contract

This article is written by Komal Saloni from Jamnalal Bajaj School of Legal Studies, Banasthali Vidyapith. This is an exhaustive article which deals with the legality of one-sided contractual terms in India.

Introduction

Drafters of contracts are inherently inclined to transfer risk to the other party. The same can be witnessed even in construction contracts. Though the risks that might appear on a construction project are not always foreseeable, both the owner and contractor acknowledge that the financial consequences of those risks are frequently important. Neither party accepts such responsibility willingly. Subsequently, transferring risk creates one-sided contractual terms. The immensity of a particular risk, or the absolute amount of risks, transferred to the other party can be comprehended as excessive. When that imbalances occur between the parties, it can be a matter of concern.

One-sided contractual terms 

In a one-sided or unilateral contract, there are two parties in which one is, called the offeror, who makes an offer to the other party. The offeree is the person who accepts or rejects the offer. In case the offeree acts on the offeror’s promise, then the offeror is legally bound to fulfill the contract, yet an offeree cannot be compelled to act (or not to act), as long as no return promises have been made to the offeror. Thereafter, in case an offeree has performed their part, then only the offeror enforceable promises subsist. 

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Example of unilateral contract:- Reward Offers by the offeror (the party who is offering the reward) cannot compel a person or other party to accept the reward offer. But, if the offeror does not give the reward after the fulfillment of the contract’s requirements by the offeree, in that case, an offeree can sue the offeror for breach of contract. In a nutshell, a unilateral or one-sided contract is that where only one party makes an express promise or undertakes a performance without attaining a reciprocal agreement from the other party.

A bilateral contract is different from a unilateral contract. In bilateral contracts, the parties exchange their mutual obligations which are often prevalent in business transactions where both the parties necessarily make various promises for the performance of one action, in exchange for the promise of the other. 

For example – The sale of goods i.e., if a pizza delivery store promises to deliver pizza at a specific time, or otherwise they would offer it for free, in this situation they are creating a bilateral contract between the buyer and the seller. Consequently, if they don’t deliver what they promise, they will have to face certain counter-reactions.

Breach of contract

When any of the parties fail to do their promised part of the terms and conditions on which both the parties agreed to contract, that is called to be a breach of contract. However, not all the violations are considered equal; the material breaches that result in damages to the non-breaching party account for the breach of contract; the immaterial breach of contract is still an issue yet it doesn’t account to affect the primary purpose of the contract and doesn’t damage the other party involved in the contract.

Consequences of breach of contract

Breach of contract occurs when one of the parties of the contract does not keep on their agreed terms and conditions of contract. However, breaching a contract can be costly. Parties are liable to pay the compensation that varies and depends upon the causes by which breach of contract occurred and the impact that it has on material damages – the contract’s core. Also, In the Indian Contract Act, Section 73, 74 and 75 deals with the consequences for breach of contract. With the implication, what shall be a liability and the course of action in case there is a breach of contract by either party. Legal action can be taken to remediate losses caused due to failure of execution which can be costly to the parties of the contract. Before proceeding with the lawsuit, it is essential to be aware of the consequences of the breach of contract.

Unfair trade practices

An unfair trade practice can be defined as any business or trade practice which, to promote and sell, use or supply any goods & services, adopts any unlawful, unfair method, or deceptive practices. For example – many construction contracts contain a so-called no-damage-for-delay clause. Such a clause provides a defence to the contractors that any delay not caused by the contractor falls under the force majeure event which is an extension in the contractual period and a sole remedy for the contractor. Such a clause will restrict the contractor’s right to additional compensation.

Force majeure – a defense to contractors  

Force majeure is a concept in contract law that describes a clause that exempts the parties to the contract from performing their contractual obligations in the event of extraordinary circumstances or the occurrence of an unforeseen situation that is completely beyond the control of the parties to the contract and that makes it impossible for the contract to be fulfilled.

