In the absence of a law prohibiting unfair terms in consumer contracts, Indian consumers often face situations where they have no option but to accept terms and conditions thrust upon them, however unreasonable.
From bankers and insurers to builders and educational institutions, almost all of them come up with standard agreements drafted to protect their interests, at the cost of the consumer. Since refusal would mean denial of service, the consumer is forced to sign on the dotted line.
Taking cognisance of the vulnerability of the consumer in such situations, countries in North America and Europe have passed laws that render such unfair terms null and void.
In India, the Law Commission has strongly recommended a comprehensive law to regulate unfairness in consumer contracts and protect the interests of consumers.
Unfortunately, the government is yet to act on it.
The vulnerability of the Indian consumer in the absence of such a law is highlighted by this question sent by an MBA student, pertaining to an agreement signed by him with regard to his stay at the college hostel.
Asks Kaushik Dhawan: I am a student of MBA and am in the second semester now. At the time of admission, I chose to stay at the hostel provided by my college. However, because of lack of proper facilities, I do not wish to continue at the hostel. But I have signed a contract saying that I would not leave the hostel for at least one year. So please clarify whether the agreement is binding, irrespective of the prevailing conditions at the hostel. The hostel charges are now due; so please suggest if I can save my money and leave the hostel.
First and foremost, you were forced into signing that agreement as a pre-condition to your getting admission into the hostel. In other words, you had no option but to agree to the conditions imposed by the hostel about the length of stay.
When a hostel undertakes to provide certain services in lieu of the fee that it collects from you, it is expected to provide a certain quality of service. Failure to do so constitutes deficiency in that service.
In other words, when you signed the agreement with the hotel, the expectation was that the hostel would fulfil its part of the contract — which is to provide decent hostel facilities. Having failed to do so, it cannot bind you to the clause about continuing in the hostel for a year. I would briefly quote here two orders of the consumer courts to explain this further. In the case of PUDA vs Shakuntala Devi Saini, the National Consumer Disputes Redressal Commission held that a service provider who has not fulfilled his part of the contract cannot bind the consumer to the forfeiture clause.
Similarly, in the case School of Convergence vs Ms Ramina Devi Haorokcham, the Delhi State Consumer Disputes Redressal Commission made it clear that: “Any term of the contract which is unconscionable is not enforceable.”
Referring to a term that said that "fees once paid are not refundable", it observed that the student may leave midstream if he finds the service deficient and sub-standard and to tell him that the fee is not refundable is unfair.
So go ahead and write to the hostel authorities and tell them that you have no option but to leave the hostel in view of the poor and deficient service being provided by them. I must also add that if the services provided by the hostel are not of the standard promised, the hostel is also guilty of unfair trade practices and you have a right to be protected against such practice.