WHETHER OR NOT SHRINK WRAP CONTRACT IS VALID?

It is most respectfully submitted before The Honble Supreme Court that Shrink wrap contract as
mentioned in this case is a contract which is entered into by the NGE with public at large. This
contract was drafted by one party and signed by another party without any modification or
change. It was essentially "take it or leave it" contracts with no room for negotiations.
Shrink Wrap Agreements were found inside the sealed packaging of tangible products, where one
cannot see the agreement until the product has been purchased or used. For example, software
CD came packaged in plastic with a notice that by tearing the plastic, the user will be deemed to
have assented to the terms of use which are enclosed in the CD. Such agreements are likely to be
found unenforceable on the grounds of inadequate notice to the users, unless constructive notice
has been established.1
It is humbly submitted before the honorable court that such type of contracts which a business
concern may have to enter into with a large number of its customers or clients are also referred as
Standard Form of Contract.
It is further submitted that Shrink Wrap Contract here in this case can be taken as Standard form
of Contract as this contract is basically same for all the people and the terms and conditions are
not negotiable. These contracts are criticized for killing the bargaining power of the weaker party
and open up wide opportunity for exploitation.
In Standard Form of Contracts, the courts being influenced by this principle have laid down
some principles so that the weaker party may not sustain unfair harm as else there will be
nothing like mutuality and choice in the contract and there will remain no importance of the
intention of the individual.2
It is humbly submitted that the basic essentials of standard form of contract are that there should
be contractual document, there should be no misrepresentation, there should be reasonable notice
of contractual terms, notice should be contemporaneous with the contract, the terms of the

1 Rastogi Anirudh, Cyber Law, Pg no 255, Lexis Nexis.

2 Srivastava Sahai, Surendra. Law of Contract I & II, Pg no. 15-16, Central Law Publications, 3 rd edn

contract should be reasonable, strict interpretation of the exemption clause, fundamental breach
of contract, equal bargaining power, non-contractual liability.
There are certain essentials which are not adhere to in this contract which makes it an invalid
contract. All those essentials are:
i)

There was no reasonable notice of the contractual terms

It is most respectfully submitted that in order that the terms of a contract become binding all that
is necessary to draw the attention of the other party to those terms should be done by the party
who has pre drafted the terms of the contract. However, in this case, the attention of the party
was never drawn to the terms and conditions of the contract. Moreover, the party was bound by
the contract as soon as they tore open the wrapper of the bulb box.
It is humbly submitted before the Honble Court this is sheer injustice to the aggrieved party.
They become bound by an unknown contract by opening the wrapper of a bulb box. The
reasonable notice to the terms and conditions is the very significant essential of Standard form of
Contract and the same had not been followed by NGE.
In the United States, the 1996 landmark case of Pro CD v. Zeidenberg3 The court found this
alternate method of contract formation to yield an enforceable contract, especially when, as in
ProCD, the purchaser accepts without protest. Consequently, Zeidenberg's use of the software,
after receiving notice of the license, constituted an acceptance, and thus Zeidenberg was found
liable for breach of contract.4
It is humbly submitted before the court that Shrink Wrap Contract in this case was held to be
enforceable because the terms and conditions were explicitly mentioned on the box and while
using the CD also Zeidenberg was reminded of the terms and conditions. Moreover, the
purchaser had the right to return the CD if did not find the terms and conditions appropriate.

3 86 F.3d 1447, 39 U.S.P.Q.2d 1161, 1 ILRD 634 (7th Cir. 1996)

4 The fact that Zeidenberg paid for the product before he knew the terms of the enclosed agreement was
irrelevant in determining whether an enforceable contract had been created because the notice on the
outside of the box, coupled with the opportunity for a refund if the consumer did not agree to the terms of
the license, was acceptable and sufficient to form a valid contract