Instances that might trigger a force majeure clause into effect include a disease epidemic, declaration of war, or an earthquake, hurricane, or any other natural disaster events that fit within the legal term, “Act of God.” Further, the mere occurrence of such an event is not adequate to trigger a force majeure clause. It must also include the situation that the catastrophic event directly averted at least one of the parties to a contract from attaining their contractual obligations.

COVID-19 and force majeure

For many individuals and companies, the COVID-19 pandemic accounts for a force majeure event. Consistently, many people and corporate entities are probing relief from contractual agreements in which they previously entered into, before the pandemic. Force majeure contract clauses are effectively triggered by the pandemic and probably to happen in situations where the lockdown and quarantine are necessarily imposed by the government making it impossible for one or both parties to fulfill their contractual obligations. However, it’s important to consider that just a general decrease in business conditions, such as recession, is not deemed as sufficient grounds for a party to claim relief under the force majeure provision in a contract.

COVID influence lease agreements

Retailers say that they will pay rent only in proportion to actual business during the lockdown. However, the top retailers and restaurant groups such as Reliance Retail, Domino’s, Madura Fashion & Lifestyle, Mamagoto, Plum by Bent Chair, Farzi Cafe, Wrangler, Lee, and Cafe Warehouse among others, are demanding on introducing clauses in all new leases that specify that they will pay only in percentage to their actual business, in the affairs of government-mandated closures of stores and malls.

Concept of force majeure with the current COVID-19 scenario

Let us understand the concept of force majeure in a contract with the following hypothetical situation. ‘A’ is a company that entered into a supply contract for a non-essential good with Company ‘B’ and aforesaid supply contract develops specific reference to the occurrence of a force majeure event and consequences of the same.

The provision of force majeure in the supply contract includes that a notice of the happening of the event shall be given by either party to the other within 30 days from the date of occurrence of such event, and simultaneously the obligations of Company ‘B’ to supply the goods to Company ‘A’ and obligation of Company ‘A’ to make payments to Company ‘B’ for such goods shall be deferred for six weeks and within the ambit of orders of government. 

Since in the present times, owing to the coronavirus, the lockdown imposed by the government can be interpreted as an act or order of the government, where Company ‘B’ will be required to issue a notice to Company ‘A’ stipulating that such an event has taken place and the lockdown is beyond the control of Company ‘B’ and hence the provisions of force majeure clause will set off and all obligations of Company ‘A’ and Company ‘B’ shall be deferred for a period till the order for lockdown continues to be in effect.

Impact of the concept of force majeure on businesses, companies, and organizations in the stir of COVID-19

COVID-19 has impacted the cross-border trade, the real estate market, specifically the home-buyers, the developers, the commercial lease arrangements, joint-venture agreements, EPC (engineering, procurement & construction) as well as M&A deals in India. It also hits the parties’ ability to meet their contractual obligations owing to restrictions in movement, increase costs of products due to the scarcity of raw materials, stoppage of production, lack of funds, labor shortages, disturbance in the supply chains, etc.

At present, companies in different sectors have already declared a force majeure which includes Gateway Terminals India Private Limited, Indian Oil and Mangalore Refineries, Adani Ports in Gujarat, and also the private highway developers such as Ashoka Buildcon, IRB Infrastructure, and Hero MotoCorp. Due to Covid-19, the widespread disruption in business, manufacturing, and transport, set the stage for India to see an inundation of ‘force majeure invocations’. 

Of course, in such a situation, the courts and arbitrators will have to judge and decide each dispute on an individual basis, which would be based upon the intent of the parties, the terms of the contract, and the steps taken to mitigate. In 2020, the Ministry of Finance has by way of an office memorandum clarified that the disruption of the supply chains due to the spread of coronavirus in China or other countries should be considered as an occurrence of natural calamity and the “force majeure clause” may be invoked, wherever considered appropriate, ensuing the due procedure.

