What Is Unconscionable Contracts in India

There are several other judgments in which the courts have ruled that these arbitrary and inappropriate clauses in contracts are unscrupulous and have ruled that the principle of arbitrariness should not be extended to employment contracts in order to safeguard the interests of workers. If the court concludes in a dispute that a contract is unscrupulous, it will usually cancel the contract. No specific compensation or benefit is granted, but the parties are released from their contractual obligations. The Indian Contracts Act of 1872 does not provide for any specific legislative provisions to relieve the weaker part that is subject to unscrupulousness. The same position was described in the report of the 103rd Law Commission on “unfair contract terms” as incapable of regulating this absurdity of lack of scruples. To remedy these contracts, they must be bound or covered by a provision of the Indian Contracts Act of 1872. [16]”23. What considerations and objectives are legal and which are not? – The consideration or the object of an agreement is lawful, unless – the counterparty or the object of an agreement is lawful, unless prohibited by law; or is of such a nature that, if authorized, it would nullify the provisions of a statute; or fraudulent; or involves or implies a violation of someone else`s person or property; or the Court considers them immoral or contrary to public policy. In each of these cases, the consideration or the object of an agreement is considered illegal. Any agreement the object or consideration of which is unlawful is null and void. A typical example of an unscrupulous contract is when one party is an experienced trader in one type of business, while the other party is an average consumer. [1] accessed November 23, 2018.

The right not to be scrupulous should not be limited to contracts. Some of the cases where undue influence is exerted outside of contracts influence Pardanashin women and force a sick person to transfer their property to someone. Such a law should be applicable to all transactions, since in addition to commercial contracts, there are various transactions in which undue influence is exercised. • Procedural incapacity – Lack of procedural scruples occurs when the parties are in a negotiating situation. One party has more bargaining power than another. Employers include inappropriate clauses in employment contracts and impose very unfair conditions on employees. In Central Inland Water Transport Corporation Ltd.c. Brojo Nath Ganguly, the Supreme Court ruled that a clause providing for the termination of the services of a permanent employee by means of a three-month notice period against him is arbitrary, inappropriate, contrary to public order and therefore unscrupulous. In a similar case, the Supreme Court ruled that a clause was unscrupulous, since it conferred unbridled and arbitrary powers on the power to terminate the services of a permanent employee without giving reasons for such dismissal. Section 16 of the Indian Contracts Act defines “undue influence” as a relationship between two parties in which one party is able to dominate the will of the other party and exploit it excessively. [3] In addition, under section 19A of the Act, such a contract is considered countervailable at the discretion of the party whose consent was unlawfully given.

[4] In addition to undue influence, section 19 identifies three other grounds (coercion, misrepresentation and fraud) that make a contract voidable at the choice of the party whose consent has been obtained. In addition, section 23 nullifies an agreement if the subject matter of the agreement is illegal, immoral, etc.[5] While there are several reasons to make a treaty unscrupulous, the doctrine of unscrupulousness is contained in section 16 of the Indian Contracts Act, which speaks of “undue influence.” The main reason for this is the difficulty of proving the obstruction of free consent under undue influence in relation to coercion or fraud. In other words, section 16 can be said to lead to moral coercion, as opposed to physical coercion under section 15 of the Act.[6] The 199th report is the one that gave the concept of lack of scruples the kind of attention it deserved because of the impact it brings to an increasingly commercialized economy. The Unfair Terms (Procedural and Substantive Terms) Bill (2006)[27] has been proposed for presentation and adoption by Parliament, which would serve several purposes. Going chronologically is the hallmark of any legislation, so it was suggested that a working definition of “unscrupulous” should be established before legislating or establishing legal guidelines. In the subsequent adoption of a law, it was proposed to guide it by the United Kingdom,[28] taking into account its experience and the fact that most of our laws are based on the common law system established by the United Kingdom and spread throughout their colonization process. Unscrupulous is usually a term we encounter when we read cases of social legislation in which it is repeatedly used to describe the glaring inequality that the court is trying to resolve. The term unscrupulous means an act that is bad or immoral enough for a person to be ashamed of their actions.[1] The legal dictionary changes its meaning to some extent by defining lack of scruples as unreasonableness and injustice.[2] Although the two dictionary meanings have a slight difference in their definition of the term, both have in common that the term unscrupulously encompasses a certain level of boring activity that is subjective in nature. The doctrine of lack of scruples developed in the English courts of equity[3] in the 18th century can be associated with this.

This doctrine was used in the courts of equity to do justice to parties who had entered into extremely unreasonable and unfair contracts in times of necessity, and it has since been developed into a common law doctrine.[4] However, this presumption of undue influence can only be raised if one party is able to influence the will of the other party, and this presumption cannot be raised even if two equal parties are engaged in a difficult activity.[10] Once the presumption has been raised, the burden of proof lies with the other party to prove that it did not exert undue influence, which is difficult to prove when the conditions shock the judicial conscience of the court.[11] The courts will investigate the start of the transaction or its subsequent transactions to determine if there is anything unscrupulous that renders the contract unenforceable.[12] The court will not consider unequal bargaining power until the presumption of undue influence has been established and, therefore, general cases such as insufficient financial consideration[13], high interest rates in a loan agreement[14] or a claim in a lawsuit that exceeds the money initially lent[15] will not be directly affected by the lack of scruples. However, once the presumption has been raised, the court will consider whether unequal bargaining power could have led the weaker party to accept an unscrupulous contract.[16] Therefore, unequal bargaining power is a new way for the courts to intervene in trade agreements, where there will always be unequal bargaining power. Surprisingly, Article 2-302 of the UCC applies only to transactions involving the sale of goods. However, there are various other transactions in addition to the sale of goods such as leases, transactions that govern the relationship between the bank and its customer, etc. Fortunately, these were covered by section 208 of the Second Contracts, which is an international treaty and establishes general principles for common law contracts. Article 208 is defined as follows: “If a contract or a provision thereof is unscrupulous at the time of the conclusion of the contract, a court may refuse performance or perform the rest of the contract without an unscrupulous clause or restrict the application of an unscrupulous clause to avoid an unscrupulous result”. [16] Lack of scruples is not clearly defined in either statute, so it is best to rely on a few cases to better understand the concept of lack of scruples. Lack of scruples is not defined anywhere in Indian law. There have been various debates on this issue and the Law Commission of India recommended in its 103rd and 199th reports that there should be changes in existing laws to protect the citizens of our country from unscrupulous treaties. However, we can look at various other provisions of the Indian Contracts Act to understand the doctrine of unscrupulousness and how it is used to avoid contract. In an unscrupulous contract or agreement, one party always has greater bargaining power than the other.

Such treaties are considered arbitrary on their face and give the courts the power to intervene and restore equality and justice. One of the essential elements of a contract valid under the Indian Treaty Act is consensus ad idem, that is, the gathering of minds and when a treaty is formed without meeting minds; it is considered an invalid contract. But even in a case where the meeting of minds is there, but the consent thus given by one of the parties is by force or by deceiving the other party, this is not considered intentional consent, and subsequently the contract is considered unscrupulous in the eyes of the law. .