It is further contended that in this case the aggrieved party was given no notice of the terms and
conditions on the top of the box and the customers were bound by the contract as soon as they
tore the wrapper of the bulb box.
Thus, to ensure enforceability of standard form e-contracts, it is essential FOR THE WEBSITES
to provide adequate notice of the contract. A good example of such caveat provided
conspicuously on the first page of the website: PLEASE READ THIS AGREEMENT
CAREFULLY TO ENSURE THAT YOU UNDERSTAND EACH PROVISION. THIS
AGREEMENT CONTAINS A MANDATORY INDIVIDUAL ARBITRATION.5
In Ticketmaster Corp. v. Tickets.com, Inc.,6 The court said that,
In defending this claim, Ticketmaster makes reference to the "shrink-wrap license" cases, where
the packing on the outside of the CD stated that opening the package constitutes adherence to the
license agreement (restricting republication) contained therein. This has been held to be
enforceable. That is not the same as this case because the "shrink-wrap license agreement" is
open and obvious and in fact hard to miss. Many web sites make you click on "agree" to the
terms and conditions before going on, but Ticketmaster does not. Further the terms and
conditions are set forth so that the customer needs to scroll down the home page to find and read
them. Many customers instead are likely to proceed to the event page of interest rather than
reading the "small print". It cannot be said that merely putting the terms and conditions in this
fashion necessarily creates a contract with anyone using the web site. The motion is granted with
leave to amend in case there are facts showing [defendant] Tickets' knowledge of them plus facts
showing implied agreement to them.

Hence, it is submitted before the court that the shrink wrap contract can become binding not only
when notice of the terms is provided but reasonable notification which is within the reach of the
customer. Whereas, in this case the plaintiff came to know about the terms and conditions when
5 Rastogi Anirudh, Cyber Law, Pg no. 255. Lexis Nexis.
6 2000 U.S. Dist. Lexis 4553 (C.D. Ca., March 27, 2000)

he went for further enquiry. By this we can certainly draw the inference that the terms and
conditions were not within the reach of any ordinary person.

In Special Secretary, Government of Rajasthan v. V.V. Seshaiyar,7 the question for

consideration before Andhra Pradesh High Court as to whether the purchaser of a lottery ticket
was bound by the terms and conditions printed on the reverse of lottery ticket in small ticket. The
High Court observed that unless the terms of the contract were arrived at after due negotiations,
they cannot be held binding merely because a ticket is late issued containing the said terms.8

Further in the case of Richardson Spence & Co. v. Rowntree,9 it was held that reasonably
sufficient notice of the terms had not been given to the plaintiff and, therefore, she was entitled to
recover compensation for the whole loss.

It is contented that the terms and conditions were not within the reach of the customer. The
courts with various judgments had given this significant essential of the reasonable notice of the
contractual terms, which is not fulfilled in this case.

ii)

The terms of the contract were unreasonable

It is most respectfully submitted before the court that the next issue is the way in which the terms
of the document are to be construed. The disparity between the bargaining power of consumer
and large enterprises means that terms have often been imposed upon the customers which are
7 A.I.R. 1984 A.P.5.
8 Ibid, at 11; also see Road Transport Corporation v. Kirloskar Brothers Ltd., A.I.R. 1981 Bom. 299.
9 (1894) A.C. 217.

unfair in their application and which exempt the enterprise putting forward the document, either
wholly or in part, from its liability under the contract.10
It is not enough that the terms of the contracts have been brought to the knowledge of the other
party by a sufficient notice before the contract is entered into, it is also necessary that the terms
of the contract themselves are reasonable. If the terms of the contract are unreasonable, they will
not be enforced even if they were printed on the reverse of the bill or a receipt.11
In Dhillon LJs words: If one condition in a set of printed conditions is particularly onerous or
unusual, the party seeking to enforce it must show that particular condition was fairly brought to
the attention of the other party.12
It is contented before the honorable court that in this case, the terms and conditions were found
unreasonable and the NGE was obviously at the stronger position whereas the aggrieved party
was at the weaker position.
The more unusual or unexpected a particular term is, the higher will be the degree of notice
required to incorporate it. If the clause is of such a nature that the party adversely affected would
not normally expect it, then the other party will not be able to incorporate it by simply handing
over or displaying a document containing the clause. He must further go and make it
conspicuous.13
It has been said that some clauses would need to be printed in red ink on the face of the
document with a red hand pointing to it before the notice could be held to be sufficient.14

