One Sided Agreement
Law Commission of India - 199th Report
The Law Commission of India in its 199th Report, addressed the issue of "Unfair (Procedural & Substantive) Terms in Contract". The Law Commission inter alia recommended that a legislation be enacted to counter such unfair terms in contracts. In the draft legislation provided in the Report, it was stated that:
"... a contract or a term thereof is substantively unfair if such contract or the term thereof is in itself harsh, oppressive or unconscionable to one of the parties."
Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer's Agreement
Agreement – One sided agreement - Whether the terms of the Apartment Buyer's Agreement were one-sided, and the Apartment Buyers would not be bound by the same - The clauses reflect the wholly one-sided terms of the Apartment Buyer's Agreement, which are entirely loaded in favour of the Developer, and against the allottee at every step - The terms of the Apartment Buyer's Agreement are oppressive and wholly one-sided, and would constitute an unfair trade practice under the Consumer Protection Act, 1986 – Hold that the Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer's Agreement - Consumer Protection Act, 1986, Section 2(1)(c).
One sided agreement - State Consumer Fora and the National Commission have power to declare contractual terms which are unfair, as null and void
Consumer Protection Act, 1986, Section 2(1)(c) - Consumer Protection Act, 2019 - Agreement – One sided agreement - Incorporation of 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 - Even under the 1986 Act, the powers of the consumer fora were in no manner constrained to declare a contractual term as unfair or one-sided as an incident of the power to discontinue unfair or restrictive trade practices - An "unfair contract" has been defined under the 2019 Act, and powers have been conferred on the State Consumer Fora and the National Commission to declare contractual terms which are unfair, as null and void - This is a statutory recognition of a power which was implicit under the 1986 Act.
Agreement contained one-sided clauses, which were not final and binding on the apartment buyers, and would constitute an unfair trade practice.
Consumer Protection Act, 1986 Section 2 (r) - 'Unfair trade practice' – Agreement - A term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder.
6.3 The National Commission in the impugned order dated 23-10-2018 [Geetu Gidwani Verma v. Pioneer Urban Land and Infrastructure Ltd., 2018 SCC OnLine NCDRC 1164] held that the clauses relied upon by the builder were wholly one-sided, unfair and unreasonable, and could not be relied upon.
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6.8. A term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder. The contractual terms of the agreement dated 8-5-2012 are ex facie one-sided, unfair and unreasonable. The incorporation of such one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2(1)(r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the builder."
Contractual terms of the Agreement are ex-facie one-sided, unfair, and unreasonable
Consumer Protection Act, 1986 Section 2 (r) - 'Unfair trade practice' – Agreement - The contractual terms of the Agreement are ex-facie one-sided, unfair, and unreasonable - The incorporation of such one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2 (r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the Builder - We have no hesitation in holding that the terms of the Apartment Buyer's Agreement were wholly one-sided and unfair to the Flat Purchaser - The Builder could not seek to bind the Flat Purchaser with such one-sided contractual terms.
Held,
Builder agreement - Finding of National Commission that the Clauses relied upon by the Builder were wholly one-sided, unfair and unreasonable, and could not be relied upon, upheld - Buyer's Agreement - Stark incongruities between the remedies available to both the parties - Whereas entitles builder to charge Interest @18% p.a. on account of any delay in payment of installments from the Flat Purchaser and to cancel the allotment and terminate the Agreement, if any installment remains in arrears for more than 30 days, if the Builder fails to deliver possession of the apartment within the stipulated period, the Flat Purchaser has to wait for a period of 12 months after the end of the grace period, before serving a Termination Notice of 90 days on the Builder, and even thereafter, the Builder gets 90 days to refund only the actual installment paid by the Flat Purchaser, after adjusting the taxes paid, interest and penalty on delayed paymentsand pay Interest @9% p.a. only – Further Agreement entitles the Builder to serve a Termination Notice upon the Flat Purchaser for breach of any contractual obligation and if flat purchaser fails to rectify the default within 30 days of the Termination Notice, then the Agreement automatically stands cancelled, and the Builder has the right to forfeit the entire amount of Earnest Money towards liquidated damages, whereas if Flat Purchaser fails to exercise his right of termination within the time limit provided then he shall not be entitled to terminate the Agreement thereafter, and shall be bound by the provisions of the Agreement.
The stringent terms imposed on the flat purchaser are not in consonance with the obligation of the Developer to meet the timelines for construction and handing over possession, and do not reflect an even bargain
The terms of the agreement authored by the Developer does not maintain a level platform between the Developer and the flat purchaser. The stringent terms imposed on the flat purchaser are not in consonance with the obligation of the Developer to meet the timelines for construction and handing over possession, and do not reflect an even bargain. The failure of the Developer to comply with the contractual obligation to provide the flat within the contractually stipulated period, would amount to a deficiency of service. Given the one-sided nature of the Apartment Buyer's Agreement, the consumer fora had the jurisdiction to award just and reasonable compensation as an incident of the power to direct removal of deficiency in service.
Wg. Cdr. Arifur Rahman Khan & Others v. DLF Southern Homes Pvt. Ltd., 2020 SCC Online SC 667