. NON CONTRACTUAL
LIABILITY
 In cases where more then one kind of liability arises,
exclusion of contractual liability may not negative
any other kind of liability.
 White v. John Warrick and co. Ltd. (1953)
 Plaintiff hired a cycle from defendants under
agreement stipulating that “Nothing in this
agreement shall render the owners liable for any
personal injury”
 While plaintiff was riding the cycle its saddle tilted
and as a consequences he received personal injuries.
 Court held that exemption clause excluded only
contractual liability but defendant can be made
liable under law of torts for negligence.
9. LIABILITY TOWARDS THIRD
PARTY
 Exemption clause operates against the
parties only.
 It will not exclude the liability of any third
party.
 Eg: if A and B enter into a contract and B
exempts his liability his servant C can be
made liable for any kind of negligence
caused by him.
10. STATUTORY PROTECTION
 There are so many laws which prevents any
party from taking undue advantages in
standard form contracts. Some of them are
quoted bellow:
1. The Misrepresentation Act 1967
2. The Sale of Goods Act 1979
3. Road Traffic Act 1960
4. Unfair Contract Terms Act 1977
5. Consumer Protection Act 1986
11. CONTRA PROFERENTEM
RULE
 When there is doubt or ambiguity in any term
of standard form contract, rule of contra
proferentem provides that such doubt or
ambiguity must be resolved against the party
proffering the written document and in
favour of the other party.
 In other words the construction must be
adopted which would be least favourable to
the person putting forward the instrument.
PROMISSORY
ESTOPPEL
 Basically a contractual obligation arises from
a contract between two parties.
 But in some cases a person may become
bound by the application of law of Estoppel.
 When one party has made a promise or given
assurance to another person and other
person acted on the faith of the same, the
person making promise or giving assurance
becomes bound thereby, due to the
application of law of estoppel.
EMERGENCE OF PROMISSORY
ESTOPPEL
 Central London Property Trust ltd. v. High Trees
House Ltd. (1947)
 In 1937 claimant leased to defendant a block of flats
for a term of 99 years at a rent of £2500 a year.
 In 1940 many of the flats were empty on account of
the war and the claimant agreed to reduce the rent
to £1250 during war period.
 By 1945 the flats were again full. In September 1945
the receiver of the claimant demanded full rent for
the future.
 Subsequently he brought an action claiming the full
original rent for future.
Cont....
 Denning J. Held that the action should
succeed.
 Had the claimant sued for the full rent
between 1940-45, it would have been
estopped by its promise from asserting its
legal rights to demand payment in full.
 In other words, promise to accept less rent
while wartime conditions prevailed was
binding despite the absence of consideration.
DOCTRINE OF EXECUTIVE
NECESSITY
 Some times it is pleaded that doctrine of
promissory estoppel is not applicable against
the government, as govt. Cannot bound itself
to fetter its future executive actions.
 In other words it is contended that doctrine
of executive necessity is on priority and it
overpowers doctrine of promissory estoppel
 Which empowers the govt. To act according
to the necessity or needs of the society.
 But this contention was denied by supreme
court on many occassions.
POURNAMI OIL MILLS V. GODFREY
PHILIPS INDIA LTD. (1986)
 State of Kerala issued an order dated 11.4.79
whereby new small scale units were invited to set
up their industries in the state.
 It was also announced that industries set up after
11.4.79 will be exempted from the payment of sales
and purchase tax for a period of five years.
 State issued another notification on 21.10.80
withdrawing the exemption relating to purchase tax
retrospectively.
 Which was challenged by the owners of industries
on the principle of promissory estoppel.
 Whether demand of industry owners is legal or
not?
 Court held that the industries set up
between 11.4.79 to 21.10.80 were entitled
for the exemption from sales as well as from
purchase tax.
 State can not impose the tax retrospectively.
 Though only new industries set up after
21.10.80 were liable to pay purchase tax.

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STANDARD FORM

 Eg: “ we promise to do a thing, but in case

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