Force Majeure: how successful has the law been post-COVID in India

In India, it is relevant to observe that the instances of Covid-19 getting recognized in the sphere of contractual law by the Government of India, Ministry of Finance, through the Office Memorandum dated 19.02.2020 where it interprets under para 9.7.7 of the Manual for Procurement of Goods, 2017 (which didn’t include “pandemics” or “epidemics” as a force majeure event), and specifically count Covid-19 under the bracket of force majeure, considering it as a natural calamity. Subsequently, further reliefs were announced, including relaxation in bank guarantee norms and extension of time as well as concession period with no cost to the contractors. 

Regarding road projects, several reliefs were granted for all national highway works, including the expeditious release of payments, an extension of time, expeditions approval of change of scope, an extension of the concession agreement, relaxation of PBG rules, relaxation in remittance of toll money for tolling contractors, etc. 

Regulators such as the Reserve Bank of India (RBI) and Securities Exchange Board of India (SEBI) had also introduced several relief measures such as imposing a moratorium/deferment of 3 months on payment of loan installments and interest on working capital facilities, and exemptions from several compliance and disclosure requirements. Further, considering the severity of the situation, the moratorium was extended and the same is continuing. Likewise, amendments were also brought to the Insolvency and Bankruptcy Code (IBC) by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2020.

Also, various courts in India have recognized Covid-19 as force majeure. The celebrated judgment of M/s Halliburton Offshore Services Inc vs. Vedanta Limited, 2020 was one of the ultimate judgments in which the High Court of Delhi categorically held Covid-19 to be a force majeure event. However, the court has stated that non-performance or breach of a contract must justify the reason of Covid-19 and the same has to be examined on the facts and circumstances of the individual case and was therefore allowed only in a genuine matter where the party could justify its non-performance or was prevented because of the pandemic. The court also held that a force majeure clause has to be interpreted carefully and in case there is a breach from before the Covid-19 period, in that case, the parties will not be entitled to take the interest of the force majeure clause. 

In another judgment of Mep Infrastructure Developers Ltd. vs. South Delhi Municipal Corporation, 2020, the Delhi High Court especially relied on the Ministry of Road Transport & Highways to grant relief under para 29 in remittance in toll collection from the contractor to South Delhi Municipal Corporation from 26.03.2020 till 90% traffic, compared to the traffic before lockdown period of a weekly basis, stands to restart. Therefore, the Governments concerning certain sectors are voluntarily providing certain reliefs, however, the question remains whether or not the said reliefs are enough. 

One-sided and unreasonable clause : unfair trade practice in apartment buyer’s agreement

In the leading case Pioneer Urban Land And others v. Govindan Raghavan (2019), it was stated that “A term of a contract will not be final and binding in nature if it manifests that the flat purchaser had no choice except signing on the dotted line, on the contract which is formulated by the builder.” It was held by the Supreme Court that the amalgamation of one-sided clauses in a builder-buyer agreement established an unfair trade practice according to Section 2 (1)(r) of the Consumer Protection Act, 1986. The bench comprising Justice Indu Malhotra and Justice UU Lalit also observed that a builder could not strive to confine a flat buyer with one-sided contractual terms contained in the Apartment Buyer‘s Agreement.

Developer (the Appellant) challenged the decision of NCDRC where refund of the installment amount by the apartment buyers was directed on account of unreasonable delay in obtaining the Occupation Certificate and in finishing the construction work. The court discarded an appeal that had been filed by the developer against the order passed by the National Consumer Disputes Redressal Commission i.e., regulating the developer to refund the amount due because of the delay in completing the construction.

Issues raised in the appeal 

  • Determining the date from which the 42 months period for retaining possession is to be calculated under Clause 13.3 – whether it would be from the date of sanction of the Building Plans as affirmed by the Apartment Buyers or from the date of the issuance of the Fire – NOC as contended by the Developer. 
  • Whether the contractual terms were one-sided and the Apartment Buyers would not be bound by the Apartment Buyer‘s Agreement? 
  • Whether the provisions of the Real Estate (Regulation and Development) Act, 2016 shall be prioritized over the Consumer Protection Act, 1986?
  • Whether the Apartment Buyers were entitled to terminate the agreement on account of the inordinate delay in handing over possession, and claim for the amounts deposited to refund with interest?

