New approach to ‘standard’ contracts urged

Press, Volume CXII, Issue 33049, 17 October 1972, Page 2

New approach to ‘standard’ contracts urged

It might be time for a new approach to the law on standard-form contracts: contracts usually involving printed forms or conditions, and proffered to consumers by those dealing in commodities or services, Mr E. J. Somers, of Christchurch, told the Law Society conference in Christchui-ch yesterday.

There were elements about many standard-form contracts that were open to criticism, but the forms which gave the greatest concern were those used in transactions with consumers, Mr Somers said. They were seldom read by the consumer, and if read, were probably not understood. “In the case of such contracts, to which a consumer Simply adheres, the courts pre faced with a problem of Considerable social consequences." With some success, the rommon law had attempted io deal with the problems Within existing rules relating to the law of contract, Mr

Somers said. But occasionally these showed signs of strain, and the cases did not always fit into accepted principles. This was not surprising, he said, because the circumstances surrounding such standard - form contracts differed substantially from contracts resulting from bargaining. "It is a common feature of transactions involving standard forms that they preclude any real bargaining: the choice is not as to terms, but as to whether to contract on the proffered conditions or not to contract at all.” And it was from the notion of an individual bargain and agreement that the relevant rules of the law of contract had grown, he said. Contract law rules were based on an agreement between two parties of "reasonably comparable bargaining power.” Such a comparison did not exist in the case of most standard-form contracts, he said. Accordingly, many would consider that principles based on such “comparable power” needed, in the field of standard-form contracts, considerable adjustment. "The vast number of stan-dard-form contracts, and the weight of commerce founded on them, make it desirable

that lawyers consider carefully not only the nature of the premises on which they are constructed and interpreted, but also whether such premises as may exist are satisfactory in such a context.” The alternative to the "robust development” of common law on standard-form contracts was legislative intervention, Mr Somers said. This had been suggested. However, such legislation did not seem likely at present, so it might be hoped that the common law would develop its rules or form new ones to deal adequately with such contracts.

Mr Somers discussed the developing pattern of the law as regards standard-form contracts, and said that his paper could be regarded, from the layman’s standpoint, as an inquiry into how far he was bound by “a writing” when it did not truly represent the bargain he supposed himself to have made.

In spite of the recognised principles, he said, there were signs that the courts were becoming more willing to seek out the real agreement between the parties and to allow the printed form to be overridden by the spoken word where the form was not prepared for the specific

transaction, but for general use.

Where the consumer had no chance to read the printed form, any statements made about it by the person preferring it must assume considerable importance, Mr Somers said.

And just as a misrepresentation as to the terms of a standard form should render those terms unenforceable, a person who promised not to rely on a particular term in the document should not thereafter be allowed to do so, Mr Somers said. “Everyone is familiar with the case of the salesman who asserts that ‘we never act under that clause* . . .” Statements at variance with the document were another case: an example was an oral statement on the quality of the goods when the form excluded liability for any such statement if it was untrue, Mr Somers said. The court might also hold against the terms of the document when it included signed representations known by both parties to be false: such as an exclusion clause saying that the consumer had inspected the goods and relied on his own judgment in their purchase, when in fact no inspection had been made —and both parties knew it