14 STANDARD FORM CONTRACTS

The basic reason underlying the widespread use of standard forms of contract is the need to facilitate the conduct of trade in the most efficient way. Standard form contracts often run to a great many pages of detailed clauses and individual clauses to more than a page. There are undoubtedly thousands of such contracts in use at any time. Often standards form contracts are of use because the parties regularly enter into complex technical and legal relations. This is the case, for instance, in the construction industry, international trade and engineering. In other cases it is because the dealings in question involve transactions relating to standardised and mass-produced products, services or marketing techniques. The latter is a particularly common feature of modern business. In such cases the presence of a standard form contract such mean that standard conditions do not have to be re-negotiated for every transaction.

Many of the reasons for the development of standard written contracts are positive. In the inter-business field, they may be well established as exemplars negotiated by trade associations or professional bodies on behalf of parties of approximately equal bargaining power over a lengthy period of time. The cif international contract of sale and the JCT form of building contract, discussed below, are good examples of this. With these types of contracts there is a presumption by the courts that they are fair and reasonable. However, this does not mean that standard form contracts are without their problems. The ‘battle of the forms’ is an example of the problems which arise when use is made of standard form contracts by both parties to the deal. While standard form contracts can represent the intentions of the parties, it is clear that people often proceed without reading the details embodied in a standard form.

However, it is not uncommon for a powerful business organisation to impose its ‘written standard terms of business’ upon others who possess considerably less bargaining strength. Such inequality of bargaining strength is normally found to exist between businesses and consumers. It comes about as a result of a concentration of market power, be it monopolistic or oligopolistic, or because the interests of smaller firms are regulated by a trade association. Where the use of standard form contracts is accompanied by inequality of bargaining power, there is a greater likelihood of their being used as instruments of economic oppression because their terms can more easily be weighted in favour of the interests of the stronger parties who prepare them. Here there is no presumption by the courts that such contracts are fair and reasonable and, as a result, they are more likely to be subjected to judicial regulation. In such circumstances, the courts may well take into account the absence of genuine agreement and justify their intervention on that basis.

A number of problems with the use of standard forms when dealing with a consumer relate to the way information about the crucial rights and duties of the parties is communicated. All too often, this is contained in the ‘small print’ of standard form documents. Amaze of small print usually means that onerous clauses are either not read or not understood. It is well known that the consumer may have no time to read standard form clauses which are often contained in another document elsewhere. Contracts with railway or bus companies are an excellent example of this. Tickets commonly refer to the fact that standard terms and conditions apply but these are often only available on posters near the booking office. However, practice is changing with greater use being made of the internet for buying and selling services. Many sites do not allow ‘click and wrap’ contracts to be concluded until the purchaser confirms they have read the standard forms which can be called up at the click of a mouse.