Observation of the court

The Bench held that it shall be an obligatory demand under the Haryana Fire Safety Act, 2009 to obtain the Fire “No Objection Certificate” before the inception of building construction. The said requirement was specified in the Environment Clearance and also in the sanctioned Building Plans which provided that delivery possession of the apartments would need to be enumerated from the date on which Fire “No Objection Certificate” was issued, and not from the date of the Building Plans being permitted. In the instant matter, the Developer made a delay of approximately 7 months in obtaining the fire NOC.

As regards the second issue, the court held that one-sided contractual terms were an unfair trade practice under Consumer Protection Act, 1986.

The court responded to the third issue by mentioning to the judgment of M/s Imperia Structures Ltd. v. Anil Patni and Anr (2020) where it was held that Section 79 of RERA Act, 2016 is not a bar under the Consumer forum to entertain the complaint on behalf of an allottee. Section 18 of the RERA Act, 2016 specifies that the remedies are “without prejudice to any other remedy available”. In the case of  Emaar MGF Land Ltd. v. Aftab Singh, (2019), it was held that the remedy under the Consumer Protection Act, 1986 is confined to the complaint filed by a consumer as defined by the Act, for defects and deficiency caused by the service provider. The other issues were also in the favour of the allottees.

Dealing with one-sided contracts

Signing a contract for a masterwork can be both intimidating and exciting. The expectation of being employed on an eminent project depends upon the idea of transparency which is paramount towards the company and the additional work resulting from a well-done job. 

Whatsoever, practically the sub-contractor will also be required to agree upon the terms and conditions of projects, whether the project is large or medium is immaterial; they are required to agree to the long as well as complex sub-contract. However, it would be very difficult for contractors to understand each and everything in the standard subcontract agreement – an enormous pyramid of documents including special terms and conditions, general terms and conditions, cross-references to building codes, plans and specifications, and industry guidelines, and many other ambiguous terms. All these terms are deliberated in a manner that provides benefits to the general contractor.

Many contractors simply sign these contracts and hope for the best. Although such blind faith can work on occasion, some simple steps can make the contracts more agreeable:-

  1. Ask the general contractor to make certain variations in terms. Alternatively, general contractors would like to use the same contract with every sub-contractor for simplicity. For the reason that they are working with their standard contract, a person can expect that it will esteem them nearly in every respect. This doesn’t mean that they are reluctant while negotiating. Don’t forget that the general contractor has selected you as their sub-contractor, and there is a possibility that they agree to replace or remove a couple of those one-sided terms to clinch the deal. 
  2. Keep in mind that not all the contractual terms are enforceable. Some of the contracts enclose unenforceable terms. For example: 
  • Most of the sub-contracts enclose a “pay-when-paid” clause. A valid meaning of this clause is that the general contractor has no such obligations to make payment to subcontractors until he is paid by the owner. 
  • Correspondingly, a contract that runs contradictory to the “prompt-payment” laws can only be enforced in the condition that it encounters certain statutory requirements.

These are two examples of contractual terms which could not be enforceable. Regrettably, until you don’t know that terms are unenforceable, you are probably to merely accept them at their face value. Consequently, if you are anxious about a specific contract provision, and in case you were incompetent to persuade the general contractor to alter it, in this case, it is appropriate to consult with an attorney about the enforceability of the particular terms.

  1. In the end, your pre-eminent defense might be your willingness to abandon an adverse contract. It is verifiable that even a bad contract can have some good outcomes. This may permit you to retain your business and encounter payment until the profitable project comes your way. Nevertheless, the gloomy effects of probing into a one-sided contract will frequently overshadow the good. 

