Explain Standard Form Contract?
Standard form contract refers to the agreement signed by the parties, but the terms and conditions set by one side. The other part of the contract has no ability or a little part to negotiate the terms of the contract with a provision of “take it or leave it” situation. The standard form of contract is also referred to as a boilerplate or adhesion contract. The example of this type of contract is insurance policies where the insurer is in decision making position about the insured subjects or objects. It also refers to the government contract with the government agencies as there is the inclusion of some clauses by the law or regulations (Brook 2012).
The standard form of contract is not illegal per se, and there is a genuine possibility for unconscionability. If any ambiguity occurs, that will be solved by the interpretation against the drafting party of the contract. The standard form of contract is signed between two or more diverse negotiating partners. This contract is lawfully binding the parties to the agreement for doing a certain thing, where bargaining power assigned to one party and it may be written in the contract preliminary for an advantage (Chappell 2014).
The standard form of contract plays a significant role to promote the economic efficiency. This type of contract reduces the transaction by preventing the necessitate for the buyers and sellers of services and goods. On the contrary, there is a possibility for the signatories to sign the contract with unjust and inefficient terms. Also, they are not allow to modify or terminate the contract.
It is difficult for the large-scale organisations to make separate contracts with every possible person. For that reason, they have a written and printed form of the contract. The contract includes an enormous number of terms and conditions that confine or exclude the liability of the huge companies. The other part of the contract would sign the contract by understanding the conditions without any modifications (Fawzy and El-adaway 2013).
Lengthy adhesion contract’s terms often written in a complex legal language and finely printed seems irrelevant in the contract. The buyers do not understand the legal language apparently, they use to find the information as irrelevant. Although the buyers may understand the terms of the contract, they have no option to negotiate as the contract is represented by the provision of ‘take it or leave it’. One need a lot of time to read and understand the terms of the contract, but the expected payoff is very little (Adriaanse and Robinson 2015).
Sometimes, one signed a document, which is not the entire contract. The purchaser seldom told that some more terms are written in another location. It reduces the probability that the customer may read the clauses of the contract. Sometimes the provisions are written in the box and have to open the box before reading the terms. For example, the software license agreements interpret after the acceptance of the terms of the contract by buying the good. This types of contracts may be not enforceable as the common law states that all the conditions of the contract should be disclosed before the contract is performed (Eadie et al. 2015).
The quality and price of the product are most material for the buyers before buying any goods or services, which are understood by them before signing the contract of adhesion. The purchasers are not interested to know or understand the terms of the agreement, which have a little chance of occurrence. For this reason, the opportunity of reading the terms became very quiet, or the buyers use to ignore the provisions of the contract (Cooke and Williams 2013).
The main details of the transaction firstly explained to the purchasers, then the standard form contracts signed. At that time, social pressure from the various sources are provided to the buyers to wrap up the bargain. The salesperson often said that there is no reason to treat the terms as if that is only waste of time, and told that the conditions are some formalities written by the lawyers and need to sign by purchasers. In case, the buyer stands in the first place in a queue, and then people standing behind him/her give some additional pressure to sign quickly. Finally, in case, the salesperson give a concession on a product describing as a gift, and then the purchaser has the obligation of being co-operative with them and conclude the transaction (Cheung 2014).
If a contract of adhesion is the basis of selling a good and it is crucial for the buyers to buy the product, then the purchasers have an interpretation that they have no other choice other than to accept the terms. The example for these contracts is a rental property or requirement of medical item. The dilemma may be lessened in case the number of suppliers of the goods increase who have different terms written I the contract. However, this solution always not possible to invoke, for instance, a student may have to sign a contract before joining in the college dormitory as the college would not allow the freshman to stay out of the campus (Joyce and Houghton 2014).
It is contended that consumers can negotiate with the terms of the contract in a competitive market as they have choices to accept the product in their favourable conditions. However, if one wants the credit card or the other oligopolies, for example, the customer able to shop around with the access to the standard forms of contracts with same types of terms and there is no opportunity to moderate the terms (Ndekugri and Rycroft 2012).
