Exemption Clauses are the contractual terms that limit, alter, change or oust the liability that generally flows from the contractual relationships. Thus, the contracting parties seek to exercise maximum control and contain the risks involved through exemption clauses.1
A common example of exemption clause shall be: "The Vendor shall not be under any liability to the Purchaser for any defects in the goods or for any damage, loss, death or injury (other than death or personal injury caused by the negligence of the Vendor) resulting from such defects or from any work done in connection therewith."2
Special contracts are those contracts which set up well-defined and distinguishable rights and liabilities of the contracting parties.
One of the key features of the latest economic regulation in various countries has been the adoption of effective legislation of consumer protection. The consumer in India is not educated and not organized like the ones in the West. This has been one of the contributing reasons for the continuation of exploitation of consumer class to go unchecked in India.
The preamble of the Consumer Protection Act, 1986, highlights the legislative intent behind the act which reads as, "an Act to provide for better protection of the interest of consumers and for that purpose, to make provision for establishment of consumer councils and other authorities for the settlement of consumer disputes and for matters connected therewith."
The massive shift towards the focus on protecting the consumer interests in recent times has been attributed to the growth of the phenomenon of consumerism.
This is turn led to the advent of effective consumer law legislations across various jurisdictions.
"Consumerism is a social as well as an economic order which encourages the buying of goods and services in ever-greater amounts. This term is sometimes associated with critics of consumption beginning with Thorstein Veblen. Veblen's topic of examination, the newly emerging middle class coming up at the threshold of the twentieth century, is coming to full fruition by twentieth century end through the globalization process."
INDEMNITY CLAUSE AND CONSUMER LAW
Indemnity has been adequately defined under the Indian Contract Act, 1872. Indemnity Clauses are contractual transfer of risk between two contracting parties to mitigate the losses or limit the liability of one or both the contracting parties. Indemnity clauses are the clauses that are incorporated in the contract with the intent to limit the liability of the supplier wherever the supplier may cause damage directly or indirectly.
In earlier welfare jurisdictions, special legislations such as Consumer Protection Act, 1986, did not exist. The dynamics of the market were governed by the principle of "caveat emptor" i.e let the buyer beware. Despite there being ample safeguards in legislations like Indian Contract Act, 1872, and Sale of Goods Act, 1930, consumer interests were always jeopardized.
It has to be borne in mind that the indemnity clause though legally permissible has to surpass the test of reasonability and fairness, in order to sustain judicial scrutiny. The Consumer Law though has not ousted the legality of indemnity clauses, but it goes a long way in regulating and controlling the enforceability of indemnity clauses in the contracts entered between the parties. Such clauses shall withstand the test of law only if they meet the statutory requirements as incorporated under the Consumer Protection Act. The consumer law has precluded the supplier from claiming indemnity clause as a defense if the loss has arisen during the course of the contract due to the gross negligence attributable to the supplier.
CONTRACT OF GUARANTEE AND CONSUMER LAW
In contract, Guarantee is an undertaking that stipulates that an innocent party shall be compensated on account of loss suffered by it if certain terms of the contract are breached.
These are the guarantees that are a basic ingredient of the contract and inalienable. Parties cannot curtail these implied guarantees by contract or otherwise.
The essentials of guarantee are:
- There are generally three parties i.e. principal debtor, creditor and surety.
- Promise by the surety to compensate on event of default committed by the Principal Debtor.
- There should be a valid consideration
- The liability of the Principal Debtor is primary and that of the Surety is secondary.
- There should be a valid contract entered between the parties.
In India, the Contract of Guarantee is governed by Section 126-147 of the Indian Contract Act, 1872.
Thus, in case of breach of a contract of guarantee, the consumer has remedy to seek damages under the Consumer law against the supplier. However, there would still be a set of defense that shall be available in favor of the supplier. For example, if such damage has occurred for reasons beyond the control of the supplier or loss occurring for a reason that was not reasonably foreseeable by the supplier.