10 Ansons law of contract, pg no. 178, oxford university press, 19th edn.
11 Bangia, Indian Contract Act, pg. no 49, Allahabad law agency, 14th edn.
12 Ansonss Law of Contract, pg no. 117, Oxford University Press, 29th edn
13 Crooks v. Allen (1870) 5 Q.B.D. 38 at 40.
14 J Spurling Ltd v Bradshaw [1956] 1 WLR 461, 466 (Denning LJ); Thornton v Shoe Lane Parking Ltd
[1971] 2 QB 163; Shearson Lehman Hutton Inc v MacLaine Watson & Co Ltd[1989] 2 Lloyds Rep
570,612. Cf Ocean Chemical Transport Inc v Exnor Craggs Ltd [2000] 1 Lloyds Rep 446, 454 (red hand
approach doubted for comeercial contract).

Firstly, the condition of contract coming into force just by opening the wrapper was unreasonable
when there was nothing mentioned on the wrapper regarding terms and conditions. Secondly, the
indemnity clause came to the knowledge when further enquiry was conducted and the clause
itself does not seem to be reasonable.
It is humbly submitted that the dictionary meaning of Indemnity is compensate (someone) for
harm or loss; Secure (someone) against legal responsibility for their actions.15
Section 124 of The Indian Contract Act, 1872 defines Contract of Indemnity as A contract by
which one party promises to save the other from loss caused to him by the conduct of the
promisor himself, or by the conduct of any other person, is called a contract of indemnity.
It is most respectfully submitted that the promisor in this case is not helping NGE in covering up
their loses by letting them disclose their personal data. The indemnity clause or Contract of
Indemnity is against the Section 124 of the Indian Contract Act, 1872. Therefore, this clause
stands unreasonable.
iii)

Inequality of bargaining powers

It is most respectfully submitted before the court that the Courts have looked into the terms of
the contract in relation to the bargaining powers of the parties and have interfered in cases where
the bargaining power of the parties was not equal.
In Life Insurance Corporation of India v. Consumer Education and Research Centre and
others16 The Court held that where a contract or a clause in it was unreasonable or unfair or
irrational the relative bargaining power of the parties must be looked at to ascertain whether the
weaker party had enough bargaining power.17

15 http://www.oxforddictionaries.com/definition/english/indemnify
16 1995 AIR 1811, 1995 SCC (5) 482
17 http://www.globalhealthrights.org/asia/l-i-c-of-india-and-anr-v-consumer-education-and-researchcentre-and-ors/

In Central Inland Transport Corporation Limited v. Brojo Nath,18 It was held by the Supreme
Court that such a clause in the service agreement between the persons having gross inequality of
bargaining power was wholly unreasonable and public policy and therefore void under Section
23 of the Indian Contract Act.19 Thus, courts will not enforce and will, strike down an unfair and
unreasonable contact or an unfair and unreasonable clause in a contract, entered into between
parties who are not equal in bargaining power.
It is further submitted that these adhesion/ standardized contracts are entered into by parties
enjoying much superior bargaining power with a large no. of people, hence, affect people at
large and if unconscionable, unfair and unreasonable are injurious to public interest. These
bargains therefore must be void on account of being opposed to public policy (S.23).
It is contented that in this contracting was at strong bargaining position and it has very well
misused the same. Thus, all the terms and conditions which seem to have more inclination
towards NGE are nevertheless unreasonable and against the public policy.
It is further submitted that despite absence of a specific legislation courts have shown a marked
willingness to interfere with standard form of contracts where there is evidence of unequal
bargaining power. Courts have given reliefs in cases where weaker party has been burdened with
unconscionable, oppressive, unfair, unjust and unconstitutional obligations in a standard form
contract.

18 A.I.R 1986 S.C. 1571.

19 Bangia, Indian Contract Act, pg no. 49, Allahabad law agency, 14th edn