At best, a one-sided contract will hitch your resources so you are bound to pass on the next good job that comes across. At worst, an unbalanced agreement may cause you to drop out of your profits increase, which in turn, may constrain you into bankruptcy or towards legal action. Be attentive while probing into a new contract. Even though you will, in no circumstances, be able to persuade a general contractor to get a handle of all the one-sided wording in the contract, with few judicious changes to the contract and a better understanding of which terms will be enforceable, you can enter into a new project coupled with confidence.

Rights of the parties involved

Rights that are guaranteed to parties of the contract through a legally valid contract that have formed the agreement are as follows: 

  • Rights which are in written form; for example- the exclusive rights to copyrighted content. 
  • Rights are also in implied form; for example- each party has a right to transparency and fair disclosure of the contractual facts themselves.

Rights to a contract exist on both sides of the contracted parties, however, will most probably look different. Every contract involves a different set of rights, no two contracts are alike. If one party has the right to avail of the services, subsequently the other party has the duty to provide the services to that party. Contract rights are related but different to the duties to the parties of the contract as those are the obligations to the parties to perform as both the parties are under the terms and conditions of the agreement.  

A contract must clearly describe the following: 

  • The rights and responsibilities of the parties towards the contract.
  • The activities, time-frames for the implementation of the contract. 
  • Assignment of responsibilities if those are permitted and also clarify what are those responsibilities.

There is a need to carry out their obligations by the respective parties to the best of their abilities and their required skills to do so, indeed that is in terms of a contract. There are two types of terms as mentioned: 

  1. Express – These are detailed, clear, and state precisely what is required; they are binding on the parties.  

There are also two types: –

  1. Conditions – conditions to a contract are essential parts of a contract. Breach of such conditions can result in rescission or repudiation and is liable for damages also.
  2. Warranties – warranties to a contract are considered to be minor terms that only approach for damages.
  3. Implied- Implied contracts are deemed to be a part of the contract by law. An implied contract requires a meeting of minds. A court may refuse to read the implied terms into a contract if the point is silent or did not indicate the nature of the terms of that contract. 

Liabilities of the parties involved

Once the parties have entered into a contract, it is the responsibility of each party to make sure that they deliver on what they promise. When the parties failed to do so, they shall be liable for damages to compensate for what the other party may suffer due to the non-fulfillment of the contract by them. This will result in them needing to fulfill their contractual obligations concerning the performance for the completion and discharge of the said contract. In case the party fails to perform the contract, there are various options available to the other parties to claim and stand liable to that party; these all depend on the grounds and circumstances on which the party failed to deliver performance. 

Considering a general rule: the payment of any contract is subsequently payable only when the work is performed and for that amount which is done whatsoever when the work is not completed there payment has been deducted. As a result, if a contractor can complete the installation service for 9 houses where the contract is specified for 10 houses, that 90% of the contract fee would be payable.  

Frustration 

On certain occasions, a contract may be frustrated. It is the legal termination of a contract due to some unforeseen situations. This can prevent the objectives of the contract from being attained, depict its performance as illegal, or make it practically impossible to execute. It could be caused by reasons such as a change in the law, an accident, fire, third-party interference etc. The frustration of a contract defends non-performance and automatically discharges the contract excluding where the terms of the contract override the implied legal provision. However, frustration is not acceptable as an excuse where such circumstance was foreseeable. 

In a case where a contractor only installed the services for 9 out of the 10 houses, if one of the houses had been destroyed by fire before services could be installed, then the contract is frustrated in nature. 

Doctrine of frustration

As general rule parties to the contract are having an intention towards the fulfilment of their part and in case of a breach, the party breaching is liable to compensate for the same. But an exception to this rule is laid down under Section 56 of the Indian Contract Act 1872 which deals with the doctrine of frustration i.e., the acts that cannot be performed. Under this doctrine, a promisor is relaxed from liability under a contract for the breach of contract and the contract will deem to be void.

Section 56 is based on the maxim “lex non-cogit ad impossibilia” which means that the law will not compel anyone to do what he cannot possibly perform.

Breach of contract 

Liability of a party arises in case of breach of contract where parties fail to perform the agreed contract, what they agreed upon fails to deliver that then it is said to be a breach of contract and the parties get liable for the breach of contract. 