CONTRACT OF PLEDGE AND CONSUMER LAW
Pledge is a form of security that acts as an assurance of a parties' performance under the contract. As a general rule, pledges are used as a security in transactions involving loans or pawning of property in lieu of money or as a guarantee that the work in question shall be performed.
"Pledge is a delivery of goods, or the documents of title to goods, by a debtor to his creditors as security for a debt, or for any other obligation. It is understood that the subject of the pledge will be returned to the pledgor when the debt has been paid or the obligation fulfilled."3
"A pledge or pawn is a delivery of chattels or choses in action by a debtor to his creditor as security for his debt or any other obligation. Whilst possession of the thing passes to the pledgee, the property in the thing (i.e. the legal ownership) remains with the pledger."4
The Contract of Pledge is governed by Section 172-181 of the Indian Contract Act, 1872.
Both Pawnor as well as the Pawnee have sufficient rights available to them under the contract of pledge.
The rights available to the Pawnee under the Consumer Law are:
- Right of claiming Retainer
- Right of claiming particular lien
- Right to claim extraordinary expenses.
- Right to bring to an end the contract of pledge on account of any default committed by the Pawnor
The rights available to the Pawnor under the Consumer Law include:
- Right of Redemption
- Right to reclaim the goods
CONTRACT OF BAILMENT AND CONSUMER LAW
Bailment is an arrangement between the parties whereby the possession of goods is transferred temporarily from one person to the other. The arrangement of bailment is statutorily defined under Section 48 of the Indian Contract Act, 1872.
The Contract of Bailment has three essential features:
- There should be delivery of goods from one person to the other.
- The goods have been delivered for some purpose or consideration
- The goods have been delivered with a condition that once the reason for which they have been bailed is achieved, they shall be dealt with in a way that was agreed between the parties.
The Bailee has several rights with him in under the Consumer Law to seek appropriate remedies. Such remedies of the Bailee includes:
- Right to interplead if the goods are claimed by some other person
- If the Bailee is wrongfully denied by some third person to use such goods, the Bailee shall assume the position of the Bailor as far as his rights against that person are concerned.
- Right to claim particular lien
- Right to claim general lien
- Right to claim compensation in case the goods are faulty
- Right to claim necessary expenses
Whereas, the Bailor shall have the following rights available to him:
- Right to terminate the contract of bailment. The Bailor can terminate the contract of bailment if the Bailee does or omits to do anything which is inconsistent to the contract of bailment entered between the parties.
- Right to demand the return of goods.
CONCLUSION & SUGGESTIONS
The idea of effective consumer law is linked with an idea of having an effective and well informed pool of consumers. The idea of having effective laws to promote consumer interests are closely linked with an idea of having an organized group of consumers who are given statutory support to file consumer complaints.
The Consumer Protection Act, 1986, implies the guidelines which the United Nations has suggested for incorporation to ensure best consumer protection. It is an undeniable fact that many consumer movements are already working in the country and spreading fast countrywide. However, it is still in its primitive stage due to such consumer movements often failing to achieve the desired success. They are usually confined to certain areas or to low consumer awareness levels. It is crucial to develop awareness campaigns in the entire country through imparting proper education to consumers to understand the precise legal framework pertaining to their rights and responsibilities as consumers. It is a draconian task to educate a mass of more than 130 crores, that too representing several diverse groups and categories. Difficulties are more in the rural regions with lower literacy rate that makes them more susceptible to exploitation by the departments or ministries concerned.
Hence, it is imperative that a legal framework is adopted with the executive at the helm of affairs to formulate a multi pronged strategy involving aggressive consumer awareness campaigns along with a sharpened legislation to ensure that illiteracy never contributes to the exploitation of consumers.
1 Mckendrick Contract Law: Text, Cases and Materials (2008) 101
2 This clause was found in the English case of British Fermentation Products Ltd v Compare Reavell Ltd 1999 BLR 352; Mckendrick 437
3 Dictionary of Banking by F.E. Perry & G.Klein, 3rd Edn, 1988, p.240
4 Thomson's Dictionary of Banking by F.R. Ryder & D.B.Jenkins, 12th Edn, 1974, p.462
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.