Consumer Standard Form Contracts in India: A Proposal

India has experienced a dramatic increase in consumer Internet shopping due to its convenience and the myriad choices of the Internet. Further, India enjoys a rapidly developing economy, rising living standards, and improving middle-class income, all of which promote Internet shopping. However, worldwide, few consumers read their e-standard forms and India is likely no exception. In addition, the legal framework in India is inadequate to police vendor opportunism in the form of drafting unfair e-standard terms. The Indian Contract Act of 1872, largely a codification of the common law, obviously does not deal directly with this modern problem. Its general, and somewhat amorphous rules, including offer and acceptance, unconscionability, public policy, and fraud only indirectly relate to modern Internet contracting.  Further, these tools rely on after-the-fact policing, do nothing to decrease the costs of dispute resolution, and potentially will bury India’s courts in litigation. Because consumer confidence is a prerequisite to growing Internet commerce, a more comprehensive and direct solution would be beneficial to India’s economy.

My paper, ‘Consumer Internet Standard Form Contracts in India: A Proposal’, first examines existing strategies to protect consumers and concludes they may be inadequate. Scholars in India have followed US courts analysis of ‘clickwrap’ and ‘browsewrap’ presentation of e-terms.  The former, mirroring the paper standard form process, requires the consumer affirmatively to click ‘I agree’ or the like adjacent to or below the standard form to complete a transaction.  The latter, on the other hand, requires the consumer to search for the terms often through several screens and without requiring the consumer to click ‘I agree’. Many courts resist browsewrap because vendors can hide terms or at least deflect attention from them. Clickwrap suffers from the reality that few people read their e-standard forms and blindly click ‘I agree’.

The e-standard form problem has produced several commentators’ suggestions. For example, the law could establish a cooling-off period, in which consumers could change their minds and rescind their commitment. However, the lack of finality would be costly to vendors, who likely would pass on these costs to consumers. Another possible solution would be mandated protective terms. But regulators may fail to identify correctly the kinds of terms that would protect consumers and may wrongly impinge on freedom of contract. Another approach would be to require vendors to highlight problematic terms in bold or to closet them in a special box. Again, the selection of terms to highlight or to place in a box may challenge regulators. There is also a real possibility that impatient consumers will fail to read even conspicuous terms and will ignore boxed terms. For the same reason, consumers may ‘speed click’ through the terms if required to click next to each important term. Clicking ‘I agree’ numerous times may be especially problematic in India, where the simplicity of the current process of Internet contracting facilitates the growth of commerce.

This paper argues that the most promising approach to consumer protection comes from the American Law Institute’s (ALI) Principles of the Law of Software Contracts (for which I was the Reporter). The ALI Principles strategy is to encourage early Internet disclosure of a vendor’s standard terms, before a consumer initiates a transaction. The Principles treat such disclosure as a ‘best practice’ that increases the likelihood of enforcement of the vendor’s e-standard terms. The ALI Principles also call for a more robust judicial use of policing tools, including unconscionability and public policy, despite the limitations of these principles.   

The ALI disclosure approach likely would not improve consumer reading of e-terms. However, rating services and watchdog groups (of which there are many on the Internet) would have better access to problematic terms and could publicize vendors’ use of them. Vendors would be motivated to draft reasonable terms to establish and preserve good will and good reputations. The ALI strategy would also avoid overregulation and impediments to the formation process. For these reasons, in my paper, I argue that disclosure may be the best of admittedly limited solutions to the problem of consumer protection in Internet contracting in India and elsewhere.

Robert A. Hillman is the Edwin H. Woodruff Professor of Law at Cornell Law School.