The document delivered by the person has the duty to provide the proper notice to the other party about the printed provisions of the contract. The terms of the agreement has not bound the offeree if he has not been understood by the offeror (Chong and Phuah 2013). In Henderson v. Stevenson, a steamer ticket was bought by the plaintiff where the destination it was written on the front side and on the back side, certain terms including the liability of loss, injury or damages were mentioned. There was no indication on the front side to refer the back of the ticket for terms and the plaintiff travelled without seeing the back of the ticket. The luggage of the claimant was lost during the journey because of the mistake of employees of the company. The court found the harm to the plaintiff should be recovered from the defendant despite the exemption clause mentioned in the ticket (Henderson v. Stevenson [1875]).
The contractual dispute resolution clause may be unenforceable in the legal system as it seems to be an agreement to agree. In WTE Co-generation and Visy Energy Pty Limited v RCR Energy Pty Limited & Anor, there was a provision of dispute resolution in the contract mentioning that the senior executives would attempt to resolve the differences. The court held that the clause of the dispute resolution is the agreement to agree, which is not enforceable at law (WTE Co-generation and Visy Energy Pty Limited v RCR Energy Pty Limited & Anor, [2013]).
The common law stated that at the time of signing the contract, the term of the adhesion contract is to be brought to the notice of the contracting party. The terms of the contract would not be said to be accepted by the party unless they know the provision. Therefore, the term would not be a part of the agreement (Akbıyıklı, Dikmen and Eaton 2012). In Olley v Marlborough Court, the claimant books a hotel room. In the reception desk, the plaintiff signed the contract where any elimination clause was not mentioned. A note was given at the back of the door in the hotel room. In the notice, it was mentioned that the hotel proprietors exclude their liability in case of any damage or loss of the property of the boarders. The court held that the notice referred to in back door is not effective as the contract is already signed by the parties before the claimant saw the notice. The notice in the back of the gate did not form the part of the notice (Olley v Marlborough Court, [1949]).
In case one term of the standard forms contract resulted in the basic breach of contract, then such term must be removed from the standard forms contract so that the weaker among the parties be protected. If a party has high bargaining power, then the party tries to insert the exemption clause in the contract that the duty for the performance of the contractual obligation is harmful (Cakmak and Tas 2014). In Alexander v. Railway Executive, the claimant received a ticket in return of his deposition of luggage in the cloak room of defendant. The ticket has a printed term about the exemption of liability of the defendants in the case of any loss or misdelivery of luggage. The luggage of the plaintiff was delivered to an unauthorised person without producing the ticket. The court held that there was a fundamental breach of the contract as of non-delivery of the luggage to the plaintiff. The defendants held liable for the damages to the claimant (Alexander v. Railway Executive [1951]).
In case there is a general exemption clause mentioning the exclusion of all obligations in the contract, still the liability for tort will not be excluded. In White v. John Warwick & Co Ltd, the defendant, gave the cycle on hire basis to the plaintiff. The defendant settled in the agreement to maintain the cycle in the working condition. The agreement contains a clause that the respondent would not be liable for any personal injury. While travelling in the cycle, the load of the cycle tilted forward and the claimant fall from the cycle and injury occurred. The court held that though the exemption clause mentioned in the agreement, the defendant is liable for their negligence for which the plaintiff got an injury. (White v. John Warwick & Co Ltd [1953])
The common law of contract stated that contract is an agreement signed by two parties signed it, no third party or any party other than who signed the agreement has any liability to fulfill the contract. However, in certain cases, the third party is liable for the terms of the standard forms of contract (Mzyece et al. 2012). In Morris v. CW Martin & Sons, the furrier got the fur garment to clean from the plaintiff. As the furrier was not into the business of cleaning the fur garment, the plaintiff consented to give the garment to the defendant for cleaning. The plaintiff filed a case against the defendant as the fur garments were stolen by the servant of the respondent. The defendant claimed that he should be exempted from the liability as there was no contract signed by the plaintiff and him. The court held the defendant liable for the lost and said that he was not allowed any exemption (Morris v. CW Martin & Sons [1966]).