However, breach of contract can be related to quality and time even though in construction industries, it is common to work for defective products to be finished; in this situation, it is not any breach of contract on the condition that the faulty work must be rectified within the said period. On the other hand, in case if the contractor refused to correct the mistake or in case not completed in the said time frame which is as mentioned in the contract to be completed, then it would be considered as a breach of contract. Where there is a breach of contract and the parties fail to meet their liability, it is free for the other party to take action and seek redressal.  

Carlill v. Carbolic Smoke Ball Co. (1893)

Facts

As per the facts of this case, a company offered to pay € 100 by advertisement to anyone “who contracted the increasing epidemic cold, influenza, or any disease caused by catching a cold after having used the smoke ball according to the printed directions”. In addition to that  “€ 1000 is deposited in the Alliance Bank showing the company sincerity in the matter’’. According to the prescribed directions, the plaintiff used the smoke balls but still she subsequently suffered from influenza. She was held entitled to recoup the promised reward. It was concluded by the defendants that there was no intention to enter into a legal contract or any such kind of legal relations as it was simply a flurry advertisement; that the offer was not made particularly to any one person and that the plaintiff had also not communicated her intention to accept the offer.

Court of appeal

Bowen LJ easily disposed of the first argument by stating: “Was it intended that the amount of € 100 should be paid on fulfillment of the conditions? The advertisement said that € 1000 is advanced at the bank for the purpose. For that reason, it cannot be said that the statement for € 100 would be intended to be a mere advertisement”. It was also rejected by the Lordship that the misconception of the argument that an offer could not be made at large to the world, by stating, “why should not an offer be made to all the world which is to mature under the contract with any person who comes ahead and performs the conditions? It is an offer to become liable to anyone who, before it is withdrawn, performs the conditions, and even though the offer is made to the world, the contract is made with that limited part of the public who came forward and performed the condition on the faith of the advertisement.”

The kind of contract, in this case, is a unilateral contract, in which the offeree accepts the offer by performing their side of the agreement. It can be conflicted with a bilateral contract, in which there is a communication of promises between the two parties. It was held that all cases of general offers, which are a kind of unilateral contract, demand some act in return for the promise to pay. 

In the case of Australian Woollen Mills Pty Ltd v. The Commonwealth, (1955), it was held by the High Court of Australia that, to raise a unilateral contract,  the promise must be made “in return’’ for the doing of the act. The Court differentiated between a conditional gift and a unilateral contract. The case, in general, seems to signify the connection between the preconditions of offer and acceptance as well as intention and consideration to create legal relations.

One-sided contractual terms constitute unfair trade practice under Consumer Law in India

Ireo Grace Realtech Pvt. Ltd. v. Abhishek Khanna and Ors, (2021)

Facts

As per the facts of this case, the Department of Town and Country Planning had granted a license to Precision Realtors Pvt. Ltd. and Blue Planet Infra Developers, and Madeira Conbuild Pvt. Ltd. to develop a vast housing project called “The Corridors” in Sector 67-A, Gurgaon, Haryana. Afterwards, the licence for construction was transferred to Ireo Grace Realtech Pvt. Ltd. and the building plans of the project were sanctioned by the Directorate of Town and Country Planning, Haryana, on 23-07-2013 which contained a detailed set of terms and conditions, which inter alia incorporated provisions for fire safety and environmental authorization. According to Clause 3 of the Sanctioned Building Plan, authorization from the fire authority was needed to be submitted within 90 days from the issuance date of the Sanctioned Building Plan. Additionally, Clause 17(iv) of the Sanctioned Building Plan required the Developer to procure a no-objection certificate before beginning the construction of the project from the Ministry of Forests & Environment.

In 2013, the Developer opened booking for the apartments. A 2 BHK apartment was allotted to an apartment buyer in Tower-C of the Project on 7 August 2013. Similarly, to various other apartment buyers in the housing Project, allotment letters were issued. The Ministry of Environment & Forest Government of Haryana on December 12, 2013, was required to submit a copy of the fire safety plan as approved by the fire department before the commencement of the Project.

