If you are client of Bank of Bhutan and avail their mBoB facility, the moment you log in, the first you see is “Indemnity: You Agree to indemnify & hold BoB harmless against any direct or indirect loss arising due to technical failure, having wrongly transferred/recharged to unintended beneficiary. The transaction(s) will be executed solely at your own risk and responsibility. By accessing or using any features of mBoB application, you agree to this indemnity.”
Generally consumers are often considered the king in modern economy. But in this age of capitalism and information technology, the world economy is dictated by numerous big global, regional or national companies and corporates with huge influence and power. These big players dictate the world economy by imposing their own terms and conditions on consumers and Bhutan is no exception. In the disguise of improvement and efficiency of their service using information technology, the entire gamut of economy and business is now going cashless by way of e-commerce and e-transactions and consumers are subjected to one-sided contract. The downside of these contracts is, companies also try to save themselves from law suits for their own failures and lapses. In Bhutan, big players include banks, telecom, insurance, airline, vehicle dealers and so on. These contracts are generally known as standard form contracts. Black’s Law Dictionary defines it as “a contract prepared by one party, to be signed by the party in weaker position, usually a consumer, who has little choice about the terms.” Since, consumers must agree completely or reject it in entirety, it is also known as “leave it or take it contract.”
The recent inclusion of Indemnity Contract in mBoB by Bank of Bhutan is a classical example on how the corporates try to waive of their liability and shift it to consumers. This contract not only surprised consumers but also caused concern to many clients who avail mBoB facility. This is because, even for wrong transfer of money into another account due to technical glitch of the bank, the contract imposes the liability to consumers and BoB does not require to indemnify their customers. The question is whether the Bank can impose such terms and conditions on the consumers? If so, whether such contracts are valid and justifiable or not?
The fundamental principle of any contract is freedom of contract. According to Jeannie Paterson, “Freedom of contract promotes individual autonomy by allowing contracting parties to make their own choices about the types of contract they will enter into and the terms on which they will contract. The freedom of contract requires that contractual obligations be voluntarily assumed by contracting parties. The concept of voluntariness, in turn, requires certain preconditions be met before parties can consent to the obligations, they assume in entering into a contract.” If we apply this principle to any standard form contract, the consumers are completely deprived of any area of bargain or negotiation and hence such contract becomes void. Yet across the world, this form of contract is legally recognized as valid contract and enforced by courts. This is because, without any standard form contract, the modern economy will not be able to function and operate, and it will be too costly and impossible for every customer to negotiate every business contract. Therefore, standard form contract is necessary and its dependence would only increase.
However, it does not mean that, companies or corporates can come with up with any kind of condition they wish, in order to escape from accountability and responsibilities and generate enormous profit at the cost of consumers. There are laws and courts to protect consumers against such unreasonable, unfair or discriminatory conditions in the contract. Contract Act of Bhutan, 2013 and Consumer Protection Act of Bhutan, 2012 are two major laws governing these contracts in Bhutan. Section 210 of Contract Act, recognizes the standard form contract as legally valid contract only when “there is adequate notice to the other party and court finds that such a contractual provision be fair and reasonable in the circumstances of the case.” Further, any contract requires a lawful consideration and such consideration does not defeat provisions of any law or not against the public policy (Section 23 and 26). Otherwise, such contract becomes void including if the contract is impossible to perform (Section 44). Therefore, it is the duty of the courts to determine whether any standard form contract is reasonable and fair or against provisions of any other law or public policy.
In mBoB indemnity contract, the provision on technical glitch, consumers have no control over whatsoever and hence, first is it impossible for the consumers to perform such contract. Second, such contract is against other laws particularly the consumer laws as it exploits the consumer’s right to redressal for their loss due to technical glitch of the bank. Third, inclusion of such clause seems to make the contract very unreasonable, discriminatory and unfair for the consumers.
The protection to consumers is provided by Consumer Protection Act, where Section 3 has the effect of overriding any contract term which are in contravention with this law. And Section 4 guarantees consumers, the right of protection from any unfair, discriminatory and non-equitable treatment by businesses which include fair terms of contract and sale. The law (Section 61) ensures the right of redressal “against service provider, if the services or product resulting from the services fail to comply with any of the implied guarantees.” The brief analysis of these provisions bars any company or corporate from coming up with any contract that is unfair, discriminatory or fail to give equitable treatment to consumers in Bhutan. In the current scenario, since mBoB users have no right to indemnity, even incase of technical lapses by banks, it may very well constitute, an unfair, discriminatory and non-equitable treatment by the Bank. Therefore, the consumers do have the right to redress under various provisions of contract law and consumer protection law, if they feel they are treated unfairly by big companies and corporates.
Further, BoB is a public institution and RMA is gearing towards the national financial policy of going cashless. Such kind of contracts would be detrimental to national financial policies and may force consumers to return to traditional mode of transaction by cash due to fear of losing money not only because of their own faults but also of bank’s lapses. This kind of clause in standard form contract is not limited to BoB. For example, one of the clauses in mobile service contracts of both Bhutan Telecom or TashiCell, states that “The maximum liability of the Service Provider under all circumstances in contract, tort or otherwise shall be limited to refund of the security deposit, if any, after adjusting any charges due from the customer.” Both companies have imposed their accountability including technical lapses, negligence on the part of company to the consumers. Thus, it is not an isolated case but has become a corporate mindset and culture where they benefit the most and suffer the least.
Therefore, any disputes arising out of such contracts, the courts and consumer forum must take all necessary and adequate measures to protect consumers or weaker party from such unreasonable and unconscionable contracts or conditions against big companies and corporates. They must ensure that, any standard form contracts are fair and reasonable to the consumers. The courts and consumer protection officers must through their decision prevent any big, influential and powerful companies and corporates from taking advantage of their loyal, innocent and individual consumers by way of such contractual obligations.
In conclusion, I am not arguing that, big companies and business entities should not come up with such standard form contracts. Standard form contracts are indisputably valid contracts and it is enormously important and indispensable for companies and corporates as well as the consumers. The modern economy can’t function without standard form contracts. However, big companies and corporates, shall not take advantage of their sole bargaining power to exploit any innocent consumers. It is also because, it is often found by researchers that, generally, any consumer hardly read any standard form contracts making them more vulnerable to such exploitation. The blatant mistake of BoB must serve as a lesson to many other service providers in the country. The service providers must instead, build stronger infrastructure, improve existing services and acknowledge their lapses. It’s not only unreasonable from legal perspective but also morally and ethically wrong on the part of any service or business from coming up with such clauses. Afterall, Bhutan is not a country that is built on capitalism but based on Gross National Happiness.
Contributed by Sonam Tshering
Faculty of Law
Jigme Singye Wangchuck School of Law