The International Federation of Consulting Engineers (FIDIC), New Engineering Contract (NEC) and Joint Contracts Tribunal (JCT) mostly issue the forms of construction contracts used in England. In some cases, the obligation on construction and design are upon the constructor. There are other organizations, which publish standard forms of contracts used on the construction projects like the Institution of Civil Engineers (ICE) and the Institute of Chemical Engineers (IChemE) (Yoke-Lian et al. 2012).
The FIDIC forms used three types of design and construction that mainly vary in the assigning dependability for designing the works and in the allotment of risk:
It is the Conditions of Contract for Construction for Building and Engineering Works Design by the Employer, and also known as the Construction Contract.
Conditions of Contract for Plant and Design – Build for Electrical and Mechanical Plant, and for Building and Engineering Works Designed by the Contractor, also known as the Plant and Design-Build Contract; and
Conditions of Contract for Engineering, Procurement and Construction/Turnkey Projects, also known as the EPC/Turnkey Contract.
FIDIC also publishes the White Book – Consultant Model Services Agreement, which is a commonly used standard form for consultant services (Taggart, Koskela and Rooke 2012).
The NEC 3 Engineering and Construction Contract (NEC 3 ECC) implements a diverse advancement in the terminology, formation, and contracting the viewpoint to the customary forms, like the FIDIC forms. The NEC 3 adopts a mutual course focusing on the involvement of the party and contract administration. There is another standard form published by the NEC known as the NEC 3 Professional Services Contract. The form implements same collaborative contracting philosophy (Oluwole, Razak and Oluwole 2012).
The standard forms contract issued by the Joint Contracts Tribunal (JCT) is the common forms of the contract of building in the real estate of the UK for the construction projects. The standard forms of sub-contract and the collateral warranty also published by the JCT for the use of the construction projects in England. A broad variety of the construction contracts publishes by the JCT in England. The JCT prints standard forms based on the character of the construction projects, the contemplation of particular procurement route, and the calculation of payment for the work done and paid to the contractor (Holt 2013).
The JCT standard forms of contracts consist of the typical forms specially made for:
The task for the design of the project and the construction are reserved different, where the employer selected team created the project and accordingly the separately appointed constructors construct the building.
The requirement of the employer is meet by the constructor who is responsible for both designing and constructing the building.
The employer engages a professional team, which is accountable for work design and monitor the work management, some trade contractors with different work packages and manager of construction for administering and managing the trade contracts separately for the company.
The consultancy agreements perhaps exercise by the consultants or developers. However, the model forms of industry of the consultant agreement issued by several qualified bodies are often used by some projects. Specifically, the model forms of industry are regarded as consultant-friendly, and bespoke forms are utilised by the developers and preferred by funders (Feinman 2015).
The standard form contracts are uniform contracts, which contains huge terms and conditions printed and limits or eliminates the liability under the contract. By the standard forms, the large companies got the opportunities to abuse the weak point of the individual. The giant companies imposed the terms on individual look like private legislation can extend to exemption of liability under the contract. When the matter takes to the courts, it is found very difficult to rescue the weaker party. For this reason, certain rules made by the courts have for protection of the interest of the customer, passenger or the consumer to whom any exemption clause of the standard form contracts imposed.
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Henderson v. Stevenson [1875]L. R. 2 H. L. 470.
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Morris v. CW Martin & Sons [1966] 1 QB 716
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White v. John Warwick & Co Ltd [1953] 1 WLR 1285
WTE Co-generation and Visy Energy Pty Limited v RCR Energy Pty Limited & Anor [2013] VSC 314.
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