Subsequently, the Developer approached the Municipal Corporation, Commissioner, Gurgaon, for granting of no objection certificate for the firefighting scheme of the project. The said approval for the scheme was granted on 27 November 2014. After that, the apartment buyers received a copy of the apartment buyer’s agreement with a construction-linked payment plan with certain terms and conditions.

On 27 December 2017, Respondent no.1 of this case filed a consumer complaint before the National Consumer Disputes Redressal Commission, inter alia, appealing the amount of sales consideration to refund along with 20% interest/annum, on account of extreme delay on part of the Developer in the accomplishment of construction and getting occupation certificate.

Respondent no.1 inter alia also submitted that; 

  1. The Developer by way of misrepresentation had invited applications from the public for booking flats in the Project on the account  that all the necessary pre-clearance/ approvals concerning the constructions had already been obtained from respective authorities; 
  2. The Developer made false representations to the apartment buyers and was convinced to engage apartments on account that construction of the project would be completed within 42 months from the collection of the initial booking amount.

The Developer replied to the consumer complaint, submitting that in offering possession of the apartments there was no delay on its part, henceforth, the complaint was ulterior and liable to be dismissed. Likewise, numerous other apartment buyers filed complaints about the project before NCDRC. The National Commission inter alia ordered to refund the deposited amounts by the apartment buyers in the project on account of the excessive delay in completion of the construction and getting the occupation certificate. Aggrieved by the said pronouncement, the Developer filed an appeal under Section 23 of the Consumer Protection Act, 1986.

Findings of the court

The Court mentioned that the subsequent delay on part of the Developer in the completion of the construction and producing the offer of possession was unquestioned. Examining the terms of the Apartment Buyer’s Agreement (ABA), the Court established that alike were completely one-sided and entirely weighted in favour of the Developer, and as against the allottee at each step. It was held that the terms and conditions of the ABA were unreasonable and oppressive that would constitute an Unfair Trade Practice under the 1986 Act. The Court undisputedly held that the Developer could not compel the apartment buyers to be bound by the one-sided contractual terms specified in ABAs. The Court, however, in this case, directed the Developer to pay delayed compensation to such allottees. Concerning the allottee that had applied for the Insolvency and Bankruptcy Code, 2016, the Court directed the Developer to refund the amount deposited by him, along with interest. The Court observed that the occupation certificate was still not available (even as on date of the judgment) and the same amounted to deficiency of service. 

Held

The Supreme Court three-judge bench, inter alia, held that the developers cannot coerce apartment buyers to be confined by one-sided contractual terms. Detecting such one-sided agreements burdensome, the Court held that the equivalent would be established as unfair trade practices under the consumer laws in India.

It has also been ensured by the Supreme Court, keeping its progressive and consumer-centric view, that the parties in uneven bargaining positions are placed on an impartial footing. Keeping in mind, the Court has also stated about the prevailing financial impact of the pandemic and the commercial realities of the construction industry on the said sector. It has called for a harmonious balance between the challenging interests of the apartment buyers and developers, to accord requisite impetus to economic development and social welfare as a whole.

Conclusion

Keeping with its progressive and consumer-centric view of one-sided contractual terms in India, the Supreme Court has ensured that parties in unequal bargaining positions are placed on an equitable footing. From the different judgements, it has been laid down that a harmonious balance between the competing interests of both parties is important to accord requisite impetus to economic development and social welfare as a whole. With the one-sided contractual terms at some point in time, the other parties had no other choice except to sign on the dotted line, on the contract which is formulated by the other parties of the contract. In this situation, as aforesaid by the Apex Court, the term of a contract will not be final and binding. Also, the incorporation of such one-sided and unreasonable clauses in the Apartment Buyer’s Agreement constitutes an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act. At last, it is concluded that the party couldn’t strive with the other party with the one-sided contractual terms.

References

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